LABOR AND THE CONSTITUTION

Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
Humanization of laws and the equalization of social and economic forces by the State so that justice in
its rational and objectively secular conception may at least be approximated. Social justice means the
promotion of the welfare of all the people, the adoption by the Government of measures calculated to
insure economic stability of all the competent elements of society, through the maintenance of a proper
economic and social equilibrium in the interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored principle of salus populi est
suprema lex. (Calalang vs. Williams [G.R. No. L-47800, 02 December 1940])

The State is bound under the Constitution to afford full protection to labor and when conflicting
interests of labor and capital are to be weighed on the scales of social justice the heavier influence of
the latter should be counterbalanced with the sympathy and compassion the law accords the less
privileged workingman. This is only fair if the worker is to be given the opportunity and the right to
assert and defend his cause not as a subordinate but as part of management with which he can
negotiate on even plane. Thus labor is not a mere employee of capital but its active and equal partner.
(Fuente vs. NLRC [G.R. No. 110017, 02 January 1997])

The cause of social justice is not served by upholding the interest of petitioners in disregard of the
right of private respondents. Social justice ceases to be an effective instrument for the "equalization of
the social and economic forces" by the State when it is used to shield wrongdoing. While it is true that
compassion and human consideration should guide the disposition of cases involving termination of
employment since it affects one's source or means of livelihood, it should not be overlooked that the
benefits accorded to labor do not include compelling an employer to retain the services of an employee
who has been shown to be a gross liability to the employer. It should be made clear that when the law
tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality
between labor and management. The intent is to balance the scale of justice; to put the two parties on
relatively equal positions. There may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the result is an injustice to the
employer, Justicia remini regarda est (Justice is to be denied to none). (Jamer vs. NLRC [G.R. No.
112630, 05 September 1997])

It is true the Constitution regards labor as "a primary social economic force." But so does it declare
that it "recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investment." The Constitution bids the State to "afford full protection to
labor." But it is equally true that "the law, in protecting the right's of the laborer, authorizes neither
oppression nor self-destruction of the employer." And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so. (Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

EMPLOYER-EMPLOYEE RELATIONSHIP

Importance of the existence of an employment relation

A basic factor underlying the exercise of rights under the Labor Code is status of employment. The
question of whether employer-employee relationship exists is a primordial consideration before
extending labor benefits under the workmen's compensation, social security, medicare, termination pay
and labor relations law. It is important in the determination of who shall be included in a proposed
bargaining unit because it is the sine qua non, the fundamental and essential condition that a
bargaining unit be composed of employees. Failure to establish this juridical relationship between the
union members and the employer affects the legality of the union itself. It means the ineligibility of the
union members to present a petition for certification election as well as to vote therein. (La Suerte vs.
Director [123 SCRA 679])
Tests for the existence of Employer-Employee Relationship – South West Disaster Control
 In determining the existence of employer-employee relationship, the following elements are
generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees' conduct-although the
latter is the most important element. (35 Am. Jur. 445).

[T]o determine whether a person who performs work for another is the latter's employee or an
independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test
an employer-employee relationship exist where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the manner and means to be
used in reaching the end. (LVN vs. Philippine Musicians Guild [G.R. No. 12582] citing United Insurance
Company, 108, NLRB No. 115.)

[T]he relationship between jeepney owners/operators on one hand and jeepney drivers on the other
under the boundary system is that of employer-employee and not of lessor-lessee. We explained that in
the lease of chattels, the lessor loses complete control over the chattel leased although the lessee
cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the lessor.
In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and
control over the latter. The management of the business is in the owner's hands. The owner as holder
of the certificate of public convenience must see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers
do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the
owner/operator is not sufficient to withdraw the relationship between them from that of employer and
employee. We have applied by analogy the abovestated doctrine to the relationships between bus
owner/operator and bus conductor, auto-calesa owner/operator and driver, and recently between taxi
owners/operators and taxi drivers. Hence, petitioners are undoubtedly employees of private respondent
because as taxi drivers they perform activities which are usually necessary or desirable in the usual
business or trade of their employer. (Jardin vs. NLRC [G.R. No. 119268, 23 February 2000])
The case of Pajarillo vs. SSS, invoked by the public respondent as authority for the ruling that a
"joint fishing venture" existed between private respondent and petitioners is not applicable in the instant
case. There is neither light of control nor actual exercise of such right on the part of the boat-owners in
the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-
owners as regards their employment; that they go out to sea not upon directions of the boat-owners,
but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in
any way control the crew-members with whom the former have no relationship whatsoever; that they
simply join every trip for which the pilots allow them, without any reference to the owners of the vessel;
and that they only share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo do not exist in the instant case. The
conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the
patron/pilot of 7/B Sandyman II, to be under the control and supervision of private respondent's
operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to
return to the fishing port were shown to be the prerogative of private respondent. While performing the
fishing operations, petitioners received instructions via a single-side band radio from private
respondent's operations manager who called the patron/pilot in the morning. They are told to report
their activities, their position, and the number of tubes of fish-catch in one day. Clearly thus, the conduct
of the fishing operations was monitored by private respondent thru the patron/pilot of 7/B Sandyman II
who is responsible for disseminating the instructions to the crew members. (Ruga vs. NLRC [G.R. No.
L-72654-61, 22 January 1990])
The business venture operated under Geminesse Enterprise did not result in an employer-
employee relationship between petitioners and private respondent. While it is true that the receipt of a
percentage of net profits constitutes only prima facie evidence that the recipient is a partner in the
business, the evidence in the case at bar controverts an employer-employee relationship between the
parties. In the first place, private respondent had a voice in management of the affairs of the sales
force. Secondly, petitioner Tocao’s admissions militate against an employer-employee relationship. She
admitted that, like her who owned Geminesse Enterprise, private respondent only received
commissions and transportation and representation allowances and not a fixed salary. If indeed
 petitioner Tocano was private respondent’s employer, it is difficult to believe that they shall receive the
same income in the business. In a partnership, each partner must share in the profits and losses of the
venture, except that the industrial partner shall not be liable for losses. As an industrial partner, private
respondent had the right to demand for a formal accounting of the business and to receive her share in
the profit. (Tocao vs. CA [G.R. No. 127405, 04 October 2000])

The barbershop claims it had no control over its barbers. The power to control refers to the
existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the
employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to exercise the power. As to the “control test,” the following facts indubitably
reveal that the respondent company wielded control over the work performance of petitioners; in that
(1) they worked in the barber shop owned and operated by the respondents; (2) that they were required
to report daily and observe definite hours of work; (3) they were not free to accept other employment
elsewhere but devoted their full time working at the New Looks Barber Shop for all the fifteen (15) years
they have worked until April 15, 1995; (4) that some have worker with respondent’s since the early
1960’s; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6)
petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any
or all of them for just and vald cause. Petitioners were unarguably performing work necessary and
desiriable in the business of respondent company. (Corporal vs. NLRC [G.R. No. 129315, 02 October
2000])
Labor Only Contractor vis-à-vis an Independent Contractor
In LEGITIMATE JOB CONTRACTING, no employer-employee relationship exists between the
employees of the job contractor and the principal employer. Even then, the principal employer becomes
jointly and severally liable with the job contractor for the payment of the employees' wages whenever
the contractor fails to pay the same. In such case, the law creates an employer-employee relationship
between the principal employer and the job contractor's employees for a limited purpose, that is, to
ensure that the employees are paid their wages. Other than the payment of wages, the principal
employer is not responsible for any claim made by the employees.
On the other hand, in LABOR-ONLY CONTRACTING, an employer-employee relationship is
created by law between the principal employer and the employees of the labor-only contractor. In this
case, the labor-only contractor is considered merely an agent of the principal employer. The principal
employer is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer. The principal employer therefore becomes solidarily liable
with the labor-only contractor for all the rightful claims of the employees. (PCI Automation vs. NLRC
[GR No. 115920, 1996]
Basis of Liability
The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only"
contracting. Here, by operation of law, the contractor is merely considered as an agent of the employer,
who is deemed "responsible to the workers to the same extent as if the latter were directly employed by
him." On the other hand, Article 107 deals with "job contracting." In the latter situation, while the
contractor himself is the direct employer of the employees, the employer is deemed, by operation of
law, as an indirect employer.
In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with
Article 106. A contrary interpretation would render the provisions of Article 107 meaningless considering
that everytime an employer engages a contractor, the latter is always acting in the interest of the
former, whether directly or indirectly, in relation to his employees.
It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to
declaring that there is an employer-employee relationship between the owner of the project and the
employees of the "labor-only" contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No.
50915, 30 August 1990, 189 SCRA 127; Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January
1989, 169 SCRA 341). This is evidently because, as heretofore stated, the "labor-only" contractor is
considered as a mere agent of an employer. In contrast, in "job contracting," no employer-employee
relationship exists between the owner and the employees of his contractor. The owner of the project is
not the direct employer but merely an indirect employer, by operation of law, of his contractor's
employees.
 (Baguio vs. NLRC [G.R. No. 79004, 04 October 1991])
Requisites for allowable job contracting: (I ARM Free Capital)

1. INDEPENDENT business.
2. according to his own ACCOUNT.
3. Under his own RESPONSIBILITY.
4. According to his own METHOD of conducting business.
5. Free from the control of the principal except as to the result.
6. Sufficient Capital or investment in the form of tools, equipment, materials, work premises (TEM
Work).

More importantly, the petitioners, individually or collectively, did not have substantial capital or
investment in the form of tools, equipment, work premises and other materials which is necessary in the
conduct of the business of the respondent company. What the petitioners owned were only combs,
scissors, razors, nail cutters, nail polishers, nippers – nothing else. By no standard can these be
considered substantial capital necessary to operate a barbershop. (Corporal vs. NLRC [G.R. No.
129315, 02 October 2000])

Substantial Capital or Investment – The Neri and Fuji Xerox cases

[I]n the case of Neri vs. NLRC, we held that in order to be considered as a job contractor it is
enough that a contractor has substantial capital. In other words, once substantial capital established it
is no longer necessary for the contractor to show evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others. The rational for this is that Article 106 of the
Labor Code does not require that the contractor possess both substantial capital and investment in the
form of tools, equipment, machineries, work premises, among others. The decision of the Court in Neri,
thus, states:
Respondent BCC need not prove that it made investments in the form of tools, equipment,
machineries, work premises, among others, because it has established that it has sufficient
capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of
P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot
be deemed engaged in "labor-only" contracting.
However, in declaring that Building Care Corporation ("BCC") was an independent contractor, the
Court considered not only the fact that it had substantial capitalization. The Court noted that BCC
carried on an independent business and undertook the performance of its contract according to its own
manner and method, free from the control and supervision of its principal in all matters except as to the
results thereof. The Court likewise mentioned that the employees of BCC were engaged to perform
specific special services for its principal. Thus, the Court ruled that BCC was an independent
contractor.
The Court further clarified the import of the Neri decision in the subsequent case of Philippine Fuji
Xerox Corporation vs. NLRC. In the said case, petitioner Fuji Xerox implored the Court to apply the Neri
doctrine to its alleged job-contractor, Skillpower, Inc., and declare the same as an independent
contractor. Fuji Xerox alleged that Skillpower, Inc. was a highly capitalized venture registered with the
Securities and Exchange Commission, the Department of Labor and Employment, and the Social
Security System with assets exceeding P5,000,000.00 possessing at least 29 typewriters, office
equipment and service vehicles, and its own pool of employees with 25 clerks assigned to its clients on
a temporary basis. Despite the evidence presented by Fuji Xerox the Court refused to apply the Neri
case and explained:
Petitioners cite the case of Neri v. NLRC, in which it was held that the Building Care
Corporation (BCC) was an independent contractor on the basis of finding that it had substantial
capital, although there was no evidence that it had investments in the form of tools, equipment,
machineries and work premises. But the Court in that case considered not only the
capitalization of the BCC but also the fact that BCC was providing specific special services
(radio/telex operator and janitor) to the employer; that in another case, the Court had already
found that BCC was an independent contractor; that BCC retained control over the employees
and the employer was actually just concerned with the end-result; that BCC had the power to
reassign the employees and their deployment was not subject to the approval of the employer;
 and that BCC was paid in lump sum for the services it rendered. These features of that case
make it distinguishable from the present one.
(Vinoya vs. NLRC [G.R. No. 126586, 02 February 2000])

Liability of indirect employer for unpaid salaries/wages

The joint and several liability of the employer or principal was enacted to ensure compliance with
the provisions of the Code, principally those on statutory minimum wage. The contractor or
subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the
indirect employer of the contractor's employees. This liability facilitates, if not guarantees, payment of
the workers' compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution. This is not unduly burdensome to the employer. Should the indirect employer be
constrained to pay the workers, it can recover whatever amount it had paid in accordance with the
terms of the service contract between itself and the contractor.
Withal, fairness likewise dictates that the indirect employer should not, however, be held liable for
wage differentials incurred while the complainants were assigned to other companies. Under these
cited provisions of the Labor Code, should the contractor fail to pay the wages of its employees in
accordance with law, the indirect employer, is jointly and severally liable with the contractor, but such
responsibility should be understood to be limited to the extent of the work performed under the contract,
in the same manner and extent that he is liable to the employees directly employed by him. This liability
of petitioner covers the payment of the workers' performance of any work, task, job or project. So long
as the work, task, job or project has been performed for indirect employer's benefit or on its behalf, the
liability accrues for such period even if, later on, the employees are eventually transferred or reassigned
elsewhere.
We repeat: The indirect employer's liability to the contractor's employees extends only to the period
during which they were working for the petitioner, and the fact that they were reassigned to another
principal necessarily ends such responsibility. The principal is made liable to his indirect employees,
because it can protect itself from irresponsible contractors by withholding such sums and paying them
directly to the employees or by requiring a bond from the contractor or subcontractor for this purpose.
(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])
Liability of indirect employer for unpaid backwages and separation pay
Similarly, the solidary liability for payment of back wages and separation pay is limited, under Article
106, "to the extent of the work performed under the contract"; under Article 107, to "the performance of
any work, task, job or project"; and under Article 109, to "the extent of their civil liability under this
Chapter [on payment of wages]."
These provisions cannot apply to the indirect employer, considering that the complainants were no
longer working for or assigned to it when they were illegally dismissed. Furthermore, an order to pay
back wages and separation pay is invested with a punitive character, such that an indirect employer
should not be made liable without a finding that it had committed or conspired in the illegal dismissal.
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage,
because the workers' right to such wage is derived from law. The proposition that payment of back
wages and separation pay should be covered by Article 109, which holds an indirect employer solidarily
responsible with his contractor or subcontractor for "any violation of any provision of this Code," would
have been tenable if there were proof there was none in this case that the principal/employer had
conspired with the contractor in the acts giving rise to the illegal dismissal.
(Rosewood Processing, Inc. vs. NLRC [G.R. Nos. 116476-84, 21 May 1998])
Liability of indirect employer for statutory wage increases
[T]he liability of the petitioner to reimburse the respondent only arises if and when contractor
actually pays its employees the increases granted by Wage Order Nos. 5 and 6. Payment, which
means not only the delivery of money but also the performance, in any other manner, of the obligation,
is the operative fact which will entitle either of the solidary debtors to seek reimbursement for the share
which corresponds to each of the debtors. (Lapanday Agricultural Development Corp. vs. CA [G.R. No.
112139, 31 January 2000])
Jurisdiction of labor courts
 [W]here the claim to the principal relief sought is to be resolved not by reference to the Labor Code
or other labor relations statute or a collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the
NLRC. In such situations, resolution of the dispute requires expertise, not in labor management
relations nor in wage structures and other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the rationale for granting jurisdiction over such
claims to these agencies disappears. (SMC vs. NLRC [G.R. No. 80774, 161 SCRA 719])

[P]etitioner seeks protection under the civil laws and claims no benefits under the labor Code. The
primary relief sought is for liquidated damages for breach of a contractual obligation. The other items
demanded are not labor benefits demanded by workers generally taken cognizance of in labor
disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are
the natural consequences flowing from breach of an obligation, intrinsically a civil dispute. (Singapore
Airlines vs. Paño [G.R. No. 47739])

Petitioner filed the third-party claim before the court a quo by reason of a writ of execution issued by
the NLRC-CAR Sheriff against a property to which it claims ownership. The writ was issued to enforce
and execute the commission's decision in NLRC Case No. 0165 (Illegal Dismissal and ULP) against
Green Mountain Farm, Roberto Ongpin and Almus Alabe.
Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but
in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of
execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the
writ. The complainant was in effect a motion to quash the writ of execution of a decision rendered on a
case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and ULP. Considering
the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an
incident of the labor case, a matter beyond the jurisdiction of regional trial courts.
Precedents abound confirming the rule that said courts have no labor jurisdiction to act on labor
cases or various incidents arising therefrom, including the execution of decisions, awards or orders.
Jurisdiction to try and adjudicate such cases pertains exclusively to the proper labor official concerned
under the Department of Labor and Employment. To hold otherwise is to sanction split jurisdiction which
is obnoxious to the orderly administration of justice.
Petitioner failed to realize that by filing its third-party claim with the deputy sheriff, it submitted itself
to the jurisdiction of the Commission acting through the Labor Arbiter. It failed to perceive the fact that
what it is really controverting is the decision of the Labor arbiter and not the act of the deputy sheriff in
executing said order issued as a consequence of said decision rendered.
Jurisdiction once acquired is not lost upon the instance of the parties but continues until the case is
terminated. Whatever irregularities attended the issuance and execution of the alias writ of execution
should be referred to the same administrative tribunal which rendered the decision. This is because any
court which issued a writ of execution has the inherent power, for the advancement of justice, to correct
errors of its ministerial officers and to control its own processes.
(Deltaventures Resources, Inc. vs. Cabato [G.R. No. 118216, 09 March 2000])

Labor Dispute

"Labor dispute" includes any controversy or matter concerning terms or conditions of

employment or the association or representation of persons in negotiating, fixing, maintaining,
changing or arranging the terms and conditions of employment, regardless of whether the
disputants stand in the proximate relation of employer and employee. [Article 212 (l) of the Labor
Code]

While it is SMC's submission that no employer-employee relationship exists between itself, on the
one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate relationship of employer
and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns, among others,
 the terms and conditions of employment or a "change" or "arrangement" thereof (ibid). Put differently,
and as defined by law, the existence of a labor dispute is not negative by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union
seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that they
be absorbed into the working unit of SanMig. This matter definitely dwells on the working relationship
between said employees vis-a-vis SanMig. Terms, tenure and conditions of their employment and the
arrangement of those terms are thus involved bringing the matter within the purview of a labor dispute.
Further, the Union also seeks to represent those workers, who have signed up for Union membership,
for the purpose of collective bargaining. SanMig, for its part, resists that Union demand on the ground
that there is no employer-employee relationship between it and those workers and because the
demand violates the terms of their CBA. Obvious then is that representation and association, for the
purpose of negotiating the conditions of employment are also involved. In fact, the injunction sought by
SanMig was precisely also to prevent such representation. Again, the matter of representation falls
within the scope of a labor dispute. Neither can it be denied that the controversy below is directly
connected with the labor dispute already taken cognizance of by the NCMB-DOLE.
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and
D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship may,
in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon and
D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the notice of
strike was valid and the strike itself legal when it was allegedly instigated to compel the employer to hire
strangers outside the working unit; those are issues the resolution of which call for the application of
labor laws, and SanMig's cause's of action in the Court below are inextricably linked with those issues.
(SMC Employee Union-PTGWO vs. Hon. Bersamira [G.R. No. 87700, 1990])

MANAGEMENT PREROGATIVES

An owner of a business enterprise is given considerable leeway in managing his business because
it is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes
certain rights as inherent in the management of business enterprises. These rights are collectively
called management prerogatives or acts by which one directing a business is able to control the
variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as the
freedom to administer the affairs of a business enterprise such that the costs of running it would be
below the expected earnings or receipts. In short, the ELBOW ROOM IN THE QUEST FOR PROFITS."
(Chu vs. NLRC [G.R. No. 106107, 02 June 1994])

It is noteworthy to state that an employer is free to manage and regulate, according to his own
discretion and judgment, all phases of employment, which includes hiring, work assignments, working
methods, time, place and manner of work, supervision of workers, working regulations, transfer of
employees, lay-off of workers, and the discipline, dismissal and recall of work. While the law recognizes
and safeguards this right of an employer to exercise what are clearly management prerogatives, such
right should not be abused and used as a tool of oppression against labor. The company's prerogatives
must be EXERCISED IN GOOD FAITH and with due regard to the rights of labor. A priori, they are not
absolute prerogatives but are SUBJECT TO LEGAL LIMITS, COLLECTIVE BARGAINING
AGREEMENTS and the GENERAL PRINCIPLES OF FAIR PLAY AND JUSTICE.
The power to dismiss an employee is a recognized prerogative that is inherent in the employer's
right to freely manage and regulate his business. Corollarily, an employer cannot rationally be expected
to retain the employment of a person whose lack of morals, respect and loyalty to his employer, regard
for his employer's rules and appreciation of the dignity and responsibility of his office, has so plainly and
completely been bared. He may not be compelled to continue to employ such person whose
continuance in the service will patently be inimical to his employer's interest. The right of the company
to dismiss an employee is a measure of self-protection. Such right, however, is subject to regulation by
the State, basically in the exercise of its paramount police power. Thus, the dismissal of employees
must be made within the parameters of the law and pursuant to the basic tenets of equity, justice and
 fairplay. It must not be done arbitrarily and without just cause. (Philippine-Singapore Transit vs. NLRC
[GR No. 95449, August 1997])
Reorganization
The free will of management to conduct its own business affairs to achieve its purpose cannot be
denied (Abbot Laboratories v. NLRC, G.R. No. 76959, October 12, 1987, 154 SCRA 713). Even as the
law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise
what are clearly management prerogatives. Hence, management is not precluded from undertaking a
reorganization within the company or entering into mergers with other companies to meet the demands
of the enterprise. In such cases, the company has the prerogative to abolish managerial and
confidential positions or create new ones as the necessity for them requires. (Yap vs. Ichong [G.R. No.
L-51314, 21 June 1990])
Obedience to Company Rules and Regulations
This Court fails to see, however, how these objections and accusations justify the deliberate and
obdurate refusal of the sales representatives to obey the management's simple requirement for
submission by all Premise Sales Representatives (PSRs) of individual reports or memoranda requiring
reflecting target revenues which is all that GTE basically required and which it addressed to the
employees concerned no less than six (6) times. The Court fails to see how the existence of objections
made by the union justify the studied disregard, or wilful disobedience by the sales representatives of
direct orders of their superior officers to submit reports. Surely, compliance with their superiors'
directives could not have foreclosed their demands for the revocation or revision of the new sales
policies or rules; there was nothing to prevent them from submitting the requisite reports with the
reservation to seek such revocation or revision.
To sanction disregard or disobedience by employees of a rule or order laid down by management,
on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise irregular for one
reason or another, would be disastrous to the discipline and order that it is in the interest of both the
employer and his employees to preserve and maintain in the working establishment and without which
no meaningful operation and progress is possible. Deliberate disregard or disobedience of rules,
defiance of management authority cannot be countenanced. This is not to say that the employees have
no remedy against rules or orders they regard as unjust or illegal. They may object thereto, ask to
negotiate thereon, bring proceedings for redress against the employer before the Ministry of Labor. But
until and Unless the rules or orders are declared to be illegal or improper by competent authority, the
employees ignore or disobey them at their peril. It is impermissible to reverse the process: suspend
enforcement of the orders or rules until their legality or propriety shall have been subject of negotiation,
conciliation, or arbitration. (GTE Directories vs. Sanchez [G.R. No. 76219, 27 May 1991])
Transfers
The situation here presented is of an employer transferring an employee to another office in the
exercise of what it took to be sound business judgment and in accordance with pre-determined and
established office policy and practice, and of the latter having what was believed to be legitimate
reasons for declining that transfer, rooted in considerations of personal convenience and difficulties for
the family. Under these circumstances, the solution proposed by the employee herself, of her voluntary
termination of her employment and the delivery to her of corresponding separation pay, would appear
to be the most equitable. Certainly, the Court cannot accept the proposition that when an employee
opposes his employer's decision to transfer him to another work place, there being no bad faith or
underhanded motives on the part of either party, it is the employee's wishes that should be made to
prevail. In adopting that proposition by way of resolving the controversy, the respondent NLRC gravely
abused its discretion. (PT & T vs. Laplana [G.R. No. 76645, 23 July 1991])
[T]he Court has recognized and upheld the prerogative of management to transfer an employee
from one office to another within the business establishment provided that there is no demotion in rank
or a diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer's
right to control and manage its enterprise effectively. Even as the law is solicitous of the employees'
welfare, it cannot ignore the right of the employer to exercise what are clearly and obviously
management prerogatives. The freedom of management to conduct its business operations to achieve
its purpose cannot be denied.
But like all other rights, there are limits. The managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair
 play. HAVING THE RIGHT SHOULD NOT BE CONFUSED WITH THE MANNER IN WHICH THAT
RIGHT MUST BE EXERCISED. Thus it cannot be used as a subterfuge by the employer to rid himself
of an undesirable worker. Nor when the real reason is to penalize an employee for his union activities
and thereby defeat his right to self-organization. But the transfer can be upheld when there is no
showing that it is unnecessary, inconvenient and prejudicial to the displaced employee .
The reassignment of Halili and Magno to Manila is legally indefensible on several grounds. Firstly, it
was grossly inconvenient to private respondents. They are working students. When they received the
transfer memorandum directing their relocation to Manila within seven days from notice, classes had
already started. The move from Tarlac to Manila at such time would mean a disruption of their studies.
Secondly, there appears to be no genuine business urgency that necessitated their transfer. As well
pointed out by private respondents' counsel, the fabrication of aluminum handles for ice boxes does not
require special dexterity. Many workers could be contracted right in Manila to perform that particular line
of work. (Yuco Chemicals vs. Minster of Labor [G.R. No. L-75656, 1991])

Waiver of Management Prerogatives Possible; CBA provision to the contrary

Section 2, Article II of the CBA expressly provides that:
Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole
and exclusive right and power, among other things, to direct the operations and the working force
of its business in all respects; to be the sole judge in determining the capacity or fitness of an
employee for the position or job to which he has been assigned; to schedule the hours of work,
shifts and work schedules; to require work to be done in excess of eight hours or Sundays or
holidays as the exigencies of the service may require; to plan, schedule, direct, curtail and control
factory operations and schedules of production; to introduce and install new or improved methods
or facilities; to designate the work and the employees to perform it; to select and hire new
employees; to train new employees and improve the skill and ability of employees from one job to
another or form one shift to another; to classify or reclassify employees; and to make such
changes in the duties of its employees as the COMPANY may see fit or convenient for the proper
conduct of its business.
Verily and wisely, management retained the prerogative, whenever exigencies of the service so
require, to change the working hours of its employees. And as long as such prerogative is exercised in
good faith for the advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this Court will
uphold such exercise (Union Carbide Labor Union vs. Union Carbide [215 SCRA 554])
Imposition of Penalty; A commensurate penalty for an offense
[W]hile Clarete may be guilty of violation of company rules, we find the penalty of dismissal imposed
upon him by respondent Caltex too harsh and unreasonable. As enunciated in Radio Communications
of the Philippines, Inc. v. National Labor Relations Commission, supra, "such a penalty (of dismissal)
must be commensurate with the act, conduct or omission imputed to the employee and imposed in
connection with the employer's disciplinary authority" (at p. 667). Even when there exist some rules
agreed upon between the employer and employee on the subject of dismissal, we have ruled in
Gelmart Industries Phils., Inc. v. National Labor Relations Commission, 176 SCRA 295 (1989), that the
same cannot preclude the State from inquiring on whether its rigid application would work too harshly
on the employee. (Caltex Refinery vs. NLRC [ G.R. No. 102993, 14 July 1995])
Application of; With minor infractions, first violations and length of service.
Mary Johnston Hospital v. NLRC, where the employee had a heated argument with the department
head, the Court held that since the incident was her first offense during her seventeen (17) years of
employment the penalty of termination was not commensurate with the act committed.
Manila Electric Company v. NLRC, where the employee was declared guilty of breach of trust and
violation of company rules the penalty of dismissal was not meted to him considering his twenty (20)
years of service without any previous derogatory record and his two (2) commendations for honesty
from the company.
Dolores v. NLRC, where the employee absented herself without permission from her superior, the
Court ruled that the penalty of dismissal was too severe considering her twenty-one (21) years of
service with the company and it appearing that it was her first offense.
 Philippine Telegraph and Telephone Corporation v. NLRC, where the employee was adjudged guilty
of tampering a receipt, the Court ruled that the imposition of the supreme penalty of dismissal would
certainly be very harsh and disproportionate to the infraction committed, especially after noting that it
was his first offense after seven (7) long years of satisfactory service.
Radio Communications of the Philippines, Inc. v. NLRC, where the employee was found guilty of
misappropriating company funds and withholding messages for transmission, the Court ruled that in
view of the employee's continuous service of ten (10) years with the company the penalty of dismissal
for the minor infractions would be unduly harsh and grossly disproportionate.
Bonotan v. NLRC, where the employee shouted at the operations manager, the Court ruled that
since the employee has been with the company for twenty-six (26) years and nowhere in the records
did it appear that she committed any previous violation of company rules and regulations, dismissal
from work would be too severe a penalty under the circumstances.
Tanduay Distillery Labor Union v. NLRC, where the employees were found guilty of eating while at
work, the Court ruled that inasmuch as they had served the company without any record of violation or
infraction of company rules and regulations prior to the incident for periods ranging from 16 to 26 years,
respectively, the dismissal meted out on them was too harsh a penalty.
EMPLOYEE CLASSIFICATION AND/OR STATUS
Regular, Casual and Seasonal employees
Regular and casual employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreements of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer except where the
employment has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That any employee who has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity exists. (Article 280 of the
Labor Code)
[A]n employment shall be deemed regular if the employee performs activities usually necessary or
desirable in the usual business and trade of the employer OR if the employee has rendered at least one
(1) year of service, whether the service be continuous or broken. Ferrochrome Phils. vs. NLRC, 236
SCRA 315 G.R. 105538 [5 September 1994]
The primary standard, therefore, of determining a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade of
the employer. THE TEST IS WHETHER THE FORMER IS USUALLY NECESSARY OR DESIRABLE IN
THE USUAL BUSINESS OR TRADE OF THE EMPLOYER. The connection can be determined by
considering the nature of the work performed and its relation to the scheme of the particular business or
trade in its entirety. ALSO, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing need
for its performance as sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular, but ONLY WITH RESPECT TO SUCH
ACTIVITY AND WHILE SUCH ACTIVITY EXISTS. (De Leon vs. NLRC [G.R. No. 70705, 21 August
1989])
[T]he second paragraph of Article 280 relates only to casual employees and is not applicable to
those who fall within the definition of said Article's first paragraph, i.e., project employees. The familiar
grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of
the provision to which it is attached, and not to other sections thereof, unless the clear legislative intent
is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions
of the statute or even the statute itself as a whole. No such intent is observable in Article 280 of the
Labor Code.
 The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do
not fall under the definition of the preceding paragraph. The proviso, in said second paragraph, deems
as regular employees those "casual" employees who have rendered at least one year of service
regardless of the fact that such service may be continuous or broken. (Mercado, Sr. vs. NLRC [G.R.
No. 79869, 05 September 1991])

In the case at bar, while it may appear that the work of the petitioner is seasonal, inasmuch as
petitioners have served the company for many years, a number for over 20 years, performing services
which are necessary and indispensable to LUTORCO’s business, serve as badges of regular
employment. Moreover, the fact that petitioners do not work continuously for one whole year but only
for the duration of the tobacco season does not detract from considering them in regular employment
since in a litany of cases this Court has already settled that seasonal employees who are called to work
from time to time and are temporarily laid off during off-season are not separated from service in said
period, but merely considered on leave until re-employed.
Private respondent’s reliance on the case of Mercado vs. NLRC is misplaced considering that since
in said case of Mercado, although respondent company therein consistently availed of the services of
the petitioners therein from year to year, it was clear that petitioners therein were not in respondent
company’s regular employ. Petitioners therein performed different phases of agricultural work in a given
year. However, during that period, they were free to contract services to work for other farm owners, as
in fact they did. Thus, the Court ruled in that case that their employment would naturally end upon
completion of each project or phase of farm work for which they have been contracted.
All the foregoing considered, the public respondent NLRC in the case at bar erred in its total
affirmance of the dismissal of the consolidated complaint, for separation pay, against private
respondents LUTORCO and See Lin Chan considering that petitioners are regular seasonal employees
entitled to the benefits of Article 283 of the Labor Code which applies to closure or cessation of an
establishment or undertaking, whether it be a complete or partial cessation of business operation.
(Abasolo vs. NLRC [G.R. No. 118475, 29 November 2000])

Probationary Employees

Probationary employment. - Probationary employment shall not exceed six months from the date
the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer
period. The services of an employee who 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 standards made known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a regular employee.
(Article 281 of the Labor Code)

[A] probationary employee, as understood under Article 282 of the Labor Code, is one who is on
trial by an employer during which the employer determines whether or not he is qualified for permanent
employment. A probationary appointment is made to afford the employer an opportunity to observe the
fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient
employee. The word "PROBATIONARY", as used to describe the period of employment, IMPLIES THE
PURPOSE OF THE TERM OR PERIOD, BUT NOT ITS LENGTH.
Being in the nature of a "trial period" the essence of a probationary period of employment
fundamentally lies in the purpose or objective sought to be attained by both the employer and the
employee during said period. The length of time is immaterial in determining the correlative rights of
both in dealing with each other during said period. While the employer, as stated earlier, observes the
fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the employer, that he has the
qualifications to meet the reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose who will be hired and who
will be denied employment. In that sense, it is within the exercise of the right to select his employees
that the employer may set or fix a probationary period within which the latter may test and observe the
conduct of the former before hiring him permanently.
xxx xxx xxx
As the law now stands, Article 281 of the Labor Code gives ample authority to the employer to
terminate a probationary employee for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of his
engagement. There is nothing under Article 281 of the Labor Code that would preclude the employer
from extending a regular or a permanent appointment to an employee once the employer finds that the
employee is qualified for regular employment even before the expiration of the probationary period.
Conversely, if the purpose sought by the employer is neither attained nor attainable within the said
period, Article 281 does not likewise preclude the employer from terminating the probationary
employment on justifiable causes as in the instant case. (International Catholic Migration vs. NLRC
[G.R. 72222, 30 January 1989])

This is by no means to assert that the security of tenure protection of the constitution does not apply
to probationary employees. The Labor code has wisely provided for such a case thus: "The termination
of employment of probationary employees and those employed with a fixed period shall be subject to
such regulations as the Secretary of Labor may prescribe to prevent the circumvention of the right of
the employees to be secured in their employment as provided herein." There is no question here, as
noted in the assailed order of Presidential Executive Assistant Clave, that petitioners did not enjoy a
permanent status. During such period they could remain in their positions and any circumvention of
their of the rights, in accordance with the statutory statutory scheme, subject to inquiry and therafter
correction by the Department of Labor. Thus there was the safeguard as to the duration of their
employment being respected. To that extent, their tenure was secure. The moment, however, the period
expired in accordance with contracts freely entered into, they could no longer invoke the constitutional
protection. (Biboso vs. Victorias Milling [G.R. No. L-44360, 31 March 1977])
[T]he extension of Dequila's probation was ex gratia, an act of liberality on the part of his employer
affording him a second chance to make good after having initially failed to prove his worth as an
employee. Such an act cannot now unjustly be turned against said employer's account to compel it to
keep on its payroll one who could not perform according to its work standards. The law, surely, was
never meant to produce such an inequitable result.
By voluntarily agreeing (the extension was with Dequila's written consent) to an extension of the
probationary period, Dequila in effect waived any benefit attaching to the completion of said period if he
still failed to make the grade during the period of extension. The Court finds nothing in the law which by
any fair interpretation prohibits such a waiver. And no public policy protecting the employee and the
security of his tenure is served by prescribing voluntary agreements which, by reasonably extending the
period of probation, actually improve and further a probationary employee's prospects of demonstrating
his fitness for regular employment. (Mariwasa vs. Leodegario [G.R. No. 74246, 26 January 1989])
Generally, the probationary period of employment is limited to six (6) months. The exception to this
general rule is when the parties to an employment contract may agree otherwise, such as when the
same is established by company policy or when the same is required by the nature of work to be
performed by the employee. In the latter case, there is recognition of the exercise of managerial
prerogatives in requiring a longer period of probationary employment, such as in the present case
where the probationary period was set for eighteen (18) months, i.e. from May 1980 to October 1981,
especially where the employee must learn a particular kind of work such as selling, or when the job
requires certain qualifications, skills, experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts
on the period of probationary employment. It states as follows:
Probationary Employment has been the subject of misunderstanding in some quarter. Some
people believe six (6) months is the probationary period in all cases. On the other hand employs
who have already served the probationary period are sometimes required to serve again on
probation.
Under the Labor Code, six (6) months is the general probationary period but the probationary
period is actually the period needed to determine fitness for the job. This period, for lack of a better
measurement is deemed to be the period needed to learn the job.
The purpose of this policy is to protect the worker at the same time enable the employer to
make a meaningful employee selection. This purpose should be kept in mind in enforcing this
provision of the Code. This issuance shall take effect immediately.
In the case at bar, it is shown that private respondent Company needs at least eighteen (18)
months to determine the character and selling capabilities of the petitioners as sales representatives.
 The Company is engaged in advertisement and publication in the Yellow Pages of the PLDT Telephone
Directories. Publication of solicited ads are only made a year after the sale has been made and only
then win the company be able to evaluate the efficiency, conduct, and selling ability of its sales
representatives, the evaluation being based on the published ads. Moreover, an eighteen month
probationary period is recognized by the Labor Union in the private respondent company, which is
Article V of the Collective Bargaining Agreement,...
xxx xxx xxx
And as indicated earlier, the very contracts of employment signed and acquiesced to by the
petitioners specifically indicate that "the company hereby employs the employee as telephone sales
representative on a probationary status for a period of eighteen (18) months, i.e. from May 1980 to
October 1981, inclusive. This stipulation is not contrary to law, morals and public policy. (Ver Buiser vs.
GTE Directories [G.R. No. L-63316, 1984])

Managerial employees and supervisory employees

"Managerial employee" is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not merely routinary or clerical
in nature but requires the use of independent judgment. All employees not falling within any of the
above definitions are considered rank-and-file employees for purposes of this Book. [Article 212 (m),
of the Labor Code]
The grave abuse of discretion committed by public respondent is at once apparent. Art. 212, par.
(m), of the Labor Code is explicit. A managerial employee is (a) one who is vested with powers or
prerogatives to lay down and execute management policies, or to hire, transfer, suspend, lay off,
recall, discharge, assign or discipline employees; or (b) one who is vested with both powers or
prerogatives. A supervisory employee is different from a managerial employee in the sense that the
supervisory employee, in the interest of the employer, effectively recommends such managerial
actions, if the exercise of such managerial authority is not routinary in nature but requires the use of
independent judgment.
Ranged against these definitions and after a thorough examination of the evidence submitted by
both parties, we arrive at a contrary conclusion. Branch Managers, Cashiers and Controllers of
respondent Bank are not managerial employees but supervisory employees. The finding of public
respondent that bank policies are laid down and/or executed through the collective action of these
employees is simply erroneous. His discussion on the division of their duties and responsibilities does
not logically lead to the conclusion that they are managerial employees, as the term is defined in Art.
212, par. (m). (NATU-RPB vs. Torres (G.R. No. 93468, 20 December 1994])
[A] thorough dissection of the job description of the concerned supervisory employees and section
heads show that they are not actually managerial but only supervisory employees since they do not
lay down company policies. PICOP’s contention that the subject section heads and unit managers
exercise the authority to hire and fire is ambiguous and quite misleading for the reason that any
authority they my exercise is not supreme but merely advisory in character. Theirs is not a final
determination of the company policies inasmuch as any action taken by them on matters relating to
hiring, promotion, transfer, suspension and termination of employees is still subject to confirmation and
approval of their respective superior. Thus, where such power, which is in effect recommendatory in
character, is subject to evaluation, review and final action by the department heads and other higher
executives of the company, the same, although present, is not effective and not an exercise of
independent judgment as required by law. (PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])
FIRST-LINE MANAGERS The lowest level in an organization at which individuals are responsible
for the work of others is called first-line or first-level management. First-line managers direct operating
employees only; they do not supervise other managers. Examples of first-line managers are the
"foreman" or production supervisor in a manufacturing plant, the technical supervisor in a research
department, and the clerical supervisor in a large office. First-level managers are often called
supervisors.
 MIDDLE MANAGERS The term middle management can refer to more than one level in an
organization. Middle managers direct the activities of other managers and sometimes also those of
operating employees. Middle managers' principal responsibilities are to direct the activities that
implement their organizations' policies and to balance the demands of their superiors with the
capacities of their subordinates. A plant manager in an electronics firm is an example of a middle
manager.
TOP MANAGERS Composed of a comparatively small group of executives, top management is
responsible for the overall management of the organization. It establishes operating policies and guides
the organization's interactions with its environment. Typical titles of top managers are "chief executive
officer," "president," and "senior vice-president." Actual titles vary from one organization to another and
are not always a reliable guide to membership in the highest management classification.
As can be seen from this description, a distinction exists between those who have the authority to
devise, implement and control strategic and operational policies (top and middle managers) and those
whose task is simply to ensure that such policies are carried out by the rank-and-file employees of an
organization (first-level managers/supervisors). What distinguishes them from the rank-and-file
employees is that they act in the interest of the employer in supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct categories: the "managers"
per se, who compose the former group described above, and the "supervisors" who form the latter
group. Whether they belong to the first or the second category, managers, vis-a-vis employers, are,
likewise, employees.
xxx xxx xxx
Earlier in this opinion, reference was made to the distinction between managers per se (top
managers and middle managers) and supervisors (first-line managers). That distinction is evident in the
work of the route managers which sets them apart from supervisors in general. Unlike supervisors who
basically merely direct operating employees in line with set tasks assigned to them, route managers are
responsible for the success of the company's main line of business through management of their
respective sales teams. Such management necessarily involves the planning, direction, operation and
evaluation of their individual teams and areas which the work of supervisors does not entail.
(United Pepsi Cola Supervisory Union vs. Laguesma [288 SCRA 15, 1998])
[A] thorough dissection of the job description of the concerned supervisory employees and section
heads indisputably show that they are not actually managerial but supervisory employees since they do
not lay down company policies. PICOP’s contention that the subject section heads and unit managers
exercise the authority to hire and fire is ambiguous and misleading for the reason that any authority
they exercise is not supreme but merely advisory in character. Theirs is not a final determination of the
company policies inasmuch as any action taken by them on matters relative to hiring, promotion,
transfer, suspension and termination of employees is still subject to the confirmation and approval by
their respective supervisor. Thus, where power, which is in effect recommendatory in character, is
subject to evaluation, review and final action by department heads and other higher executives of the
company, the same, although present, is not effective and not an exercise of independent judgment as
required by law. (PICOP vs. Laguesma [G.R. No. 101738, 12 April 2000])
Term employment
The question immediately provoked by a reading of Article 319 is whether or not a voluntary
agreement on a fixed term or period would be valid where the employee "has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer." The
definition seems a non sequitur. From the premise that the duties of an employee entail "activities
which are usually necessary or desirable in the usual business or trade of the employer the" conclusion
does not necessarily follow that the employer and employee should be forbidden to stipulate any period
of time for the performance of those activities. There is nothing essentially contradictory between a
definite period of an employment contract and the nature of the employee's duties set down in that
contract as being "usually necessary or desirable in the usual business or trade of the employer." The
concept of the employee's duties as being "usually necessary or desirable in the usual business or
trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically,
THE DECISIVE DETERMINANT IN TERM EMPLOYMENT SHOULD NOT BE THE ACTIVITIES THAT
THE EMPLOYEE IS CALLED UPON TO PERFORM, BUT THE DAY CERTAIN AGREED UPON BY
THE PARTIES FOR THE COMMENCEMENT AND TERMINATION OF THEIR EMPLOYMENT
RELATIONSHIP, A DAY CERTAIN BEING UNDERSTOOD TO BE "THAT WHICH MUST
NECESSARILY COME, ALTHOUGH IT MAY NOT BE KNOWN WHEN." Seasonal employment, and
employment for a particular project are merely instances employment in which a period, where not
expressly set down, necessarily implied.
xxx xxx xxx
There can of course be no quarrel with the proposition that where from the circumstances it is
apparent that periods have been imposed to preclude acquisition of tenurial security by the employee,
they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such
intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist,
e.g., where it is indeed the employee himself who insists upon a period or where the nature of the
engagement is such that, without being seasonal or for a specific project, a definite date of termination
is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema?
Would such an agreement come within the scope of Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code,
under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to
which the lack of a fixed period would be an anomaly, but would also appear to restrict, without
reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The
law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the
whole concept of term employment and subverting to boot the principle of freedom of contract to
remedy the evil of employer's using it as a means to prevent their employees from obtaining security of
tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off
the head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of legislation culminating in the
present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of
regular employment as defined therein should be construed to refer to the substantive evil that the
Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment 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, or where it
satisfactorily appears that the employer and employee dealt with each other on more or less equal
terms with no moral dominance whatever being exercised by the former over the latter. Unless thus
limited in its purview, the law would be made to apply to purposes other than those explicitly stated by
its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences. (Brent School vs. Zamora (G.R. No. L-48494, 05 February 1990])
The private respondent's intention is obvious. It is remarkable that neither the NLRC nor the
Solicitor General recognized it. There is no question that the purpose behind these individual contracts
was to evade the application of the labor laws by making it appear that the drivers of the trucking
company were not its regular employees.
Under these arrangements, the private respondent hoped to be able to terminate the services of the
drivers without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements,
which, significantly, were uniformly limited to a six-month period. No cause had to be established
because such renewal was subject to the discretion of the parties. In fact, the private respondent did
not even have to wait for the expiration of the contract as it was there provided that it could be "earlier
terminated at the option of either party."
By this clever scheme, the private respondent could also prevent the drivers from becoming regular
employees and thus be entitled to security of tenure and other benefits, such as a minimum wage, cost-
of-living allowances, vacation and sick leaves, holiday pay, and other statutory requirements. The
private respondent argues that there was nothing wrong with the affidavit because all the affiant
acknowledged therein was full payment of the amount due him under the agreement. Viewed in this
light, such acknowledgment was indeed not necessary at all because this was already embodied in the
vouchers signed by the payee-driver. But the affidavit, for all its seeming innocuousness, imported more
 than that. What was insidious about the document was the waiver the affiant was unwarily making of
the statutory rights due him as an employee of the trucking company.
xxx xxx xxx
The Court looks with stern disapproval at the contract entered into by the private respondent with
the petitioner (and who knows with how many other drivers). The agreement was a clear attempt to
exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear
that the stipulations of the parties were governed by the Civil Code as in ordinary private transactions.
They were not, to be sure. The agreement was in reality a contract of employment into which were read
the provisions of the Labor Code and the social justice policy mandated by the Constitution. It was a
deceitful agreement cloaked in the habiliments of legality to conceal the selfish desire of the employer
to reap undeserved profits at the expense of its employees. The fact that the drivers are on the whole
practically unlettered only makes the imposition more censurable and the avarice more execrable.
(Cielo vs. NLRC [G.R. No. 78693, 28 January 1991])

[T]he two guidelines, by which fixed contracts of employments can be said NOT to circumvent security
of tenure, are either:
1. The fixed period of employment was KNOWINGLY 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:
2. It satisfactorily appears that the employer and employee DEALT WITH EACH OTHER ON
MORE OR LESS EQUAL TERMS with no moral dominance whatever being exercised by the
former on the latter.
(PNOC vs. NLRC [G.R. No. 97747, 31 March 1993])

It is apparent from Brent School that the critical consideration is the presence or absence of a
substantial indication that the period specified in an employment agreement was designed to
circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of
the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the
mere specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent
to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner
PIA and private respondents, we consider that those provisions must be read together and when so
read, the fixed period of three (3) years specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from
the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such
period in effect a facultative one at the option of the employer PIA. For petitioner PIA claims to be
authorized to shorten that term, at any time and for any cause satisfactory to itself, to a one-month
period, or even less by simply paying the employee a month's salary. Because the net effect of
paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents
Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that
paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private
respondents even during the limited period of three (3) years, and thus to escape completely the thrust
of Articles 280 and 281 of the Labor Code. (Pakistan Air Lines vs. Ople [G.R. No. 61594, 28 September
1990])

Project employees

…[W]here the employment has been fixed for a specific project or undertaking, the completion
or termination of which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the employment is for the
duration of the season. (1st paragraph of Article 280 of the Labor Code)

A project employee has been defined to be one whose employment has been fixed for a specific
project or undertaking, the completion or termination of which has been determined at the time of the
engagement of the employee, . . . . (Mercado, Sr. vs. NLRC [G.R. No. 79869, 05 September 1991])
 In the realm of business and industry, we note that "project" could refer to one or the other of at
least two (2) distinguishable types of activities. FIRSTLY, a project could refer to a particular job or
undertaking that is WITHIN THE REGULAR OR USUAL BUSINESS OF THE EMPLOYER company,
but which is distinct and separate, and identifiable as such, from the other undertakings of the
company. Such job or undertaking begins and ends at determined or determinable times. The typical
example of this first type of project is a particular construction job or project of a construction company.
A construction company ordinarily carries out two or more discrete identifiable construction projects:
e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their services
may be lawfully terminated at completion of the project.
The term "project" could also refer to, SECONDLY, a particular job or undertaking that is NOT
WITHIN THE REGULAR BUSINESS OF THE CORPORATION. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations of the employer. The
job or undertaking also begins and ends at determined or determinable times. The case at bar presents
what appears to our mind as a typical example of this kind of "project." (ALU-TUCP vs. NLRC [G.R. No.
109902, 02 August 1994])

As an electrical contractor, the private respondent depends for its business on the contracts it is able
to obtain from real estate developers and builders of buildings. Since its work depends on the availability
of such contracts or "projects," necessarily the duration of the employment of its work force is not
permanent but co-terminus with the projects to which they are assigned and from whose payrolls they
are paid. It would be extremely burdensome for their employer who, like them, depends on the
availability of projects, if it would have to carry them as permanent employees and pay them wages
even if there are no projects for them to work on. We hold, therefore, that the NLRC did not abuse its
discretion in finding, based on substantial evidence in the records, that the petitioners are only project
workers of the private respondent. (Cartagenas vs. Romago Electric [G.R. No. 82973, 1989])

[P]etitioner relies on Policy Instruction No. 20 which was issued by then Secretary Ople to stabilize
employer-employee relations in the construction industry to support his contention that workers in the
construction industry may now be considered regular employees after their long years of service with
private respondent. The pertinent provision of Policy Instruction No. 20 reads:
Members of a work pool from which a construction company draws its project employees, if
considered employees of the construction company while in the work pool, are non-project
employees or employees for an indefinite period. If they are employed in a particular project, the
completion of the project or of any phase thereof will not mean severance of employer-employee
relationship.
Respondent Commission correctly observed in its decision that complainants, one of whom
petitioner, failed to consider the requirement in Policy Instruction No. 20 that to qualify as member of a
work pool, the worker must still be considered an employee of the construction company while in the
work pool. In other words, there must be proof to the effect that petitioner was under an obligation to be
always available on call of private respondent and that he was not free to offer his services to other
employees. Unfortunately, petitioner miserably failed to introduce any evidence of such nature during
the times when there were no project. (Fernandez vs. NLRC [G.R. No. 106090, 28 February 1994])

Confidential Employees
Confidential employees are those who (1) ASSIST OR ACT IN A CONFIDENTIAL CAPACITY, in
regard (2) TO PERSONS WHO FORMULATE, DETERMINE, AND EFFECTUATE MANAGEMENT
POLICIES [specifically in the field of LABOR RELATIONS]. The two criteria are cumulative, and both
must be met if an employee is to be considered a confidential employee that is, the confidential
relationship must exist between the employee and his superior officer; and that officer must handle the
prescribed responsibilities relating to labor relations. (Sugbuanon Rural Bank, Inc. vs. Laguesma [G.R.
No. 116194, 02 February 2000])
 Granting arguendo that an employee has access to confidential labor relations information but such
is merely incidental to his duties and knowledge thereof is not necessary in the performance of such
duties, said access does not render the employee a confidential employee. If access to confidential
labor relations information is to be a factor in the determination of an employee's confidential status,
such information must relate to the employer's labor relations policies. Thus, an employee of a labor
union, or of a management association, must have access to confidential labor relations information
with respect to his employer, the union, or the association, to be regarded a confidential employee, and
knowledge of labor relations information pertaining to the companies with which the union deals, or
which the association represents, will not cause an employee to be excluded from the bargaining unit
representing employees of the union or association." "Access to information which is regarded by the
employer to be confidential from the business standpoint, such as financial information or technical
trade secrets, will not render an employee a confidential employee. (SMC vs. Laguesma [G.R. No.
110399, 15 August 1997])

Teachers
The acquisition of security of tenure by the teacher in the manner indicated signifies that he shall
thenceforth have the right to remain in employment as such teacher until he reaches the compulsory
retirement age in accordance with the rules of the school or the law. That tenure, once acquired, cannot
be adversely affected or defeated by requiring the teacher to execute contracts stipulating the
termination of his employment upon the expiration of a fixed period or term. Contracts of that sort are
anathema and will be struck down as null and void.
Now, a teacher may also be appointed as a department head or administrative officer of the school,
e.g., as member of the school's governing council, as college dean or assistant dean, as high school's
principal, as college secretary. Except in the case of a clear and explicit agreement to the contrary, the
acceptance by a teacher of an administrative position offered to him or to which he might have aspired,
does not operate as a relinquishment or loss by him of his security of tenure as a faculty member; he
retains his tenure as a teacher during all the time that he occupies the additional position of department
head or administrative officer of the school. Indeed, the agreement between him and the school may
very well include a provision for him to continue teaching even on a part-time basis.
xxx xxx xxx
A distinction should thus be drawn between the teaching staff of private educational institutions, on
one hand teachers, assistant instructors, assistant professors, associate professors, full professors
and department or administrative heads or officials on the other college or department secretaries,
principals, directors, assistant deans, deans. The teaching staff, the faculty members, may and should
acquire tenure in accordance with the rules and regulations of the DECS and the school's own rules
and standards. On the other hand, teachers appointed to serve as administrative officials do not
normally and should not expect to, acquire a second or additional tenure. The acquisition of such an
additional tenure is not normal, is the exception rather than the rule, and should therefore be clearly
and specifically provided by law or contract.
(La Salette of Santiago, Inc. vs. NLRC [195 SCRA 80, 1991])

RIGHT TO SELF-ORGANIZATION
As to Government Employees and Employees of GOCCs with original charters
EXECUTIVE ORDER NO. 180
(Effective: 01 June 1987)
PROVIDING GUIDELINES FOR THE EXERCISE OF THE RIGHT TO RGANIZE OF
GOVERNMENT EMPLOYEES, CREATING A PUBLIC SECTOR LABOR- MANAGEMENT
COUNCIL, AND FOR OTHER PURPOSES

The scope of the constitutional right to self-organization of "government employees" above

mentioned, was defined and delineated in Executive Order No. 180. According to this Executive Order,
the right of self-organization does indeed pertain to all "employees of all branches, subdivisions,
instrumentalities and agencies of the Government, including government-owned or controlled
corporations with original charters;" such employees "shall not be discriminated against in respect of
their employment by reason of their membership in employees' organizations or participation in the
 normal activities of their organization x x (and their) employment shall not be subject to the condition
that they shall not join or shall relinquish their membership in the employees' organizations.
However, the concept of the government employees' right of self-organization differs significantly
from that of employees in the private sector. The latter's right of self-organization, i.e., "to form, join or
assist labor organizations for purposes of collective bargaining," admittedly includes the right to deal
and negotiate with their respective employers in order to fix the terms and conditions of employment
and also, to engage in concerted activities for the attainment of their objectives, such as strikes,
picketing, boycotts. But the right of GOVERNMENT EMPLOYEES to "form, join or assist employees
organizations of their own choosing" under Executive Order No. 180 is not regarded as existing or
available for "purposes of collective bargaining," but simply "FOR THE FURTHERANCE AND
PROTECTION OF THEIR INTERESTS."
In other words, the right of Government employees to deal and negotiate with their respective
employers is not quite as extensive as that of private employees. Excluded from negotiation by
government employees are the "terms and conditions of employment ... that are fixed by law," it being
only those terms and conditions not otherwise fixed by law that "may be subject of negotiation between
the duly recognized employees' organizations and appropriate government authorities," And while EO
No. 180 concedes to government employees, like their counterparts in the private sector, the right to
engage in concerted activities, including the right to strike, the executive order is quick to add that those
activities must be exercised in accordance with law, i.e. are subject both to "Civil Service Law and
rules" and "any legislation that may be enacted by Congress," that "the resolution of complaints,
grievances and cases involving government employees" is not ordinarily left to collective bargaining or
other related concerted activities, but to "Civil Service Law and labor laws and procedures whenever
applicable;" and that in case "any dispute remains unresolved after exhausting all available remedies
under existing laws and procedures, the parties may jointly refer the dispute to the (Public Sector
Labor-Management) Council for appropriate action." What is more, the Rules and Regulations
implementing Executive Order No. 180 explicitly provide that since the "terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government-owned and controlled corporations with original charters are governed by law, the
employees therein shall not strike for the purpose of securing changes thereof.
On the matter of limitations on membership in labor unions of government employees, Executive
Order No. 180 declares that "high level employees whose functions are normally considered as policy
making or managerial, or whose duties are of a highly confidential nature shall not be eligible to join the
organization of rank-and-file government employees. A "high level employee" is one "whose functions
are normally considered policy determining, managerial or one whose duties are highly confidential in
nature. A managerial function refers to the exercise of powers such as: 1. To effectively recommend
such managerial actions; 2. To formulate or execute management policies and decisions; or 3. To hire,
transfer, suspend, lay off, recall, dismiss, assign or discipline employees.
(Arizala vs. CA [G.R. Nos. 43633-34, 14 September 1990])

I. COVERAGE
Section 1. This Executive Order applies to all employees of all branches, subdivisions, instrumentalities,
and agencies, of the Government, including government-owned or controlled corporations with original
charters. For this purpose, employees, covered by this Executive Order shall be referred to as "government
employees".
Section 2. All government employees can form, join or assist employees' organizations of their own
choosing for the furtherance and protection of their interests. They can also form, in conjunction with
appropriate government authorities, labor-management committees, works councils and other forms of
workers' participation schemes to achieve the same objectives.
Section 3. High-level employees whose functions are normally considered as policy-making or managerial
or whose duties are of a highly confidential nature shall not be eligible to join the organization of rank-and-file
government employees.
Section 4. The Executive Order shall not apply to the members of the Armed Forces of the Philippines,
including police officers, policemen, firemen and jail guards.
II. PROTECTION OF THE RIGHT TO ORGANIZE
Section 5. Government employees shall not be discriminated against in respect of their employment by
reason of their membership in employees' organizations or participation in the normal activities of their
organization. Their employment shall not be subject to the condition that they shall not join or shall relinquish
their membership in the employees' organizations.
Section 6. Government authorities shall not interfere in the establishment, functioning or administration of
government employees' organizations through acts designed to place such organizations under the control of
government authority.

III. REGISTRATION OF EMPLOYEES' ORGANIZATION

Section 7. Government employees' organizations shall register with the Civil Service Commission and the
Department of Labor and Employment. The application shall be filed with the Bureau of Labor Relations of the
Department which shall process the same in accordance with the provisions of the Labor Code of the
Philippines, as amended. Applications may also be filed with the Regional Offices of the Department of Labor
and Employment which shall immediately transmit the said applications to the Bureau of Labor Relations within
three (3) days from receipt thereof.
Section 8. Upon approval of the application, a registration certificate be issued to the organization
recognizing it as a legitimate employees' organization with the right to represent its members and undertake
activities to further and defend its interest. The corresponding certificates of registration shall be jointly
approved by the Chairman of the Civil Service Commission and Secretary of Labor and Employment.

IV. SOLE AND EXCLUSIVE EMPLOYEES' REPRESENTATIVES

Section 9. The appropriate organizational unit shall be the employers unit consisting of rank-and-file
employees unless circumstances otherwise require.
Section 10. The duly registered employees' organization having the support of the majority of the
employees in the appropriate organizational unit shall be designated as the sole and exclusive representative
of the employees.

Section 11. A duly registered employees' organization shall be accorded voluntary recognition upon a
showing that no other employees' organization is registered or is seeking registration, based on records of the
Bureau of Labor Relations, and that the said organizations has the majority support of the rank-and-file
employees in the organizational unit.
Section 12. Where there are two or more duly registered employees' organizations in the appropriate
organizational unit, the Bureau of Labor Relations shall, upon petition, order the conduct of a certification
election and shall certify the winner as the exclusive representative of the rank-and-file employees in said
organization unit.

V. TERMS AND CONDITIONS OF EMPLOYMENT IN GOVERNMENT SERVICES

Section 13. Terms and conditions of employment or improvements thereof, except those that are fixed by
law, may be the subject of negotiations between duly recognized employees' organizations and appropriate
government authorities.
Government employees. - The terms and conditions of employment of all government employees,
including employees of government-owned and controlled corporations, shall be governed by the Civil
Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as
provided for in the new constitution. However, there shall be no reduction of existing wages, benefits
and other terms and conditions of employment being enjoyed by them at the time of the adoption of this
Code. (Article 276 of the Labor Code.)
Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the ambit of
legislation or negotiate with the appropriate government agencies for the improvement of those which
are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the Public
 Sector Labor - Management Council for appropriate action. But employees in the civil service may not
resort to strikes, walk-outs and other temporary work stoppages, like workers in the private sector, to
pressure the Government to accede to their demands. As now provided under Sec. 4, Rule III of the
Rules and Regulations to Govern the Exercise of the Right of Government- Employees to Self-
Organization, which took effect after the instant dispute arose, "[t]he terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government- owned and controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes thereof." (SSSEA vs. CA [G.R.
No. 85279, 28 July 1989])
VI. PEACEFUL CONCERTED ACTIVITIES AND STRIKES
Section 14. The Civil Service laws and rules governing concerted activities and strikes in the government
service shall be observed, subject to any legislation that may be enacted by Congress.
[T]o implement the constitutional guarantee of the right of government employees to organize, the
President issued E.O. No. 180 which provides guidelines for the exercise of the right to organize of
government employees. In Section 14 thereof, it is provided that "[t]he Civil Service law and rules
governing concerted activities and strikes in the government service shall be observed, subject to any
legislation that may be enacted by Congress." The President was apparently referring to Memorandum
Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987 which, "prior to the
enactment by Congress of applicable laws concerning strike by government employees ... enjoins
under pain of administrative sanctions, all government officers and employees from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of mass action which will result in temporary
stoppage or disruption of public service." The air was thus cleared of the confusion. At present, in the
absence of any legislation allowing government employees to strike, recognizing their right to do so, or
regulating the exercise of the right, they are prohibited from striking, by express provision of
Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this juncture, it must be stated that the
validity of Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under the 1987 Constitution
"[t]he civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters" [Art. IX(B),
Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the civil service are denominated as
"government employees"] and that the SSS is one such government-controlled corporation with an
original charter, having been created under R.A. No. 1161, its employees are part of the civil service
[NASECO v. NLRC, G.R. Nos. 69870, 1988] and are covered by the Civil Service Commission's
memorandum prohibiting strikes. This being the case, the strike staged by the employees of the SSS
was illegal.
(SSSEA vs. CA [G.R. No. 85279, 28 July 1989])
We now come to the case before us. Petitioners, who are public schoolteachers and thus
government employees, do not seek to establish that they have a right to strike. Rather, they
tenaciously insist that their absences during certain dates in September 1990 were a valid exercise of
their constitutional right to engage in peaceful assembly to petition the government for a redress of
grievances. They claim that their gathering was not a strike; therefore, their participation therein did not
constitute any offense. MPSTA vs. Laguio 36 and ACT vs. Cariño, 37 in which this Court declared that
"these 'mass actions' were to all intents and purposes a strike; they constituted a concerted and
unauthorized stoppage of, or absence from, work which it was the teachers' duty to perform,
undertaken for essentially economic reasons," should not principally resolve the present case, as the
underlying facts are allegedly not identical.
Strike, as defined by law, means any temporary stoppage of work by the concerted action of
employees as a result of an industrial or labor dispute. 38 A labor dispute includes any controversy or
matter concerning terms and conditions of employment; or the association or representation of persons
in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment,
regardless of whether the disputants stand in the proximate relation of employers and employees. 39
With these premises, we now evaluate the circumstances of the instant petition.
 It cannot be denied that the mass action or assembly staged by the petitioners resulted in the non-
holding of classes in several public schools during the corresponding period. Petitioners do not dispute
that the grievances for which they sought redress concerned the alleged failure of public authorities
essentially, their "employers" to fully and justly implement certain laws and measures intended to
benefit them materially,…
(Jacinto vs. CA [G.R. No. 124540, 14 November 1997])
It has long been settled that the mass actions of September/October 1990 staged by Metro Manila
public school teachers amounted to a strike in every sense of the term, constituting, as they did,
"concerted and unauthorized stoppage of or absence from, work which it was the teachers" duty to
perform, undertaken for essentially economic reasons." The claim that the teachers involved in the
1990 mass actions were merely exercising their constitutional right to peaceful assembly was already
rejected in Gan vs. Civil Service Commission. MPSTA vs. Laguio [G.R. No. 95445, 06 August 1991])

[T]he claim that the teachers were thereby denied their rights to peaceably assemble and petition
the government for redress of grievances reasoning that this constitutional liberty to be upheld like any
other liberty, must be exercised within reasonable limits so as not to prejudice the public welfare. But
the school teachers in the case of the 1990 mass actions did not exercise their constitutional rights
within reasonable limits. On the contrary, they committed acts prejudicial to the best interest of the
service by staging the mass protest on regular school days, abandoning their classes and refusing to
go back even after they had been ordered to do so, Had the teachers availed of their free-time recess,
after classes, weekends or holidays to dramatize their grievances and to dialogue with the proper
authorities within bounds of the law, no one – not the DECS, the CSC or even the Supreme Court –
could have held them liable for their participation in the mass action. (Gan vs. CSC [G.R. No. 110717,
14 December 1993])

VII. PUBLIC SECTOR LABOR-MANAGEMENT COUNCIL

Section 15. A Public Sector Labor Management Council, hereinafter referred to as the Council, is hereby
constituted to be composed of the following:
1) Chairman, Civil Service Commission - Chairman
2) Secretary, Department of Labor and Employment - Vice Chairman
3) Secretary, Department of Finance - Member
4) Secretary, Department of Justice - Member
5) Secretary, Department of Budget and Management - Member

The Council shall implement and administer the provisions of this Executive Order. For this purpose, the
Council shall promulgate the necessary rules and regulations to implement this Executive Order.

Since NPDC is a government agency, its employees are covered by civil service rules and
regulations (Sec. 2, Article IX, 1987 Constitution). Its employees are civil service employees (Sec. 14,
Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize and join unions of
their choice, there is as yet no law permitting them to strike. In case of a labor dispute between the
employees and the government, Section 15 of Executive Order No. 180 dated June 1, 1987 provides
that the Public Sector Labor-Management Council, not the Department of Labor and Employment, shall
hear the dispute. Clearly, the Court of Appeals and the lower court erred in holding that the labor
dispute between the NPDC and the members of the NPDSA is cognizable by the Department of Labor
and Employment. (Republic vs. CA [G.R. No. 87676, 20 December 1989])

It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive
jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction to issue a writ of
injunction enjoining the continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by the Civil Service Law, rules
and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public Sector Labor - Management
 Council with jurisdiction over unresolved labor disputes involving government employees [Sec. 16].
Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its general
jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSS's complaint for
damages and issuing the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector Labor -
Management Council has not been granted by law authority to issue writs of injunction in labor disputes
within its jurisdiction. Thus, since it is the Council, and not the NLRC, that has jurisdiction over the
instant labor dispute, resort to the general courts of law for the issuance of a writ of injunction to enjoin
the strike is appropriate.
(SSSEA vs. CA [G.R. No. 85279, 28 July 1989])
VIII. SETTLEMENT OF DISPUTES
Section 16. The Civil Service and labor laws and procedures, whenever applicable, shall be followed in the
resolution of complaints, grievances and cases involving government employees. In case any dispute remains
unresolved after exhausting all the available remedies under existing laws and procedures, the parties may
jointly refer the dispute to the Council, for appropriate action.
IX. EFFECTIVITY
Section 17. This Executive Order shall take effect immediately.

As to Members of a cooperative
A cooperative, therefore, is by its nature different from an ordinary business concern being run
either, by persons, partnerships or corporations. Its owners and/or members are the ones who run and
operate the business while the others are its employees. As above stated, irrespective of the name of
shares owned by its members they are entitled to cast one vote each in deciding upon the affair of the
cooperative. Their share capital earn limited interests, They enjoy special privileges as exemption from
income tax and sales taxes, preferential right to supply their products to State agencies and even
exemption from minimum wage laws.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke
the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In
the opinion of August 14, 1981 of the Solicitor General, he corectly opined that employees of
cooperatives who are themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not members or co-owners
thereof, certainly such employees are entitled to exercise the rights of all workers to organization,
collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of
the country.
(Cooperative Rural Bank of Davao City vs. Ferrer-Calleja [G.R. No. 77951, 26 September 1988]

As to Managerial Employees

Ineligibility of managerial employees to join any labor organization; right of supervisory

employees. - Managerial employees are not eligible to join, assist or form any labor
organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own. (Article 245 of the Labor Code)

The reasons for the disqualification of a managerial employee from joining or assisting a labor
organization is applied also to confidential employees thru the doctrine of necessary implication,
wherein the SC took into consideration the rationale behind the disqualification of managerial
employees expressed in Bulletin Publishing Corporation v. Sanchez, thus: "... if these managerial
employees would belong to or be affiliated with a Union, the latter might not be assured of their loyalty
to the Union in view of evident conflict of interests. The Union can also become company-dominated
with the presence of managerial employees in Union membership." In the collective bargaining
process, managerial employees are supposed to be on the side of the employer, to act as its
representatives, and to see to it that its interests are well protected. The employer is not assured of
such protection if these employees themselves are union members. Collective bargaining in such a
 situation can become one-sided. Unionization of confidential employees for the purpose of collective
bargaining would mean the extension of the law to persons or individuals who are supposed to act "in
the interest of" the employers. It is not farfetched that in the course of collective bargaining, they might
jeopardize that interest which they are duty-bound to protect. (NATU-RPB vs. Torres [G.R. No. 93468,
29 December 1994])

As to Confidential Employees

We have decreed as disqualified from bargaining with management in case of Bulletin Publishing
Co. Inc. vs. Hon. Augusto Sanchez (144 SCRA 628) reiterating herein the rationale for such ruling as
follows: if these managerial employees would belong to or be affiliated with a Union, the latter might not
be assured of their loyalty to the Union in view of evident conflict of interests or that the Union can be
company-dominated with the presence of managerial employees in Union membership. A managerial
employee is defined under Art. 212 (k) of the new Labor Code as "one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees, or to effectively recommend such managerial actions.
All employees not falling within this definitions are considered rank-and-file employees for purposes of
this Book." (Golden Farms vs. Calleja [G.R. No. 78755, 19 July 1989])

Art. 245 of the Labor Code does not directly prohibit confidential employees from engaging in union
activities. However, under the doctrine of necessary implication, the disqualification of managerial
employees equally applies to confidential employees. The confidential-employee rule justifies exclusion
of confidential employees because in the normal course of their duties they become aware of
management policies relating to labor relations. It must be stressed, however, that when the employee
does not have access to confidential labor relations information, there is no legal prohibition against
confidential employees from forming, assisting, or joining a union. (Sugbuanon Rural Bank, Inc. vs.
Laguesma [G.R. No. 116194, 02 February 2000])

The exclusion from bargaining units of employees who, in the normal course of their duties, become
aware of management policies relating to labor relations is a principal objective sought to be
accomplished by the ''confidential employee rule." The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of interests. "Management
should not be required to handle labor relations matters through employees who are represented by the
union with which the company is required to deal and who in the normal performance of their duties
may obtain advance information of the company's position with regard to contract negotiations, the
disposition of grievances, or other labor relations matters." (SMC vs. Laguesma [G.R. No. 110399, 15
August 1997])

As to Supervisory Employees
The rationale for the amendment is the government's recognition of the right of supervisors to
organize with the qualification that they shall not join or assist in the organization of rank-and-file
employees. The reason behind the Industrial Peace Act provision on the same subject matter has been
adopted in the present statute. The interests of supervisors on the one hand, and the rank-and-file
employees on the other, are separate and distinct. The functions of supervisors, being recommendatory
in nature, are more identified with the interests of the employer. The performance of those functions
may, thus, run counter to the interests of the rank-and-file.
xxx xxx xxx
Thus, if the intent of the law is to avoid a situation where supervisors would merge with the rank
and-file or where the supervisors' labor organization would represent conflicting interests, then a local
supervisors' union should not be allowed to affiliate with the national federation of union of rank-and-file
employees where that federation actively participates in union activity in the company.
xxx xxx xxx
The prohibition against a supervisors' union joining a local union of rank-and-file is replete with
jurisprudence. The Court emphasizes that the limitation is not confined to a case of supervisors wanting
to join a rank-and-file local union. The prohibition extends to a supervisors' local union applying for
membership in a national federation the members of which include local unions of rank-and-file
employees. The intent of the law is clear especially where, as in the case at bar, the supervisors will be
 co-mingling with those employees whom they directly supervise in their own bargaining unit. (Atlas
Lithographic vs. Laguesma [205 SCRA])
As to Security Guards
Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the original provisions of Article
245 of the Labor Code, reading as follows:
Art. 245. Ineligibility of security personnel to join any labor organization. Security guards
and other personnel employed for the protection and security of the person, properties and
premises of the employer shall not be eligible for membership, in any labor organization.
and substituted it with the following provision:
Art. 245. Right of employees in the public service.
By virtue of such repeal and substitution, security guards became eligible for membership in any
labor organization. (Philips Industrial vs. NLRC [G.R. No. 88957, 25 June 1992])

Right to Unionize vs. Freedom of Religion

Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of
Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973,
provide that the right to form associations or societies for purposes not contrary to law shall not be
abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to self-
organization and to form, join of assist labor organizations of their own choosing for the purpose of
collective bargaining and to engage in concerted activities for the purpose of collective bargaining and
other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and
guarantee is the "right" to form or join associations. Notwithstanding the different theories propounded
by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely:
first, LIBERTY OR FREEDOM, i.e., the absence of legal restraint, whereby an employee may act for
himself without being prevented by law; and second, POWER, whereby an employee may, as he
pleases, join or refrain from Joining an association. It is, therefore, the employee who should decide for
himself whether he should join or not an association; and should he choose to join, he himself makes
up his mind as to which association he would join; and even after he has joined, he still retains the
liberty and the power to leave and cancel his membership with said organization at any time. It is clear,
therefore, that the RIGHT TO JOIN A UNION INCLUDES THE RIGHT TO ABSTAIN FROM JOINING
ANY UNION. Inasmuch as what both the Constitution and the Industrial Peace Act have recognized,
and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to
say that the law also imposes, in the same breath, upon the employee the duty to join associations. The
law does not enjoin an employee to sign up with any association.
The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace
Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn by
operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of
which the employer may employ only member of the collective bargaining union, and the employees
must continue to be members of the union for the duration of the contract in order to keep their jobs.
Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for an employer "to discriminate in regard to
hire or tenure of employment or any term or condition of employment to encourage or discourage
membership in any labor organization" the employer is, however, not precluded "from making an
agreement with a labor organization to require as a condition of employment membership therein, if
such labor organization is the representative of the employees". By virtue, therefore, of a closed shop
agreement, before the enactment of RA No. 3350, if any person, regardless of his religious beliefs,
wishes to be employed or to keep his employment, he must become a member of the collective
bargaining union. Hence, the right of said employee not to join the labor union is curtailed and
withdrawn.
To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced
an exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but
such agreement shall not cover members of any religious sects which prohibit affiliation of their
members in any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the
application and coverage of the closed shop agreement the employees belonging to any religious sects
 which prohibit affiliation of their members with any labor organization. What the exception provides,
therefore, is that members of said religious sects cannot be compelled or coerced to join labor unions
even when said unions have closed shop agreements with the employers; that in spite of any closed
shop agreement, members of said religious sects cannot be refused employment or dismissed from
their jobs on the sole ground that they are not members of the collective bargaining union. It is clear,
therefore, that the assailed Act, far from infringing the constitutional provision on freedom of
association, upholds and reinforces it. It does not prohibit the members of said religious sects from
affiliating with labor unions. It still leaves to said members the liberty and the power to affiliate, or not to
affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said religious sects
prefer to sign up with the labor union, they can do so. If in deference and fealty to their religious faith,
they refuse to sign up, they can do so; the law does not coerce them to join; neither does the law
prohibit them from joining; and neither may the employer or labor union compel them to join. Republic
Act No. 3350, therefore, does not violate the constitutional provision on freedom of association.
(Victoriano vs. Elizalde [G.R. No. L-25246, September 1974])
Under Section 4(a), paragraph 4, of Republic Act No. 875 (IPA), prior to its amendment by Republic
Act No. 3350, the employer was not precluded "from making an agreement with a labor organization to
require as a condition of employment membership therein, if such labor organization is the
representative of the employees." On June 18, 1961, however, Republic Act No. 3350 was enacted,
introducing an amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as
follows: ... "but such agreement shall not cover members of any religious sects which prohibit affiliation
of their members in any such labor organization". (Victoriano vs. Elizalde [G.R. No. L-25246, 12
September 1974])

Bargaining Unit

A "bargaining unit" has been defined as a group of employees of a given employer, comprised of all
or less than all of the entire body of employees, which the collective interest of all the employees,
consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the law. (University of the Philippines
vs. Ferrer-Calleja [G.R. No. 96189, 14 July 1992])

Factors to be considered in determining the proper bargaining unit:

(1) Will of the employees (Globe Doctrine);
(2) Affinity and unit of employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions;
(3) Prior collective bargaining history;
(4) Employment status, such as temporary, seasonal probationary employees; and
(5) Other factors: the history, extent and type of organization of employees in other plants of the
same employer, or other employers in the same industry; the skill, wages, work, and working
conditions of the employees; the desires of the employees; the eligibility of the employees for
membership in the union or unions involved; and the relationship between the unit or units
proposed and the employer's organization, management, and operation.

One Company – One Union Policy

We see no need for the formation of another union in PHILTRANCO. The qualified members of the
KASAMA KO may join the NAMAWU-MIF if they want to be union members, and to be consistent with
the one-union, one-company policy of the Department of Labor and Employment, and the laws it
enforces. As held in the case of General Rubber and Footwear Corp. v. Bureau of Labor Relations (155
SCRA 283 [1987]):
... It has been the policy of the Bureau to encourage the formation of an employer unit
'unless circumstances otherwise require. The proliferation of unions in an employer unit is
discouraged as a matter of policy unless there are compelling reasons which would deny a
certain class of employees the right to self-organization for purposes of collective bargaining.
This case does not fall squarely within the exception.
xxx xxx xxx
 It is natural in almost all fairly sized companies to have groups of workers discharging different
functions. No company could possibly have all employees performing exactly the same work. Variety of
tasks is to be expected. It would not be in the interest of sound labor-management relations if each
group of employees assigned to a specialized function or section would decide to break away from their
fellow-workers and form their own separate bargaining unit. We cannot allow one unit for typists and
clerks, one unit for accountants, another unit for messengers and drivers, and so on in needless
profusion. Where shall the line be drawn? The questioned decision of the public respondent can only
lead to confusion, discord and labor strife.
(Philtranco Service Enterprises vs. BLR [G.R. No. 85343, 28 June 1989])

LABOR ORGANIZATIONS

Labor Organization,
"Labor organization" means any union or association of employees which exists in whole or in
part for the purpose of collective bargaining or of dealing with employers concerning terms and
conditions of employment. (Article 212 (g) of the Labor Code)

Legitimate Labor Organization,

"Legitimate labor organization" means any labor organization duly registered with the
Department of Labor and Employment, and includes any branch or local thereof. (Article 212 (h)
of the Labor Code)

Registration Requirement
In PAFLU vs. Sec. of Labor, 27 SCRA 40, We had occasion to interpret Section 23 of R.A. No. 875
(Industrial Peace Act) requiring of labor unions registration by the Department of Labor in order to
qualify as "LEGITIMATE LABOR ORGANIZATION," and We said:
The theory to the effect that Section 23 of Republic Act No. 875 unduly curtails the
freedom of assembly and association guaranteed in the Bill of Rights is devoid of factual
basis. The registration prescribed in paragraph (b) of said section 17 is not a limitation to the
right of assembly or association, which may be exercised with or without said registration. The
latter is merely a condition sine qua non for the acquisition of legal personality by labor
organizations, associations or unions and the possession of the 'rights and privileges granted
by law to legitimate labor organizations.' The Constitution does not guarantee these rights and
privileges, much less said personality, which are mere statutory creations, for the possession
and exercise of which registration is required to protect both labor and the public against
abuses, fraud, or impostors who pose as organizers, although not truly accredited agents of
the union they purport to represent. Such requirement is a valid exercise of the police power,
because the activities in which labor organizations, associations and union or workers are
engaged affect public interest, which should be protected.
Simply put, the Amigo Employees Union (Independent) Which petitioners claim to represent, not
being a legitimate labor organization, may not validly present representation issues. Therefore, the act
of petitioners cannot be considered a legitimate exercise of their right to self-organization. Hence, We
affirm and reiterate the rationale explained in Phil Association of Free Labor Unions vs. Sec. of Labor
case, supra, in order to protect legitimate labor and at the same time maintain discipline and
responsibility within its ranks. (Villar vs. Inciong [G.R. No. L-50283-84, 20 April 1983])
Ordinarily, a labor organization acquires legitimacy only upon registration with the BLR. Under Article
234 (Requirements of Registration):
Any applicant labor organization, association or group of unions or workers shall acquire legal
personality and shall be entitled to the rights and privileges granted by law to legitimate labor
organizations upon issuance of the certificate of registration based on the following requirements:
(a) Fifty-pesos (P50.00) registration fee;
 (b) The names of its officers, their addresses, the principal address of the labor organization,
the minutes of the organizational meeting and the list of the workers who participated in
such meetings;
(c) The names of all its members comprising at least twenty 20% percent of all the employees
in the bargaining unit where it seek to operate;
(d) If the applicant has been in existence for one or more years, copies , of its annual financial
reports; and
(e) Four copies of the constitution and by-laws of the applicant union, the minutes of its
adoption or ratification and the list of the members who participated in it.
xxx xxx xxx
Absent compliance with these mandatory requirements, the local or chapter does not become a
legitimate labor organization.
(Progressive Development vs. Secretary [G.R. No. 96425, 04 February 1992])
By virtue of DEPARTMENT ORDER NO. 9, SERIES OF 1997, however, the documents needed to
be submitted by a local or chapter have been reduced to the following:
(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;
(b) The names of the local/chapter's officers, their addresses, and the principal office of the
local/chapter;
(c) The local/chapter's constitution and by-laws; provided that where the local/chapter's
constitution and by-laws is the same as that of the federation or national union, this fact shall
be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or Treasurer
of the local/chapter and attested by its President.
Since Department Order No. 9 has done away with the submission of books of account as a
requisite for registration, Pagpalain's only recourse now is to have said order declared null and void. It
premises its case on the principles laid down in Progressive and Protection Technology. First,
Pagpalain maintains that Department Order No. 9 is illegal, allegedly because it contravenes the
above-mentioned rulings of this Court. Citing Article 8 of the Civil Code, which provides that [j]udicial
decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the
Philippines," Pagpalain declares the two cases part of the law of the land which, under the third
paragraph of Article 7 of the Civil Code, may not be supplanted by mere regulation.
(Pagpalain Haulers, Inc. vs. Trajano [G.R. No. 133215, 15 July 1999])

Role of Constitution and By-Laws

“[T]he Constitution and By-laws of an organization serve as a contract that binds its members.”
(Oca vs. Trajano [G.R. No. 76189, 08 August 1991])
(The labor organization owes its personality to the state, and when such personality was granted, it was
granted under the conditions laid down in the documentary requirements submitted. The constitution
and by-laws of the organization are part and parcel of the documents submitted, hence the terms and
conditions set forth therein must be complied with.)

When the Constitution and by-laws of both unions dictated the remedy for intra-union dispute, such as
petitioner's complaint against private respondents for unauthorized or illegal disbursement of unions funds,
this should be resorted to before recourse can be made to the appropriate administrative or judicial body,
not only to give the grievance machinery or appeals' body of the union the opportunity to decide the matter
by itself, but also to prevent unnecessary and premature resort to administrative or judicial bodies. Thus, a
party with an administrative remedy must not merely initiate the prescribed administrative procedure to
obtain relief, but also pursue it to its appropriate conclusion before seeking judicial intervention. This rule
clearly applies to the instant case. The underlying principle of the rule on exhaustion of administrative
remedies rests on the presumption that when the administrative body, or grievance machinery, as in this
case, is afforded a chance to pass upon the matter, it will decide the same correctly. Petitioner's premature
invocation of public respondent's intervention is fatal to his cause of action.
Evidently, when petitioner brought before the DOLE his complaint charging private respondents with
unauthorized and illegal disbursement of union funds, he overlooked or deliberately ignored the fact that
 the same is clearly dismissible for non-exhaustion of administrative remedies. Thus, public respondent
Bienvenido E. Laguesma, in dismissing petitioner's complaint, committed no grave abuse of discretion.
(Diamonon vs. DOLE [G.R. No. 108951, 07 March 2000])

Right of Local to Disaffiliate from the Federation

The right of a local union to disaffiliate from its mother federation is well-settled. A local union, being
a separate and voluntary association, is free to serve the interest of all its members including the
freedom to disaffiliate when circumstances warrant. This right is consistent with the constitutional
guarantee of freedom of association (Volkschel Labor Union v. Bureau of Labor Relations, No. L-45824,
June 19, 1985, 137 SCRA 42).
xxx xxx xxx
The inclusion of the word NATU after the name of the local union THEU in the registration with the
Department of Labor is merely to stress that the THEU is NATU's affiliate at the time of the registration.
It does not mean that the said local union cannot stand on its own. Neither can it be interpreted to mean
that it cannot pursue its own interests independently of the federation. A local union owes its creation
and continued existence to the will of its members and not to the federation to which it belongs.
When the local union withdrew from the old federation to join a new federation, it was merely
exercising its primary right to labor organization for the effective enhancement and protection of
common interests. In the absence of enforceable provisions in the federation's constitution preventing
disaffiliation of a local union a local may sever its relationship with its parent (People's Industrial and
Commercial Employees and Workers Organization (FFW) v. People's Industrial and Commercial
Corporation, No. 37687, March 15, 1982, 112 SCRA 440).
xxx xxx xxx
Further, there is no merit in the contention of the respondents that the act of disaffiliation violated
the union security clause of the CBA and that their dismissal as a consequence thereof is valid. A
perusal of the collective bargaining agreements shows that the THEU-NATU, and not the NATU
federation, was recognized as the sole and exclusive collective bargaining agent for all its workers and
employees in all matters concerning wages, hours of work and other terms and conditions of
employment (pp. 667-706, Rollo). Although NATU was designated as the sole bargaining agent in the
check-off authorization form attached to the CBA, this simply means it was acting only for and in behalf
of its affiliate. The NATU POSSESSED THE STATUS OF AN AGENT WHILE THE LOCAL UNION
REMAINED THE BASIC PRINCIPAL UNION WHICH ENTERED INTO CONTRACT WITH THE
RESPONDENT COMPANY. When the THEU disaffiliated from its mother federation, the former did not
lose its legal personality as the bargaining union under the CBA. (Tropical Hut Employees Union vs.
Tropical Hut [181 SCRA 173, 1990])

CERTIFICATION ELECTIONS

Nature of
It is thus of the very essence of the regime of industrial democracy sought to be attained through
the collective bargaining process that there be no obstacle to the freedom Identified with the exercise of
the right to self-organization. Labor is to be represented by a union that can express its collective will. In
the event, and this is usually the case, that there is more than one such group fighting for that privilege,
a certification election must be conducted. That is the teaching of a recent decision, under the new
Labor Code, United Employees Union of Gelmart Industries v. Noriel. There is this relevant excerpt:
"The institution of collective bargaining is, to recall Cox a prime manifestation of industrial democracy at
work. The two parties to the relationship, labor and management, make their own rules by coming to
terms. That is to govern themselves in matters that really count. As labor, however, is composed of a
number of individuals, it is indispensable that they be represented by a labor organization of their
choice. Thus may be discerned how crucial is a certification election. So our decisions from the earliest
case of PLDT Employees Union v. PLDT Co. Free Telephone Workers Union to the latest, Philippine
Communications Electronics & Electricity Workers' Federation (PCWF) v. Court of Industrial Relations,
have made clear." An even later pronouncement in Philippine Association of Free Labor Unions v.
Bureau of Labor Relations speaks similarly: "Petitioner thus appears to be woefully lacking in
awareness of the significance of a certification election for the collective bargaining process. It is the
fairest and most effective way of determining which labor organization can truly represent the working
 force. It is a fundamental postulate that the will of the majority, if given expression in an honest election
with freedom on the part of the voters to make their choice, is controlling. No better device can assure
the institution of industrial democracy with the two parties to a business enterprise, management and
labor, establishing a regime of self rule." (FOITAF vs. Noriel [G.R. No. L-41937, 06 July 1976])

In any case, this Court notes that it is petitioner, the employer, which has offered the most tenacious
resistance to the holding of a certification election among its monthly-paid rank-and-file employees.
This must not be so, for the choice of a collective bargaining agent is the sole concern of the
employees. The only exception to this rule is where the employer has to file the petition for certification
election pursuant to Article 258 of the Labor Code because it was requested to bargain collectively,
which exception finds no application in the case before us. Its role in a certification election has aptly
been described in Trade Unions of the Philippines and Allied Services (TUPAS) v. Trajano, as that of a
mere by-stander. It has no legal standing in a certification election as it cannot oppose the petition or
appeal the Med-Arbiter's orders related thereto. An employer that involves itself in a certification
election lends suspicion to the fact it wants to create a company union. This Court should be the last
agency to lend support to such an attempt at interference with a purely internal affair of labor.
While employers may rightfully be notified or informed of petitions of such nature, they should not,
however, be considered parties thereto with the concomitant right to oppose it. Sound policy dictates
that they should maintain a strictly hands-off policy.
It bears stressing that no obstacle must be placed to the holding of certification elections, for it is a
statutory policy that should not be circumvented. The certification election is the most democratic and
expeditious method by which the laborers can freely determine the union that shall act as their
representative in their dealings with the establishment where they are working. It is the appropriate
means whereby controversies and disputes on representation may be laid to rest, by the unequivocal
vote of the employees themselves. Indeed, it is the keystone of industrial democracy. (San Miguel vs.
Laguesma [G.R. No. 116172, 10 October 1996])

This Court has always stressed that a certification proceeding is not a litigation, in the sense in
which this term is ordinarily understood, but an investigation of a non-adversary, fact finding character
in which the Court of Industrial Relations plays the part of a disinterested investigator seeking merely to
ascertain the desires of employees as to the matter of their representation (NLU vs. Go Soc and Sons,
23 SCRA 436; Benguet Consolidated, Inc. vs. Bobok Lumber Jack Ass'n., L-11029, May 23, 1958;
Bulakena Restaurant vs. C.I.R., 45 SCRA 95; LVN Pictures, Inc. vs. Philippine Musicians Guild (FFW)
and C.I.R., 1 SCRA 132).

The decision in a certification election case, by the very nature of such proceeding, is not such as to
foreclose all further disputes as to the existence or non-existence of an employer-employee relationship
between SSI and private respondents herein. It is an established doctrine that for res adjudicata to
apply, the following requisites must concur: ….. Clearly implicit in these requirements is that the action
or proceedings in which is issued the “prior judgment” that would operate in bar of a subsequent action
between the same parties for the same cause, be adversarial, or contentious as distinguished from an
ex parte hearing or proceeding of which the party seeking relief has given legal notice to the other party
and afforded the latter an opportunity to contest it, and a certification election is not such a proceeding.
A certification election is not a “litigation” in the sense in which this term is understood, but a mere
investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part
of a disinterested investigator seeking merely to ascertain the desires of the employees as to the matter
of their representation. (Sandoval Shipyards vs. Pepito [G.R. No. 143428, 25 June 2001])
[V]erification of a pleading is a formal, not jurisdictional requisite. Even if verification is lacking and
the pleading is formally defective, the courts may dispense with the requirement in the interest of justice
and order of correction of the pleading accordingly. Generally, technical and rigid rules of procedure are
not binding in labor cases; and this rule is specifically applied in certification election proceedings,
which are non-litigious but merely investigative and non-adversarial in character (National Mines vs.
Secretary [G.R. No. 106446, 16 November 1993])

Direct Certification
 We rule, however, that the direct certification ordered by respondent Secretary is not proper. By
virtue of Executive Order No. 111, which became effective on March 4, 1987, the direct certification
originally allowed under Article 257 of the Labor Code has apparently been discontinued as a method of
selecting the exclusive bargaining agent of the workers. This amendment affirms the superiority of the
certification election over the direct certification which is no longer available now under the change in
said provision. (Central Negros vs. Secretary [G.R. No. 94045, 13 September 1991])

Voluntary Recognition

The petition has no merit. Ordinarily, in an unorganized establishment like the SMC Calasiao Beer
Region, it is the union that files a petition for a certification election if there is no certified bargaining
agent for the workers in the establishment. If a union asks the employer to voluntarily recognize it as
the bargaining agent of the employees, as the petitioner did, it in effect asks the employer to certify it as
the bargaining representative of the employees a certification which the employer has no authority to
give, for it is the employees' prerogative (not the employer's) to determine whether they want a union to
represent them, and, if so, which one it should be. (IBM vs. Ferrer-Calleja [G.R. No. 84685, 23
February 1990])
Consent Election
To resolve the issue of union representation at the Universal Robina Textile plant, what was agreed
to be held at the company's premises and which became the root of this controversy, was a consent
election, not a certification election.
It is unmistakable that the election held on November 15, 1990 was a consent election and not a
certification election. It was an agreed one, the purpose being merely to determine the issue of majority
representation of all the workers in the appropriate collective bargaining unit. It is a separate and
distinct process and has nothing to do with the import and effort of a certification election. (Algire vs. De
Mesa [G.R. No. 97622, 19 October 1994])

Certification Election Proceedings

The right to refuse to join or be represented by any labor organization is recognized not only by law
but also in the rules drawn up for implementation thereof. The original Rules on Certification
promulgated by the defunct CIR required that the ballots to be used at a certification election to
determine which of two or more competing labor unions would represent the employees in the
appropriate bargaining unit should contain, aside from the names of each union, an alternative choice
of the employee voting, to the effect that he desires not to which of two or more competing labor unions
would represent the employees in the appropriate bargaining unit should contain, aside from the names
of each union, an alternative choice of the employee voting, to the effect that he desires not to be
represented by any union. And where only one union was involved, the ballots were required to state
the question "Do you desire to be represented by said union?" as regards which the employees voting
would mark an appropriate square, one indicating the answer, "Yes" the other, "No."
xxx xxx xxx
Withal, neither the quoted provision nor any other in the Omnibus Implementing Rules expressly
bars the inclusion of the choice of "NO UNION" in the ballots. Indeed it is doubtful if the employee's
alternative right NOT to form, join or assist any labor organization or withdraw or resign from one may
be validly eliminated and he be consequently coerced to vote for one or another of the competing
unions and be represented by one of them. Besides, the statement in the quoted provision that "(i)f only
one union is involved, the voter shall make his cross or check in the square indicating "YES" or "NO," is
quite clear acknowledgment of the alternative possibility that the "NO" votes may outnumber the "YES"
votes indicating that the majority of the employees in the company do not wish to be represented by
any union in which case, no union can represent the employees in collective bargaining. And whether
the prevailing "NO" votes are inspired by considerations of religious belief or discipline or not is beside
the point, and may not be inquired into at all.
The purpose of a certification election is precisely the ascertainment of the wishes of the majority of
the employees in the appropriate bargaining unit: to be or not to be represented by a labor organization,
and in the affirmative case, by which particular labor organization. If the results of the election should
disclose that the majority of the workers do not wish to be represented by any union, then their wishes
must be respected, and no union may properly be certified as the exclusive representative of the
 workers in the bargaining unit in dealing with the employer regarding wages, hours and other terms and
conditions of employment. The minority employees who wish to have a union represent them in
collective bargaining can do nothing but wait for another suitable occasion to petition for a certification
election and hope that the results will be different. They may not and should not be permitted, however,
to impose their will on the majority who do not desire to have a union certified as the exclusive workers'
benefit in the bargaining unit upon the plea that they, the minority workers, are being denied the right of
self-organization and collective bargaining. As repeatedly stated, the right of self-organization embraces
not only the right to form, join or assist labor organizations, but the concomitant, converse right NOT to
form, join or assist any labor union.
(Reyes vs. Trajano [G.R. No. 84433, 02 June 1992])

Who can vote in CE Proceedings

In a certification election all rank-and-file employees in the appropriate bargaining unit are entitled
to vote. This principle is clearly stated in Art. 255 of the Labor Code which states that the "labor
organization designated or selected by the majority of the employees in an appropriate bargaining unit
shall be the exclusive representative of the employees in such unit for the purpose of collective
bargaining." Collective bargaining covers all aspects of the employment relation and the resultant CBA
negotiated by the certified union binds all employees in the bargaining unit. Hence, all rank-and-file
employees, probationary or permanent, have a substantial interest in the selection of the bargaining
representative. The Code makes no distinction as to their employment status as basis for eligibility in
supporting the petition for certification election. The law refers to "all" the employees in the bargaining
unit. All they need to be eligible to support the petition is to belong to the "bargaining unit." (Airtime
Specialists, Inc. vs. Ferrer-Calleja [G.R. No. 80612-16, 29 December 1989])
At any rate, it is now well-settled that employees who have been improperly laid off but who have a
present, unabandoned right to or expectation of re-employment, are eligible to vote in certification
elections. Thus, and to repeat, if the dismissal is under question, as in the case now at bar whereby a
case of illegal dismissal and/or unfair labor practice was filed, the employees concerned could still
qualify to vote in the elections. (Phil. Fruits And Vegetables vs. Torres [G.R. No. 92391, 03 July 1992])

“Close of Election Proceedings”

[T]he phrase "close of election proceedings" as used in Sections 3 and 4 of the pertinent
Implementing Rules refers to that period from the closing of the polls to the counting and tabulation of
the votes as it could not have been the intention of the Implementing Rules to include in the term "close
of the election proceedings" the period for the final determination of the challenged votes and the
canvass thereof, as in the case at bar which may take a very long period. Thus, if a protest can be
formalized within five days after a final determination and canvass of the challenged votes have been
made, it would result in an undue delay in the affirmation of the employees' expressed choice of a
bargaining representative. (Phil. Fruits and Vegetables vs. Torres [G.R. No. 92391, 03 July 1992])

Bars to Certification Election

(1) CONTRACT BAR RULE - during the existence of a collective bargaining agreement except within the
freedom period;

This rule simply provides that a petition for certification election or a motion for intervention can only
be entertained within sixty days prior to the expiry date of an existing collective bargaining agreement.
Otherwise put, the rule prohibits the filing of a petition for certification election during the existence of a
collective bargaining agreement except within the freedom period, as it is called, when the said
agreement is about to expire. The purpose, obviously, is to ensure stability in the relationships of the
workers and the management by preventing frequent modifications of any collective bargaining
agreement earlier entered into by them in good faith and for the stipulated original period. (ALU-TUCP
v. Trajano, G.R. No. 77539, April 12, 1989, 172 SCRA 49, citing ATU v. Trajano, G.R. No. L-75321, 20
June 1988, 162 SCRA 318)
 In order to allow the employer to validly suspend the bargaining process theremust be a valid
petition for certification election raising a legitimate representation issue. Hence, mere filing of a petition
for certification election does not ipso facto justify the negotiation by the employer. The petition must
comply with the provisions of the Labor Code and its Implementing Rules. Foremost is that a petition for
certification election must be filed during the sixty day freedom period. The “Contract Bar Rule” under
Section 3, Rule XI, Book V, of the Omnibus Rules Implementing the Labor Code, provides that: “ …. If a
collective bargaining agreement has been duly registered in accordance with Article 231 of the Code, a
petition for certification election or motion for intervention can only be entertained within sixty (60) days
prior to the expiry date of such agreement.” The rule is based on Article 232, in relation to Articles 253,
253-A and 256 of the Labor Code. No petition for certification election for any representation issue may
be filed after the lapse of the sixty-day freedom period. The old CBA is extended until a new CBA shall
have been validly executed. Hence, the contract bar rule still applies. The purpose is to ensure stability
in the relationship of the workers and the company by preventing frequent modifications of any CBA
earlier entered into by them in good faith and for the stipulated original period. (Colegio de San Juan de
Letran vs. Association of Employees and Faculty of Letran [G.R. No. 14171, 18 September 2000])

[A] contract does not operate as a bar to representation proceedings, where it is shown that
because of a schism in the union the contract can no longer serve to promote industrial stability, and
the direction of the election is in the interest of industrial stability as well as in the interest of the
employees' right in the selection of their bargaining representatives. Basic to the contract bar rule is the
proposition that the delay of the right to select representatives can be justified only where stability is
deemed paramount. Excepted from the contract bar rule are certain types of contracts which do not
foster industrial stability, such as contracts where the Identity of the representative is in doubt. Any
stability derived from such contracts must be subordinated to the employees' freedom of choice
because it does not establish the type of industrial peace contemplated by the law. (Firestone Tire &
Rubber Company Employees Union vs. Estrella [G.R. No. L-45513-14, 06 January 1978])

The receipt by petitioner's "supervisor" employees of certain benefits under the CBA between
BUKLOD and petitioner is not sufficient to deny the petition for certification election filed by the labor
organization formed by the excluded employees. It is not equivalent to and does not compensate for
the denial of the right of the excluded employees to self-organization and collective bargaining. We
concur with the findings of the Undersecretary of Labor, thus:
It is not disputed that the members of both petitioning unions NSBPI and NEMPEBPI are
excluded from the coverage of the existing CBA entered into between the respondent BPI and
BUKLOD. Thus, respondent BPI being privy to the said exclusion has to accept the
inescapable consequences of its act of depriving the excluded employees of their right to self-
organization for the purpose of collective bargaining. We find immaterial and irrelevant the
allegation of hereby respondent BPI to the effect that the benefit being enjoyed by the rank
and file employees covered by the existing CBA are extended/accorded to the excluded
employees. Indeed, what is crucial and of paramount consideration is the fact that the
excluded rank and file employees are afforded the right to bargain collectively.
The Supreme Court in the cases of General Rubber vs. BLR and Manila Bay Spinning
Mills vs. Hon. Pura Ferrer-Calleja, ruled that the employees excluded from the coverage of the
CBA, who not being excluded by law, have the right to bargain collectively. Further, the
Supreme Court aptly stated that:
The allegation that some benefits under the existing CBA were extended to the
monthly paid employees, even if true will not preclude them from entering into a CBA
of their own. Neither is the inconvenience that may befall petitioner for having to
administer two CBAs an excuse for depriving the monthly paid employees of their
constitutionally guaranteed right to collective bargaining.
The petition for certification election cannot likewise be deterred by the "contract-bar rule," which
finds no application in the present case. The petitioning union NSBPI is not questioning the majority
status of Buklod as the incumbent bargaining agent of petitioner's rank and file employees. The petition
for certification election is addressed to a separate bargaining unit the excluded employees of
petitioner.
(Mirpuri vs. CA [G.R. No. 114508, 19 November 1999])
(2) CERTIFICATION YEAR BAR RULE - within one (1) year from the date of issuance of declaration of a
final certification election result; or

It is evident that the prohibition imposed by law on the holding of a certification election "within one
year from the date of issuance of declaration of a final certification election result in this case, from
February 27, 1981, the date of the Resolution declaring NAFLU the exclusive bargaining representative
of rank-and-file workers of VIRON can have no application to the case at bar. That one-year period-
known as the "certification year" during which the certified union is required to negotiate with the
employer, and certification election is prohibited has long since expired. (Kaisahan Ng Manggagawang
vs. Trajano [G.R. No. 75810, 09 September 1991])

(3) DEADLOCK BAR RULE - during the existence of a bargaining deadlock to which an incumbent or
certified bargaining agent is a party and which had been submitted to conciliation or arbitration or had
become the subject of a valid notice of strike or lockout.

A "deadlock" is defined as the "counteraction of things producing entire stoppage: a state of inaction
or neutralization caused by the opposition of persons or of factions (as in government or a voting body):
standstill." There is a deadlock if there is a "complete blocking or stoppage resulting from the action of
equal and opposed forces; as, the deadlock of a jury or legislature." The word is synonymous with the
word impasse which, within the meaning of the American federal labor laws, "presupposes reasonable
efforts at good faith bargaining which, despite noble intentions, does not conclude in a agreement
between the parties." (Divine Word University of Tacloban vs. Secretary [G. R. No. 91915, 11
September 1992])

The Deadlock Bar Rule simply provides that a petition for certification election can only be
entertained if there is no pending bargaining deadlock submitted to conciliation or arbitration or had
become the subject of a valid notice of strike or lockout. The principal purpose is to ensure stability in
the relationship of the workers and the management. (NACUSIP-TUCP vs. Trajano [G.R. No. L-67485,
10 April 1992])

Prejudicial Question; When applicable to certification election proceedings

Under settled jurisprudence, the pendency of a formal charge of company domination is a
prejudicial question that, until decided, bars proceedings for a certification election, the reason being
that the votes of the members of the dominated union would not be free. (United CMC Textile Workers
Union vs. BLR [G.R. No. L-51337, 22 March 1984])

COLLECTIVE BARGAINING AND ADMINISTRATION OF AGREEMENT

It is important to determine whether or not a particular labor organization is legitimate since
legitimate labor organizations have exclusive rights under the law which cannot be exercised by non-
legitimate unions, one of which is the right to be certified as the exclusive representative of all the
employees in an appropriate collective bargaining unit for purposes of collective bargaining. (San
Miguel Foods, Inc. vs. Laguesma [G.R. No. 116172, 10 October 1996])
A collective bargaining agreement (CBA), as used in Article 252 of the Labor Code, refers to a
contract executed upon request of either the employer or the exclusive bargaining representative
incorporating the agreement reached after negotiations with respect to wages, hours of work and all
other terms and conditions of employment, including proposals for adjusting any grievances or
questions arising under such agreement.
While the terms and conditions of a CBA constitute the law between the parties, it is not, however,
an ordinary contract to which is applied the principles of law governing ordinary contracts. A CBA, as a
labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, is not merely contractual in nature but impressed with
public interest, thus, it must yield to the common good. As such, it must be construed liberally rather
than narrowly and technically, and the courts must place a practical and realistic construction upon it,
 giving due consideration to the context in which it is negotiated and purpose which it is intended to
serve. (Davao Integrated Port Stevedoring Services vs. Abarquez [G.R. No. 102132, 19 March 1993])
[T]he general rule laid out in Fernando vs. Angat Labor Union (5 SCRA 248 [1962], that a collective
bargaining agreement is a contract in personam and, therefore, not enforceable against the successor-
employer, … (E. Razon, Inc. vs. Secretary [G.R. No. 85867, 13 May 1993])

It appears that the procedural requirement of filing the CBA within 30 days from date of execution
under Article 231 was not met. The subject CBA was executed on November 28, 1989. It was ratified
on December 8, 1989, and then filed with DOLE for registration purposes on March 14, 1990. Be that
as it may, the delay in the filing of the CBA was sufficiently explained, i.e., there was an inter-union
conflict on who would succeed to the presidency of ILO-PHILS. The CBA was registered by the DOLE
only on May 4, 1990. It would be injudicious for us to assume, as what petitioner did, that the said CBA
was filed only on April 30, 1990, or five (5) days before its registration, on the unsupported surmise that
it was done to suit the law that enjoins Regional Offices of Dole to act upon an application for
registration of a CBA within five (5) days from its receipt thereof. In the absence of any substantial
evidence that DOLE officials or personnel, in collusion with private respondent, had antedated the filing
date of the CBA, the presumption on regularity in the performance of official functions hold.
More importantly, non-compliance with the cited procedural requirement should not adversely affect
the substantive validity of the CBA between ILO-PHILS and the Transunion Corporation-Glassware
Division covering the company's rank and file employees. A collective bargaining agreement is more
than a contract. It is highly impressed with public interest for it is an essential instrument to promote
industrial peace. Hence, it bears the blessings not only of the employer and employees concerned but
even the DOLE. To set it aside on technical grounds is not conducive to the public good. (TUCP vs.
Laguesma, G.R. No. 95013, 1994])
Duty to Bargain Collectively
Meaning of duty to bargain collectively. - The duty to bargain collectively means the performance of a
mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of
negotiating an agreement with respect to wages, hours of work and all other terms and any grievances
or questions arising under such agreement and executing a contract incorporating such agreements if
requested by either party, but such duty does not compel any party to agree to a proposal or to make
any concession. (Article 252 of the Labor Code)
Collective bargaining which is defined as negotiations towards a collective agreement, is one of the
democratic frameworks under the New Labor Code, designed to stabilize the relation between labor
and management and to create a climate of sound and stable industrial peace. It is a mutual
responsibility of the employer and the Union and is characterized as a legal obligation. So much so that
Article 249, par. (g) of the Labor Code makes it an unfair labor practice for an employer to refuse "to
meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement
with respect to wages, hours of work, and all other terms and conditions of employment including
proposals for adjusting any grievance or question arising under such an agreement and executing a
contract incorporating such agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer, however, is not under any
legal duty to initiate contract negotiation. The mechanics of collective bargaining is set in motion only
when the following jurisdictional preconditions are present, namely, (1) possession of the status of
majority representation of the employees' representative in accordance with any of the means of
selection or designation provided for by the Labor Code; (2) proof of majority representation; and (3) a
demand to bargain under Article 251, par. (a) of the New Labor Code . ... all of which preconditions are
undisputedly present in the instant case.
xxx xxx xxx
The case at bar is not a case of first impression, for in the Herald Delivery Carriers Union (PAFLU)
vs. Herald Publications the rule had been laid down that "unfair labor practice is committed when it is
shown that the respondent employer, after having been served with a written bargaining proposal by
the petitioning Union, did not even bother to submit an answer or reply to the said proposal. This
doctrine was reiterated anew in Bradman vs. CIR wherein it was further ruled that "while the law does
not compel the parties to reach an agreement, it does contemplate that both parties will approach the
negotiation with an open mind and make a reasonable effort to reach a common ground of agreement.
 (Kiok Loy vs. NLRC [G.R. No. L-54334, 22 January 1986])
It is essential to the right of a putative bargaining agent to represent the employees that it be the
delegate of a majority of the employees and, conversely, an employer is under duty to bargain
collectively only when the bargaining agent is representative of the majority of the employees. A natural
consequence of these principles is that the employer has the right to demand of the asserted
bargaining agent proof of its representation of its employees. Having the right to demonstration of this
fact, it is not an 'unfair labor practice' for an employer to refuse to negotiate until the asserted
bargaining agent has presented reasonable proof of majority representation. It is necessary however,
that such demand be made in good faith and not merely as a pretext or device for delay or evasion.
The employer's right is however to reasonable proof. ...
... Although an employer has the undoubted right to bargain with a bargaining agent whose
authority has been established, without the requirement that the bargaining agent be officially certified
by the NLRB as such, if the informally presented evidence leaves a real doubt as to the issue, the
employer has a right to demand a certification and to refuse to negotiate until such official certification is
presented."
(LAKAS vs. Marcelo Enterprises [G.R. No. L-38258, 19 November 1982] citing Rothenberg)
We hold that there existed no duty to bargain collectively with the complainant LAKAS on the part of
said companies. And proceeding from this basis, it follows that all acts instigated by complainant
LAKAS such as the filing of the Notice of strike on June 13, 1967 (although later withdrawn) and the
'two strikes of September 4, 1967 and November 7, 1967 were calculated , designed and intended to
compel the respondent Marcelo Companies to recognize or bargain with it notwithstanding that it was
an uncertified union, or in the case of respondent Marcelo Tire and Rubber Corporation, to bargain with
it despite the fact that the MUEWA of Paulino Lazaro vas already certified as the sole bargaining agent
in said respondent company. These concerted activities executed and carried into effect at the
instigation and motivation of LAKAS ire all illegal and violative of the employer's basic right to bargain
collectively only with the representative supported by the majority of its employees in each of the
bargaining units. This Court is not unaware of the present predicament of the employees involved but
much as We sympathize with those who have been misled and so lost their jobs through hasty, ill-
advised and precipitate moves, We rule that the facts neither substantiate nor support the finding that
the respondent Marcelo Companies are guilty of unfair labor practice. (LAKAS vs. Marcelo Enterprises
[G.R. No. L-38258, 19 November 1982])
[I]n a situation like this where the issue of legitimate representation in dispute is viewed for not only
by one legitimate labor organization but two or more, there is every equitable ground warranting the
holding of a certification election. In this way, the issue as to who is really the true bargaining
representative of all the employees may be firmly settled by the simple expedient of an election.
(PAFLU vs. The Bureau of Labor Relations [69 SCRA 132])

The inference that respondents did not refuse to bargain collectively with the complaining union
because they accepted some of the demands while they refused the others even leaving open other
demands for future discussion is correct, especially so when those demands were discussed at a
meeting called by respondents themselves precisely in view of the letter sent by the union on April 29,
1960. It is true that under Section 14 of Republic Act 875 whenever a party serves a written notice
upon the employer making some demands the latter shall reply thereto not later than 10 days from
receipt thereof, but this rendition is merely procedural and as such its non-compliance cannot be
deemed to be an act of unfair labor practice. The fact is that respondents did not ignore the letter sent
by the union so much so that they called a meeting to discuss its demands, as already stated
elsewhere. (National Union of Restaurant Workers vs. CIR [G.R. No. L-20044, 30 April 1964])

Duration of a CBA

Art. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining

Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five year term of the Collective Bargaining
 Agreement. All other provisions of the Collective Bargaining Agreement shall be
renegotiated not later than three (3) years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into within six (6) months from
the date of expiry of the term of such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such date. If any such agreement
is entered into beyond six months, the parties shall agree on the duration of retroactivity
thereof. In case of a deadlock in the renegotiation of the collective bargaining agreement,
the parties may exercise their rights under this Code.

Article 253-A is a new provision. This was incorporated by Section 21 of Republic Act No. 6715 (the
Herrera-Veloso Law) which took effect on March 21, 1989. This new provision states that the CBA has
a term of five (5) years instead of three years, before the amendment of the law as far as the
representation aspect is concerned. All other provisions of the CBA shall be negotiated not later than
three (3) years after its execution. The "representation aspect" refers to the identity and majority status
of the union that negotiated the CBA as the exclusive bargaining representative of the appropriate
bargaining unit concerned. "All other provisions" simply refers to the rest of the CBA, economic as well
as non-economic provisions, except representation.
xxx xxx xxx
From the aforesaid discussions, the legislators were more inclined to have the period of effectivity
for three (3) years insofar as the economic as well as non-economic provisions are concerned, except
representation.
Obviously, the framers of the law wanted to maintain industrial peace and stability by having both
management and labor work harmoniously together without any disturbance. Thus, no outside union
can enter the establishment within five (5) years and challenge the status of the incumbent union as the
exclusive bargaining agent. Likewise, the terms and conditions of employment (economic and non-
economic) cannot be questioned by the employers or employees during the period of effectivity of the
CBA. The CBA is a contract between the parties and the parties must respect the terms and conditions
of the agreement. Notably, the framers of the law did not give a fixed term as to the effectivity of the
terms and conditions of employment. It can be gleaned from their discussions that it was left to the
parties to fix the period.
(SMC vs. Confesor [G.R. No. 111262, 19 September 1996])

The signing of the CBA is not determinative of the question whether "the agreement was entered
into within six months from the date of expiry of the term of such other provisions as fixed in such
collective bargaining agreement" within the contemplation of Art. 253-A.
As already stated, on November 12, 1992, the Union sent the Company a notice of deadlock in
view of their inability to reconcile their positions on the main issues, particularly on wages. The Union
filed a notice of strike. However, on December 18, 1992, in a conference called by the NCMB, the
Union and the Company agreed on a number of provisions of the CBA, including the provision on wage
increase, leaving only the issue of retirement to be threshed out. In time, this, too, was settled, so that
in his record of the January 14, 1993 conference, the Med-Arbiter noted that "the issues raised by the
notice of strike had been settled and said notice is thus terminated." It would therefore seem that at that
point, there was already a meeting of the minds of the parties, which was before the February 1993 end of
the six-month period provided in Art. 253-A.
The fact that no agreement was then signed is of no moment. Art. 253-A refers merely to an
"agreement" which, according to Black's Law Dictionary is "a coming together of minds; the coming
together in accord of two minds on a given proposition." This is similar to Art. 1305 of the Civil Code's
definition of "contract" as "a meeting of minds between two persons."
The two terms, "agreement" and "contract," are indeed similar, although the former is broader than
the latter because an agreement may not have all the elements of a contract. As in the case of
contracts, however, agreements may be oral or written. Hence, even without any written evidence of
the CBA made by the parties, a valid agreement existed in this case from the moment the minds of the
parties met on all matters they set out to discuss.
(Mindanao Terminal & Brokerage vs. Roldan-Confessor [G.R. No. 111809, 05May 1997])
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2
years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers
 a three-year period. Labor laws are silent as to when an arbitral award in a labor dispute where the
Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In
general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day
immediately following such date and if agreed thereafter, the effectivity depends on the agreement of
the parties. On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that
granted not by virtue of the mutual agreement of the parties but by intervention of the government.
Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months
from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the
employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to the
first day after the six-month period following the expiration of the last day of the CBA should there be
one. In the absence of a CBA, the Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered
into by the parties because it requires the interference and imposing power of the State thru the
Secretary of Labor when he assumes jurisdiction. However, the arbitral award can be considered as an
approximation of a collective bargaining agreement which would otherwise have been entered into by
the parties. The terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is
nothing that would prevent its application by analogy to an arbitral award by the Secretary considering
the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond
six months, the parties shall agree on the duration of retroactivity thereof." In other words, the law
contemplates retroactivity whether the agreement be entered into before or after the said six-month
period. The agreement of the parties need not be categorically stated for their acts may be considered
in determining the duration of retroactivity. In this connection, the Court considers the letter of
petitioner's Chairman of the Board and its President addressed to their stockholders, which states that
the CBA "for the rank-and-file employees covering the period December 1, 1995 to November 30, 1997
is still with the Supreme Court," as indicative of petitioner's recognition that the CBA award covers the
said period. Earlier, petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA
covering the same period inclusive. In addition, petitioner does not dispute the allegation that in the
past CBA arbitral awards, the Secretary granted retroactivity commencing from the period immediately
following the last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason
to retroact the subject CBA awards to a different date. The period is herein set at two (2) years from
December 1, 1995 to November 30, 1997.
(MERALCO vs. Quisumbing [G.R. No. 127598, 22 February 2000])

Effect of Failure to Bargain Collectively

A thorough study of the records reveals that there was no "reasonable effort at good faith
bargaining" specially on the part of the University. Its indifferent towards collective bargaining inevitably
resulted in the failure of the parties to arrive at an agreement. As it was evident that unilateral moves
were being undertaken only by the DWUEU-ALU, there was no "'counteraction" of forces or an impasse
to speak of. While collective bargaining should be initiated by the union, there is a corresponding
responsibility on the part of the employer to respond in some manner to such acts. This is a clear from
the provisions of the Labor Code Art 250(a) of which states:
xxx xxx xxx
Hence, petitioner's contention that the DWUEU-ALU's proposals may not be unilaterally imposed on
it on the ground that a collective bargaining agreement is a contract wherein the consent of both parties
is indispensable is devoid of merit. A similar argument had already been disregarded in the case of Kiok
Loy v. NLRC, where we upheld the order of the NLRC declaring the unions draft CBA proposal as the
collective agreement which should govern the relationship between the parties. Kiok Loy v. NLRC is
applicable in the instant case considering that the fact therein have also been indubitably established in
this case. These factors are: (a) the union is the duly certified bargaining agent; (b) it made a definite
request to bargain submitted its collective bargaining proposals, and (c) the University made no further
proposal whatsoever. As we said in Kiok Loy v. NLRC, [a] company's refusal to make counter proposal
if considered in relation to the entire bargaining process, may indicate bad faith and this is especially
true where the Union's request for a counter proposal is left unanswered." Moreover, the Court added in
the same case that "it is not obligatory upon either side of a labor controversy to precipitately accept or
agree to the proposal of the other. But an erring party should not be tolerated and allowed with impunity
to resort to schemes feigning negotiations by going through empty gestures."
 (Divine Word University of Tacloban vs. Secretary [G. R. No. 91915, 11 September 1992])
Any provision in the CBA is deemed to be a bilateral agreement, hence subject to negotiation
The company's contention that its retirement plan is non-negotiable, is not well-taken. The NLRC
correctly observed that the inclusion of the retirement plan in the collective bargaining agreement as
part of the package of economic benefits extended by the company to its employees to provide them a
measure of financial security after they shall have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial peace, gives "A CONSENSUAL
CHARACTER" to the plan so that it may not be terminated or modified at will by either party (Nestle
Phil., Inc. vs. NLRC [G.R. No. 91231, 04 February 1991]
ADMINISTRATION OF THE CBA; GRIEVANCE AND VOLUNTARY ARBITRATION
COMPULSORY ARBITRATION is a system whereby the parties to a dispute are compelled by the
government to forego their right to strike and are compelled to accept the resolution of their dispute
through arbitration by a third party. The essence of arbitration remains since a resolution of a dispute is
arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but
in compulsory arbitration, such a third party is normally appointed by the government.
Under VOLUNTARY ARBITRATION, on the other hand, referral of a dispute by the parties is made,
pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a
final and binding resolution. Ideally, arbitration awards are supposed to be complied with by both parties
without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by
both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration
as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually
acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de
bound by said arbitrator's decision.
In the Philippine context, the parties to a CBA are required to include therein provisions for a
machinery for the resolution of grievances arising from the interpretation or implementation of the CBA
or company personnel policies. For this purpose, parties to a CBA shall name and designate therein a
voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from
those accredited by the NCMB. Article 261 of the Labor Code accordingly provides for exclusive original
jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or
implementation of the CBA and (2) the interpretation or enforcement of company personnel policies.
Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other
labor disputes.
(Luzon Development Bank vs. Association [G.R. No. 120319, 06 October 1995])

The terms and conditions of a collective bargaining contract constitute the law between the parties.
Those who are entitled to its benefits can invoke its provisions. In the event that an obligation therein
imposed is not fulfilled, the aggrieved party has the right to go to court for redress. Nor does it suffice as
a defense that the claim is made on behalf of non-members of intervenor ALU, for it is a well-settled
doctrine that the benefits of a collective bargaining agreement extend to the laborers and employees in
the collective bargaining unit, including those who do not belong to the chosen bargaining labor
organization. Any other view would be a discrimination on which the law frowns. It is appropriate that
such should be the case. As was held in United Restauror's Employees v. Torres, this Court speaking
through Justice Sanchez, "the right to be the exclusive representative of all the employees in an
appropriate collective bargaining unit is vested in the labor union 'designated or selected' for such
purpose 'by the majority of the employees' in the unit concerned." If it were otherwise, the highly
salutory purpose and objective of the collective bargaining scheme to enable labor to secure better
terms in employment condition as well as rates of pay would be frustrated insofar as non-members are
concerned, deprived as they are of participation in whatever advantages could thereby be gained. The
labor union that gets the majority vote as the exclusive bargaining representative does not act for its
members alone. It represents all the employees in such a bargaining unit. It is not to be indulged in any
attempt on its part to disregard the rights of non-members. Yet that is what intervenor labor union was
guilty of, resulting in the complaint filed on behalf of the laborers, who were in the ranks of plaintiff
Mactan Labor Union. (Mactan Workers Union vs. Don Ramon Aboitiz [G.R. No. L-30241, 1972])
 In formulating the "substitutionary" doctrine, the only consideration involved was the employees'
interest in the existing bargaining agreement. The agent's interest never entered the picture. In fact, the
justification for said doctrine was:
... that the majority of the employees, as an entity under the statute, is the true party in
interest to the contract, holding rights through the agency of the union representative. Thus,
any exclusive interest claimed by the agent is defeasible at the will of the principal....
Stated otherwise, the "SUBSTITUTIONARY" DOCTRINE only provides that the employees cannot
revoke the validly executed collective bargaining contract with their employer by the simple expedient of
changing their bargaining agent. And it is in the light of this that the phrase "said new agent would have
to respect said contract" must be understood. It only means that the employees, thru their new
bargaining agent, cannot renege on their collective bargaining contract, except of course to negotiate
with management for the shortening thereof.
The "substitutionary" doctrine, therefore, cannot be invoked to support the contention that a newly
certified collective bargaining agent automatically assumes all the personal undertakings like the no-
strike stipulation here in the collective bargaining agreement made by the deposed union. When BBWU
bound itself and its officers not to strike, it could not have validly bound also all the other rival unions
existing in the bargaining units in question. BBWU was the agent of the employees, not of the other
unions which possess distinct personalities. To consider UNION contractually bound to the no-strike
stipulation would therefore violate the legal maxim that res inter alios nec prodest nec nocet. (Benguet
vs. BCI Employees [G.R. No. L-24711, 30 April 1968])

The reference to a Grievance Machinery and Voluntary Arbitrators for the adjustment or resolution
of grievances arising from the interpretation or implementation of their CBA and those arising from the
interpretation or enforcement of company personnel policies is mandatory. The law grants to voluntary
arbitrators original and exclusive jurisdiction to hear and decide all unresolved grievances arising from
the interpretation or implementation of the Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies (Article 261 of the Labor Code).

The procedure introduced in RA 6715 of referring certain grievances originally and exclusively to
the grievance machinery and when not settled at this level, to a panel of voluntary arbitrators outlined in
CBA's does not only include grievances arising from the interpretation or implementation of the CBA but
applies as well to those arising from the implementation of company personnel policies. No other body
shall take cognizance of these cases.
xxx xxx xxx
In the instant case, however, We hold that the Labor Arbiter and not the Grievance Machinery
provided for in the CBA has the jurisdiction to hear and decide the complaints of the private
respondents. While it appears that the dismissal of the private respondents was made upon the
recommendation of PSSLU pursuant to the union security clause provided in the CBA, We are of the
opinion that these facts do not come within the phrase "grievances arising from the interpretation or
implementation of (their) Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies," the jurisdiction of which pertains to the Grievance
Machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. Article 260 of the
Labor Code on grievance machinery and voluntary arbitrator states that "(t)he parties to a Collective
Bargaining Agreement shall include therein provisions that will ensure the mutual observance of its
terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances
arising from the interpretation or implementation of their Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies." It is further provided in
said article that the parties to a CBA shall name or designate their respective representatives to the
grievance machinery and if the grievance is not settled in that level, it shall automatically be referred to
voluntary arbitrators (or panel of voluntary arbitrators) designated in advance by the parties. It need not
be mentioned that the parties to a CBA are the union and the company. Hence, only disputes involving
the union and the company shall be referred to the grievance machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the union and
the company on the one hand and some union and non-union members who were dismissed, on the
other hand. The dispute has to be settled before an impartial body. The grievance machinery with
members designated by the union and the company cannot be expected to be impartial against the
dismissed employees. Due process demands that the dismissed workers grievances be ventilated
before an impartial body. Since there has already been an actual termination, the matter falls within the
jurisdiction of the Labor Arbiter. (Sanyo Phil. Workers Union-PSSLU vs. Canizares [G.R. No. 101619,
08 July 1992])

[T]ermination cases fall under the original and exclusive jurisdiction of the Labor Arbiter. It should be
noted, however, that in the opening there appears the phrase: "Except as otherwise provided under this
Code . . . ." It is paragraph (c) of the same Article which respondent Commission has erroneously
interpreted as giving the voluntary arbitrator jurisdiction over the illegal dismissal case.
However, Article 217 (c) should be read in conjunction with Article 261 of the Labor Code which
grants to voluntary arbitrators original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the collective bargaining agreement and
those arising from the interpretation or enforcement of company personel policies. Note the phrase
"unresolved grievances." In the case at bar, the termination of petitioner is not an unresolved grievance.
The stance of the Solicitor General in the Sanyo case is totally the reverse of its posture in the case
at bar. In Sanyo, the Solicitor General was of the view that a distinction should be made between a
case involving "interpretation or implementation of Collective Bargaining Agreement" or interpretation or
"enforcement" of company personel policies, on the one hand and a case involving termination, on the
other hand. It argued that the dismissal of the private respondents does not involve an "interpretation or
implementation" of a Collective Bargaining Agreement or "interpretation or enforcement" of company
personel policies but involves "termination." The Solicitor General further said that where the dispute is
just in the interpretation, implementation or enforcement stage, it may be referred to the grievance
machinery set up the Collective Bargaining Agreement or by voluntary arbitration. Where there was
already actual termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter. We fully
agree with the theory of the Solicitor General in the Sanyo case, which is radically apposite to its
position in this case.
Moreover, the dismissal of petitioner does not fall within the phrase "grievance arising from the
interpretation or implementation of collective bargaining agreement and those arising from the
interpretation or enforcement of company personel policies," the jurisdiction of which pertains to the
grievance machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. It is to be
stressed that under Article 260 of the Labor Code, which explains the function of the grievance
machinery and voluntary arbitrator. "(T)he parties to a Collective Bargaining Agreement shall include
therein provisions that will ensure the mutual observance of its terms and conditions. They shall
establish a machinery for the adjustment and resolution of grievances arising from the interpretation or
implementation of their CBA and those arising from the interpretation or enforcement of company
personel policies." Article 260 further provides that the parties to a CBA shall name or designate their
respective representative to the grievance machinery and if the grievance is unsettled in that level, it
shall automatically be refered to the voluntary arbitrators designated in advance by the parties to a CBA
of the union and the company. It can thus be deduced that only disputes involving the union and the
company shall be referred to the grievance machinery or voluntary arbitrators.
(Maneja vs. NLRC [G.R. No. 124013, 05 June 1998]
It should be explained that "company personnel policies" are guiding principles stated in broad,
long-range terms that express the philosophy or beliefs of an organization's top authority regarding
personnel matters. They deal with matters affecting efficiency and well-being of employees and include,
among others, the procedure in the administration of wages, benefits, promotions, transfer and other
personnel movements which are usually not spelled out in the collective agreement. The usual source
of grievances, however, are the rules and regulations governing disciplinary actions. (Maneja vs. NLRC
[G.R. No. 124013, 05 June 1998]
[T]he award of a Voluntary Arbitrator is final and executory after ten (10) calendar days from receipt
of the award by the parties. There was a time when the award of a Voluntary Arbitrator relating to
money claims amounting to more than P 100,000.00 or forty percent (40%) of the paid-up capital of the
employer (whichever was lower), could be appealed to the National Labor Relations Commission upon
the grounds of (a) abuse of discretion; or (b) gross incompetence, presumably of the arbitrator. This is
 no longer so today although, of course, certiorari will lie in appropriate cases. A petition for certiorari
under Rule 65 of the Revised Rules of Court will lie only where a grave abuse of discretion or an act
without or in excess of jurisdiction on the part of the Voluntary Arbitrator is clearly shown. It must be
borne in mind that the writ of certiorari is an extraordinary remedy and that certiorari jurisdiction is not to
be equated with appellate jurisdiction. In a special civil action of certiorari, the Court will not engage in a
review of the facts found nor even of the law as interpreted or applied by the Arbitrator unless the
supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave abuse
of discretion or an excess de pouvoir on the part of the Arbitrator. The Labor Code and its Implementing
Rules thus clearly reflect the important public policy of encouraging recourse to voluntary arbitration
and of shortening the arbitration process by rendering the arbitral award non- appealable to the NLRC.
The result is that a voluntary arbitral award may be modified and set aside only upon the same grounds
on which a decision of the NLRC itself may be modified or set aside, by this Court. (Sime Darby vs.
Magsalin [G.R. No. 90426, 15 December 1989])
The Union erred in filing a motion for reconsideration of the decision dated July 12, 1988. So did the
respondent Voluntary Arbitrator in entertaining the motion and vacating his first decision.
When the parties submitted their grievance to arbitration, they expressly agreed that the decision of
the Voluntary Arbitrator would be final, executory and inappealable. In fact, even without this stipulation,
the first decision had already become so by virtue of Article 263 of the Labor Code making voluntary
arbitration awards or decisions final and executory. (Imperial Textile Mills, Inc. vs. Sampang [G.R. No.
94960, 08 March 1993])
Levy;Check-Off
A check-off is a process or device whereby the employer, on agreement with the union recognized
as the proper bargaining representative, or on prior authorization from its employees, deducts union
dues or agency fees from the latter's wages and remits them directly to the union. Its desirability to a
labor organization is quite evident; by it, it is assured of continuous funding. Indeed, this Court has
acknowledged that the system of check-off is primarily for the benefit of the union and, only indirectly, of
the individual laborers. When so stipulated in a collective bargaining agreement, or authorized in writing
by the employees concerned the Labor Code and its Implementing Rules recognize it to be the duty of
the employer to deduct sums equivalent to the amount of union dues from the employees' wages for
direct remittance to the union, in order to facilitate the collection of funds vital to the role of the union as
representative of employees in a bargaining unit if not, indeed, to its very existence. And it may be
mentioned in this connection that the right to union dues deducted pursuant to a check-off, pertains to
the local union which continues to represent the employees under the terms of a CBA, and not to the
parent association from which it has disaffiliated.
The legal basis of check-off is thus found in statute or in contract. Statutory limitations on check-offs
generally require written authorization from each employee to deduct wages; however, a resolution
approved and adopted by a majority to the union members at a general meeting will suffice when the
right to check-off has been recognized by the employer, including collection of reasonable assessments
in connection with mandatory activities of the union, or other special assessments and extraordinary
fees.
Authorization to effect a check-off of union dues is co-terminous with the union affiliation or
membership of employees. On the other hand, the collection of agency fees in an amount equivalent to
union dues and fees, from employees who are not union members, is recognized by Article 248 (e) of
the Labor Code. No requirement of written authorization from the non-union employee is imposed. The
employee's acceptance of benefits resulting from a collective bargaining agreement justifies the
deduction of agency fees from his pay and the union's entitlement thereto. In this aspect, the legal
basis of the union's right to agency fees is neither contractual nor statutory, but quasi-contractual,
deriving from the established principle that non-union employees may not unjustly enrich themselves by
benefiting from employment conditions negotiated by the bargaining union.
No provision of law makes the employer directly liable for the payment to the labor organization of
union dues and assessments that the former fails to deduct from its employees' salaries and wages
pursuant to a check-off stipulation. The employer's failure to make the requisite deductions may
constitute a violation of a contractual commitment for which it may incur liability for unfair labor practice.
 But it does not by that omission, incur liability to the union for the aggregate of dues or assessments
uncollected from the union members, or agency fees for non-union employees.
Check-offs in truth impose an extra burden on the employer in the form of additional administrative
and bookkeeping costs. It is a burden assumed by management at the instance of the union and for its
benefit, in order to facilitate the collection of dues necessary for the latter's life and sustenance. But the
obligation to pay union dues and agency fees obviously devolves not upon the employer, but the
individual employee. It is a personal obligation not demandable from the employer upon default or
refusal of the employee to consent to a check-off. The only obligation of the employer under a check-off
is to effect the deductions and remit the collections to the union. The principle of unjust enrichment
necessarily precludes recovery of union dues or agency fees from the employer, these being, to repeat,
obligations pertaining to the individual worker in favor of the bargaining union. Where the employer fails
or refuses to implement a check-off agreement, logic and prudence dictate that the union itself
undertake the collection of union dues and assessments from its members (and agency fees from non-
union employees); this, of course, without prejudice to suing the employer for unfair labor practice. Holy
Cross of Davao vs. Joaquin [G.R. No. 110007, 18 October 1996])

Art. 241 has three (3) requisites for the validity of the special assessment for union's incidental
expenses, attorney's fees and representation expenses. These are:
(1) authorization by a written resolution of the majority of all the members at the general
membership meeting called for the purpose;
(2) secretary's record of the minutes of the meeting; and
(3) individual written authorization for check off duly signed by the employees concerned.
(Gabriel vs. Secretary [G.R. No. 115949, 16 March 2000])

Article Provision Requisites

241 [n] No special assessment or other extraordinary A levy/special assessment via
fees may be levied upon the members of a labor a written resolution of the
organization unless authorized by a written majority of all the members in
resolution of a majority of all the members at a a general membership meeting
general membership meeting duly called for the duly called for the purpose with
purpose. The secretary of the organization shall the secretary recording the
record the minutes of the meeting including the list minutes of the meeting, list of
of all members present, the votes cast, the purpose members as well as the votes
of the special assessment or fees and the recipient cast.
of such assessment or fees. The record shall be
attested to by the president
241 [o] Other than for mandatory activities under the A check-off via individual
Code, no special assessment, attorney's fees, written authorization signed by
negotiation fees or any other extraordinary fees every employee.
may be checked off from any amount due an
employee without an individual written
authorization duly signed by the employee. The
authorization should specifically state the amount,
purpose and beneficiary of the deduction;
222 [b] No attorney's fees, negotiation fees or similar Prohibits attorney's fees,
charges of any kind arising from any collective negotiations fees and similar
bargaining negotiations or conclusion of the charges arising out of the
collective agreement shall be imposed on any conclusion of a collective
individual member of the contracting union: bargaining agreement from
Provided, however, That attorney's fees may be being imposed on any
charged against union funds in an amount to be individual union member.
agreed upon by the parties. Any contract,
agreement or arrangement of any sort to the
contrary shall be null and void.

Enforcement of Union Security Clause; Obligation of Employer

 Turning now to the involvement of the Company in the dismissal of petitioner Cariño we note that
the Company upon being formally advised in writing of the expulsion of petitioner Carino from the
Union, in turn simply issued a termination letter to Cariño, the termination being made effective the very
next day. We believe that the Company should have given petitioner Carino an opportunity to explain
his side of the controversy with the Union. Notwithstanding the Unions Security Clause in the CBA, the
Company should have reasonably satisfied itself by its own inquiry that the Union had not been merely
acting arbitrarily and capriciously in impeaching and expelling petitioner Cariño. From what was already
discussed above, it is quite clear that had the Company taken the trouble to investigate the acts and
proceedings of the Union, it could have very easily determined that the Union had not acted arbitrarily
in impeaching and expelling from its ranks petitioner Cariño. The Company offered the excuse that the
Union had threatened to go on strike if its request had not been forthwith granted. Assuming that such a
threat had in fact been made, if a strike was in fact subsequently called because the Company had
insisted on conducting its own inquiry, the Court considers that such would have been prima facie an
illegal strike. The Company also pleaded that for it to inquire into the lawfulness of the acts of the Union
in this regard would constitute interference by the Company in the administration of Union affairs. We
do not believe so.
xxx xxx xxx
5. We conclude that the Company had failed to accord to petitioner Cariño the latter's right to
procedural due process. The right of an employee to be informed of the charges against him and to
reasonable opportunity to present his side in a controversy with either the Company or his own Union,
is not wiped away by a Union Security Clause or a Union Shop Clause in a CBA. An employee is
entitled to be protected not only from a company which disregards his rights but also from his own
Union the leadership of which could yield to the temptation of swift and arbitrary expulsion from
membership and hence dismissal from his job. (Cariño vs. NLRC [G.R. No. 91086, 08 May 1990])

UNFAIR LABOR PRACTICE

Of Employers
Indeed, it is an unfair labor practice for an employer operating under a collective bargaining
agreement to negotiate or to attempt to negotiate with his employees individually in connection with
changes in the agreement. And the basis of the prohibition regarding individual bargaining with the
strikers is that although the union is on strike, the employer is still under obligation to bargain with the
union as the employees' bargaining representative (Melo Photo Supply Corporation vs. National Labor
Relations Board, 321 U.S. 332).
xxx xxx xxx
The test of whether an employer has interfered with and coerced employees within the
meaning of subsection (a) (1) is whether the employer has engaged in conduct which it may
reasonably be said tends to interfere with the free exercise of employees' rights under section
3 of the Act, and it is not necessary that there be direct evidence that any employee was in
fact intimidated or coerced by statements of threats of the employer if there is a reasonable
inference that anti-union conduct of the employer does have an adverse effect on self-
organization and collective bargaining. (Francisco, Labor Laws 1956, Vol. II, p. 323, citing
NLRB v. Ford, C.A., 1948, 170 F2d 735).
Besides, the letters, exhibits A and B, should not be considered by themselves alone but should be
read in the light of the preceding and subsequent circumstances surrounding them. The letters should
be interpreted according to the "TOTALITY OF CONDUCT DOCTRINE,"
... whereby the culpability of an employer's remarks were to be evaluated not only on the
basis of their implicit implications, but were to be appraised against the background of and in
conjunction with collateral circumstances. Under this "doctrine" expressions of opinion by an
employer which, though innocent in themselves, frequently were held to be culpable because
of the circumstances under which they were uttered, the history of the particular employer's
labor relations or anti-union bias or because of their connection with an established collateral
plan of coercion or interference. (Rothenberg on Relations, p. 374, and cases cited therein.)
(Insular Life Assurance Co., Ltd., Employees Assoc. vs. Insular Life [G.R. No. L-25291, 1971])
An employer is not denied the privilege of interrogating its employees as to their union affiliation,
provided the same is for a legitimate purpose and assurance is given by the employer that no reprisals
would be taken against unionists. Nonetheless, any employer who engages in interrogation does so
with notice that he risks a finding of unfair labor practice if the circumstances are such that his
interrogation restrains or interferes with employees in the exercise of their rights to self-organization.
(Blue Flash Express Co., Inc., 109 NLRB 591.)
xxx xxx xxx
The rule in this jurisdiction is that subjection by the company of its employees to a series of
questionings regarding their membership in the union or their union activities, in such a way as to
hamper the exercise of free choice on their part, constitutes unfair labor practice (Scoty's Department
Store vs. Micaller, 52 O.G. 5119). PHILSTEAM's aforestated interrogation squarely falls under this rule.
(Phil. Steam Navigation Co. vs. Phil. Officers Guild [G.R. No. L-20667/69, 29 October 1965])
[I]t can be established that the true and basic inspiration for the employer's act is derived from the
employee's union affiliations or activities, the assignment by the employer or another reason, whatever
its semblance of validity, is unavailing. Thus, it has been held that the facts disclosed that the
employer's acts in discharging employees were actually prompted by the employers 'improper interest
in the affected employee's improper interest in the affected employee's union affiliations and activities,
even though the employer urged that his acts were predicated on economic necessity, desire to give
employment to more needy persons, lack of work, cessation of operations, refusal to work overtime,
refusal of non-union employees to work with union employees, seasonal lay-off, libelous remarks
against management, violation of company rules. (Visayan Bicycle, Mfg., Co., Inc. vs. NLU [G.R. No. L-
19997, 19 May 1965] citing Rothenberg on Labor Relations)
The petitioner further claims that it could not have committed the unfair labor practice
charge for dismissing some of its employees due to their alleged union activities because the
alleged dismissal took place more than four (4) months before the organizational meeting of
the union and more than one (1) year before actual registration of said union with the Labor
Organization Division of the BLR.
The contention is without merit. Under Article 248(a) of the Labor Code of the Philippines, "to
interfere with, restrain, or coerce employees in their exercise of the right to self-organization" is an
unfair labor practice on the part of the employer. Paragraph (d) of said Article also considers it an unfair
labor practice for an employer "to initiate, dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of financial or other support to it. In this
particular case, the private respondents were dismissed or their services were terminated, because
they were soliciting signatures in order to form a union within the plant. (Judric Canning Corp. vs.
Inciong [G.R. No. L-51494, 19 August 1982])

Respondent court thus correctly held that: "(T)o the mind of the Court, whether or not the Pines
Hotel incurred losses is of no moment. The fact that management granted Christmas bonus to its
employees, the same should have been divided equally as it has been done before. Aside from the
Christmas bonus of 50% that was allocated to the Manila Hotel employees, some of them were granted
year-end bonus while the employees of the Pines Hotel did not receive any year-end bonus. This is a
clear case of discrimination, it appearing that there is no union at the Manila Hotel or the Taal Vista
Lodge and considering further that lately respondents had always been beset with demands for better
living conditions from the complainant union as well as strikes being staged by the union." (Manila Hotel
Co. vs. CIR, [G.R. No. L-30139, 28 September 1972])

Under the CBA between the parties that was in force and effect from May 1, 1985 to April 30,1988 it
was agreed that the "bargaining unit" covered by the CBA "consists of all regular or permanent
employees, below the rank of assistant supervisor, Also expressly excluded from the term "appropriate
bargaining unit" are all regular rank and file employees in the office of the president, vice-president, and
the other offices of the company personnel office, security office, corporate affairs office, accounting
and treasurer department .
It is to this class of employees who were excluded in the "bargaining unit" and who do not derive
benefits from the CBA that the profit sharing privilege was extended by petitioner.
There can be no discrimination committed by petitioner thereby as the situation of the union
employees are different and distinct from the non-union employees. Indeed, discrimination per se is not
unlawful. There can be no discrimination where the employees concerned are not similarly situated.
(Wise & Co., Inc., vs. Wise & Co. Employees Union [G.R. No. L-87672, 13 October 1989])
 The case before us does not pertain to any controversy involving discrimination of employees but
only the issue of whether the change of work schedule, which management deems necessary to
increase production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in the
same line of work whether or not they are members of private respondent union. Hence, it cannot be
said that the new scheme adopted by management prejudices the right of private respondent to self-
organization.
xxx xxx xxx
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 dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although this Court has inclined more often than not toward the worker and has upheld
his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that
justice is in every case for the deserving, tobe dispensed in the light of the established facts and the
applicable law and doctrine.
(Sime Darby Pilipinas, Inc. vs. NLRC [G.R. No. 119205, 15 April 1998])

Petitioner's appeal must be dismissed. It is speciously grounded on mere form rather than the
realities of the case. In form, respondent court gently treated petitioner's scheme to deprive the fifteen
drivers and helpers of their rightful status as employees and did not denounce it as a betrayal of the
salutary purpose and objective of the Industrial Peace Act, but instead remarked that since the grant of
employees' benefits hinged on the court's decision on their status as such employees, petitioner "could
not have been guilty of refusal to bargain in accordance with the Act." The reality, however, is that
respondent court expressly found that "in truth and in fact, (petitioner) corporation is the "employer" of
the driver or helper and not the salesman or propagandist who is merely expressly authorized by the
former to engage such services." Petitioner's failure to comply with its duty under the collective
bargaining agreement to extend the privileges, rights and benefits thereof to the drivers and helpers as
its actual employees clearly amounted to the commission of an unfair labor practice. And consequently
respondent court properly ordered in, its judgment that said drivers and helpers "should be given and/or
extended all the privileges, rights and benefits that are given to all the other regular employees
retroactive as of the effectivity of the first agreement of March 14, 1962 up to the present." In ordering,
respondent court but discharging its function under section 5(c) of the Act, supra, to order the cessation
of an unfair labor practice and "take such affirmative action as will effectuate the policies of this Act."
Failure on petitioner's part to live up in good faith to the terms of its collective bargaining agreement
by denying the privileges and benefits thereof to the fifteen drivers and helpers through its device of
trying to pass them off as "employees" of its salesmen and propagandists was a serious violation of
petitioner's duty to bargain collectively and constituted unfair labor practice in any language. As
succinctly stated by Mr. Justice Castro on Republic Savings Bank vs. CIR, in unfair labor practice
cases, "(T)he question is whether the (respondent) committed the act charged in the complaint. If it did,
it is of no consequence either as a matter of procedure or of substantive law, what the act is
denominated whether as a restraint, interference or coercion, as some members of the Court believe it
to be, or as a discriminatory discharge as other members think it is, or as refusal to bargain as some
other members view it, or even as a combination of any or all of these."
(Alhambra Industries, Inc. vs. CIR [G.R. No. L-25984, 30 October 1970])

In the bargaining process, the workers and employer shall be represented by their exclusive
bargaining representatives. The labor organization designated or selected by the majority of employees
in an appropriate collective bargaining unit, shall be the exclusive representative of the employees in
such unit for the purpose of collective bargaining. In the case at bar, it is the ALU which is the exclusive
bargaining representative of BALMAR employees and as such it has the right and duty to bargain
collectively with BALMAR.
The duty to bargain collectively means the performance of a mutual obligation to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to
wages, hours of work and all other terms and conditions or employment including proposals for
adjusting any grievance or questions arising under such agreement if requested by either party but
 such duty does not compel any party to agree to a proposal or to make any concession (Art. 252, Labor
Code, as amended).
Procedurally, ALU sent a letter to BALMAR, attaching therewith its proposals for collective
bargaining agreement. In reply, BALMAR refused to negotiate with ALU allegedly because` it received a
copy of a letter purportedly written on November 12, 1982 by one Johnny Luces, who claimed to be the
president of Balmar Farms Employees Association, informing the Labor Regional Director that more
than a majority of them would like to negotiate directly with their employer BALMAR. There is no
showing, however, that said letter was favorably acted upon, much less, is there an order superseding
the Med-Arbiter's order of October 27, 1982 certifying ALU as the sole and exclusive bargaining
representative of the rank and file workerks of BALMAR.
BALMAR cannot also invoke good faith in refusing to negotiate with ALU, considering that the latter
has been certified as the exclusive bargaining representative of BALMAR rank and file employees. As
observed by the SolGen, BALMAR'S pretense that majority of its rank and file employees disaffiliated
simply because of a letter it received to that effect, all the more sustains the finding of bad faith for it is
not for the petitioner BALMAR to question which group is the collective bargaining representative of its
rank and file employees.
(Balmar Farms, Inc. vs. NLRC [G.R. No. 73504, 15 October 1991])

Of Employees

This Court has held that a closed-shop is a valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of the right of freedom of association guaranteed by
the Constitution. (Lirag Textile Mills, Inc. vs. Blanco, 109 SCRA 87; Manalang vs. Artex Development
Company, Inc., 21 SCRA 561).

The Court stresses, however, that union security clauses are also governed by law and by
principles of justice, fair play, and legality. Union security clauses cannot be used by union officials
against an employer, much less their own members, except with a high sense of responsibility, fairness,
prudence, and judiciousness.
A union member may not be expelled from her union, and consequently from her job, for personal
or impetuous reasons or for causes foreign to the closed-shop agreement and in a manner
characterized by arbitrariness and whimsicality.
(Manila Mandarin Employees Union vs. NLRC [G.R. No. 76989, 29 September 1987])

When the Union struck and picketed on January 16, 1965, it might have been true that the Union
commanded a majority of Sulo's employees. Without need of certification, it could, under such
circumstances, conclude a collective bargaining agreement with Sulo. But it is not disputed that on
October 4, 1965, i.e., shortly after this case was filed on September 18, 1965, a consent election was
held. Not controverted, too, is the fact that, in that consent election, SELU defeated the Union,
petitioner herein. Because of this, SELU was certified to the Sulo management as the "collective
bargaining representative of the employees ... for collective bargaining purposes as regards wages,
hours of work, rates of pay and/or such other terms and conditions of employment allowed them by
law."
The consent election, it should be noted, was ordered by CIR pursuant to the Union's petition for
direct certification docketed as Case 1455-MC and a similar petition for certification filed by SELU
docketed as Case 1464-MC. Verily, the Union can no longer demand collective bargaining. For, it
became the minority union. As matters stand, said right properly belongs to SELU, which commands
the majority. By law, the right to be the exclusive representative of all the employees in an appropriate
collective bargaining unit is vested in the labor union "designated or selected" for such purpose "by the
majority of the employees" in the unit concerned. SELU has the right as well as the obligation to hear,
voice out and seek remedies for the grievances of all Sulo employees, including employees who are
members of petitioner Union, regarding the "rates of pay, wages, hours of employment, or other
conditions of employment."
(United Restauror's vs. Torres [G.R. No. L-24993, 18 December 1968])
STRIKES, LOCKOUTS and CONCERTED ACTIONS

A LOCKOUT mans the temporary refusal of the employer to furnish work as a result of an industrial
or labor dispute. (Article 212 [p] of the Labor Code)

A STRIKE, considered as the most effective weapon of labor, is defined as any temporary stoppage
of work by the concerted action of employees as a result of an industrial or labor dispute. A labor
dispute includes any controversy or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing, maintaining, changing or arranging the
terms and conditions of employment, regardless of whether or not the disputants stand in the proximate
relation of employers and employees. (Gold City Integrated Port Service, Inc. vs. NLRC [G.R. No.
103560, 06 July 1995])

A strike is "any temporary stoppage of work by the concerted action of employees as a result of an
industrial or labor dispute." It is the most preeminent of the economic weapons of workers which they
unsheathe to force management to agree to an equitable sharing of the joint product of labor and
capital. Undeniably, strikes exert some disquieting effects not only on the relationship between labor
and management but also on the general peace and progress of society. Our laws thus regulate their
exercise within reasons by balancing the interests of labor and management together with the
overarching public interest. (Lapanday Workers Union vs. NLRC [G.R. Nos. 95494-97, 07 September
1995])

Some of the limitations on the exercise of the right of strike are provided for in paragraphs (c) and
(f) of Article 263 of the Labor Code, as amended, supra. They provide for the procedural steps to be
followed before staging a strike filing of notice of strike, taking of strike vote, and reporting of the strike
vote result to the Department of Labor and Employment. (Lapanday Workers Union vs. NLRC [G.R.
Nos. 95494-97, 07 September 1995])

Requisites for a lawful lockout

[T]he requisites for a valid lockout are as follows:

1. a notice of intention to declare a lockout has been filed with the Department of Labor;
2. at least 30 days has elapsed since the filing of notice before the lockout is declared;
3. an impasse has resulted in the negotiations; and
4. the lockout is not discriminatory.
(San Pablo Oil Factory vs. CIR [6 SCRA 628])

It is not herein controverted that the complainants were locked out or denied work by the
respondent Company. Under Republic Act 875, however, for the discrimination by reason of union
membership to be considered an unfair labor practice, the same must have been committed to courage
or discourage such membership in the union. This cannot be said of the act of the Company
complained of. As clearly established by the evidence, its refusal to all complainants to work and
requirement that the latter stay out of the premises in the meantime (perhaps while the strike was still
going on at the factory) was borne out of the Company's justified apprehension and fear that sabotage
might be committed in the warehouse where the products machinery and spare parts were stored, as
has been the case in Binangonan. It has never been shown that the act of the Company was intended
to induce the complain ants to renounce their union-membership or as a deterrent for non-members to
affiliate therewith, nor as a retaliatory measure for activities in the union or in furtherance of the cause
of the union. (Rizal Cement Workers Union vs. Madrigal Co. [G.R. No. L-19767, 30 April 1964])

Requisites for a Lawful Strike

[T]he requisites for a valid strike are as follows:

1. a notice of strike filed with the Department of Labor at least 30 days before the intended
date thereof or 15 days in case of unfair labor practice;
2. strike vote approved by a majority of the total union membership in the bargaining unit
 concerned, obtained by secret ballot in a meeting called for that purpose;
3. notice given to the Department of Labor and Employment of the results of the voting at least
7 days before the intended strike.
These requirements are mandatory.
(First City Interlink vs. Confesor [G.R. No. 106316, 05 May 1997])

Purposes of strike notice and strike-vote report. In requiring a strike notice and a cooling-off period,
the avowed intent of the law is to provide an opportunity for mediation and conciliation. It thus directs
the MOLE "to exert all efforts at mediation and conciliation to effect a voluntary settlement" during the
cooling-off period. As applied to the CAC-NFSW dispute regarding the 13th month pay, MOLE
intervention could have possibly induced CAC to provisionally give the 13th month pay in order to avert
great business loss arising from the project strike, without prejudice to the subsequent resolution of the
legal dispute by competent authorities; or mediation/conciliation could have convinced NFSW to at least
postpone the intended strike so as to avoid great waste and loss to the sugar central, the sugar
planters and the sugar workers themselves, if the strike would coincide with the mining season.
So, too, the 7-day strike-vote report is not without a purpose. As pointed out by the Solicitor
General:
Many disastrous strikes have been staged in the past based merely on the insistence of
minority groups within the union. The submission of the report gives assurance that a strike
vote has been taken and that, if the report concerning it is false, the majority of the members
can take appropriate remedy before it is too late.
(NFSW vs. Ovejera [G.R. No. L-59743, 13 May 1982])

The SEVEN (7) DAY WAITING PERIOD is intended to give the Department of Labor and
Employment an opportunity to verify whether the projected strike really carries the imprimatur of the
majority of the union members. The need for assurance that majority of the union members support the
strike cannot be gainsaid. Strike is usually the last weapon of labor to compel capital to concede to its
bargaining demands or to defend itself against unfair labor practices of management. It is a weapon
that can either breathe life to or destroy the union and its members in their struggle with management
for a more equitable due of their labors. The decision to wield the weapon of strike must, therefore, rest
on a rational basis, free from emotionalism, unswayed by the tempers and tantrums of a few hotheads,
and firmly focused on the legitimate interest of the union which should not, however, be antithetical to
the public welfare. Thus, our laws require the decision to strike to be the consensus of the majority for
while the majority is not infallible, still, it is the best hedge against haste and error. In addition, a majority
vote assures the union it will go to war against management with the strength derived from unity and
hence, with better chance to succeed. (Lapanday Workers Union vs. NLRC [G.R. Nos. 95494-97, 07
September 1995])

When the law says "the labor union may strike" should the dispute "remain unsettled until the lapse
of the requisite number of days (cooling-off period) from the filing of the notice," the unmistakable
implication is that the union may not strike before the lapse of the cooling-off period. Similarly, the
mandatory character of the 7-day strike ban after the report on the strike-vote is manifest in the
provision that "in every case," the union shall furnish the MOLE with the results of the voting "at least
seven (7) days before the intended strike, subject to the (prescribed) cooling-off period." It must be
stressed that the requirements of cooling-off period and 7-day strike ban must both be complied with,
although the labor union may take a strike vote and report the same within the statutory cooling-off
period.
If only the filing of the strike notice and the strike-vote report would be deemed mandatory, but not
the waiting periods so specifically and emphatically prescribed by law, the purposes (hereafter
discussed) for which the filing of the strike notice and strike-vote report is required would not be
achieved, as when a strike is declared immediately after a strike notice is served, or when as in the
instant case the strike-vote report is filed with MOLE after the strike had actually commenced Such
interpretation of the law ought not and cannot be countenanced. It would indeed be self-defeating for
the law to imperatively require the filing on a strike notice and strike-vote report without at the same
time making the prescribed waiting periods mandatory.
(NFSW vs. Ovejera [G.R. No. L-59743, 13 May 1982])
Assumption of Jurisdiction

Article 263 (g) of the Labor Code does not violate the workers' constitutional right to strike. The
section provides in part, viz.:
When in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout
in an industry indispensable to the national interest, the Secretary of Labor and Employment
may assume jurisdiction over the dispute and decide it or certify the same to the Commission
for compulsory arbitration. .
The foregoing article clearly does not interfere with the workers' right to strike but merely regulates
it, when in the exercise of such right, national interests will be affected. The rights granted by the
Constitution are not absolute. They are still subject to control and limitation to ensure that they are not
exercised arbitrarily. The interests of both the employers and employees are intended to be protected
and not one of them is given undue preference.
(PTWU vs. CONFESOR [G.R. No. 117169, 12 March 1997])

The Labor Code vests upon the Secretary of Labor the discretion to determine what industries are
indispensable to national interest. Thus, upon the determination of the Secretary of Labor that such
industry is indispensable to the national interest, it will assume jurisdiction over the labor dispute of said
industry. The assumption of jurisdiction is in the nature of police power measure. This is done for the
promotion of the common good considering that a prolonged strike or lockout can be inimical to the
national economy. The Secretary of Labor acts to maintain industrial peace. Thus, his certification for
compulsory arbitration is not intended to impede the workers' right to strike but to obtain a speedy
settlement of the dispute. (PTWU vs. Confesor [G.R. No. 117169, 12 March 1997])
The intervention of the Secretary of Labor was therefore necessary to settle the labor dispute which
had lingered and which had affected both respondent company and petitioner union. Had it not been
so, the deadlock will remain and the situation will remain uncertain. Thus, it cannot be deemed that the
Secretary of Labor had acted with grave abuse of discretion in issuing the assailed order as she had a
well-founded basis in issuing the assailed order. It is significant at this point to point out that grave
abuse of discretion implies capricious and whimsical exercise of judgment. Thus, an act may be
considered as committed in grave abuse of discretion when the same was performed in a capricious or
whimsical exercise of judgment which is equivalent to lack of jurisdiction. The abuse of discretion must
be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an
arbitrary and despotic manner by reason of passion or personal hostility. (PTWU vs. Confesor [G.R. No.
117169, 12 March 1997] citing International Pharmaceuticals, Inc. vs. Secretary of Labor)
[T]he fact remains that under the circumstances the Secretary had the power and the duty to
assume jurisdiction over the labor dispute and, corollary to the assumption of jurisdiction, issue a
return-to-work order. Given this factual and legal backdrop, no grave abuse of discretion can be
attributed to the Secretary. (PSBA-Manila vs. Noriel [G.R. No. 80648, 15 August 1988])
A strike that is undertaken despite the issuance by the Secretary of Labor of an assumption or
certification order becomes a prohibited activity and thus illegal, pursuant to the second paragraph of
Art. 264 of the Labor Code as amended. The Union officers and members, as a result, are deemed to
have lost their employment status for having knowingly participated in an illegal act. (Zamboanga Wood
Products, Inc. v. NLRC [G.R. 82088, 13 October1989])

Incidental Issues
[T]he fundamental normative rule that jurisdiction is the authority to bear and determine a cause the
right to act in a case. However, this should be distinguished from the exercise of jurisdiction. The
authority to decide a case at all and not the decision rendered therein is what makes up jurisdiction.
Where there is jurisdiction over the person and the subject matter, the decision of all other questions
arising in the case is but an exercise of that jurisdiction.
[T]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to assume
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable
to the national interest, and decide the same accordingly. Necessarily, this authority to assume
 jurisdiction over the said labor dispute must include and extend to all questions and include and extend
to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has
exclusive jurisdiction.
(International Pharmaceuticals, Inc. v. Secretary [G.R. Nos. 92981-83, 09 January 1992])
Before the Secretary of Labor and Employment may take cognizance of an issue which is merely
incidental to the labor dispute, therefore, the same must be involved in the labor disputed itself, or
otherwise submitted to him for resolution. If it was not, as was the case in PAL v. Secretary or Labor and
Employment, supra, and he nevertheless acted on it, that assumption of jurisdiction is tantamount to a
grave abuse of discretion. Otherwise, the ruling in International Pharmaceuticals, Inc. v. Secretary of
Labor and Employment, supra, will apply.
The submission of an incidental issue of a labor dispute, in assumption and/or certification cases, to
the Secretary of Labor for his resolution is thus one of the instances referred to whereby the latter may
exercise concurrent jurisdiction together with the Labor Arbiters.
(St. Scholastica's College vs. Torres [G.R. No. 100158, 02 June 1992])

Return to Work Order

Once the Secretary of Labor assumes jurisdiction over, or certifies for compulsory arbitration, a
labor dispute adversely affecting the national interest, the law mandates that if a strike or lockout has
already taken place at the time of assumption or certification, "all striking or locked out employees shall
immediately return to work and the employer shall immediately resume operations and readmit all
workers under the same terms and conditions prevailing before the strike." [Art. 263 (g), Labor Code,
as amended.] Far from erring, the Acting Secretary, in issuing the return to work order, merely
implemented the clear mandates of the law. Thus, the contention that error attended the issuance of
such order is without any legal basis. (PSBA - Manila vs. Noriel [G.R. No. 80648, 15 August 1988])
Article 263 (g) of the Labor Code provides that if a strike has already taken place at the time of
assumption, "all striking . . . employees shall immediately return to work." This means that by its very
terms, a return-to-work order is immediately effective and executory notwithstanding the filing of a
motion for reconsideration. It must be strictly complied with even during the pendency of any petition
questioning its validity. After all, the assumption and/or certification order is issued in the exercise of
respondent Secretary's compulsive power of arbitration and, until set aside, must therefore be
immediately complied with. (St. Scholastica's vs. Torres [G.R. No. 100158, 02 June 1992])
To say that its (return-to-work order) effectivity must wait affirmance in a motion for reconsideration
is not only to emasculate it but indeed to defeat its import, for by then the deadline fixed for the return to
work would, in the ordinary course, have already passed and hence can no longer be affirmed insofar
as the time element is concerned. (PALEA vs. PAL)
The respective liabilities of striking union officers and members who failed to immediately comply
with the return-to-work order is outlined in Art. 264 of the Labor Code which provides that any
declaration of a strike or lockout after the Secretary of Labor and Employment has assumed jurisdiction
over the labor dispute is considered an illegal act. Any worker or union officer who knowingly
participates in a strike defying a return-to-work order may, consequently, "be declared to have lost his
employment status." (St. Scholastica's vs. Torres [G.R. No. 100158, 02 June 1992])
[T]he underlying principle embodied in Art. 264(g) on the settlement of labor disputes is that
assumption and certification orders are executory in character and are to be strictly complied with by
the parties even during the pendency of any petition questioning their validity. This extraordinary
authority given to the Secretary of Labor is aimed at arriving at a peaceful and speedy solution to labor
disputes, without jeopardizing national interests.
Regardless therefore of their motives, or the validity of their claims, the striking workers must cease
and/or desist from any and all acts that tend to, or undermine this authority of the Secretary of Labor,
once an assumption and/or certification order is issued. They cannot, for instance, ignore return-to-work
orders, citing unfair labor practices on the part of the company, to justify their actions.
(UFE vs. Nestle Phil., Inc. [G.R. No. 88710-13, 19 December 1990])
[T]he return-to-work order not so much confers a right as it imposes a duty; and while as a right it
may be waived, it must be discharged as a duty even against the worker's will. Returning to work in this
 situation is not a matter of option or voluntariness but of obligation. The worker must return to his job
together with his co-workers so the operations of the company can be resumed and it can continue
serving the public and promoting its interest. That is the real reason such return can be compelled. So
imperative is the order in fact that it is not even considered violative of the right against involuntary
servitude. The worker can of course give up his work, thus severing his ties with the company, if he
does not want to obey the order; but the order must be obeyed if he wants to retain his work even if his
inclination is to strike. (Sarmiento vs. Tuico [G.R. No. 75271-73, 27 June 1988])
We also wish to point out that an assumption and/or certification order of the Secretary of Labor
automatically results in a return-to-work of all striking workers, whether or not a corresponding order
has been issued by the Secretary of Labor. Thus, the striking workers erred when they continued with
their strike alleging absence of a return-to-work order. Article 264(g) is clear. Once an
assumption/certification order is issued, strikes are enjoined, or if one has already taken place, all
strikers shall immediately return to work. (UFE vs. Nestle Phil., Inc. [G.R. No. 88710-13, 19 December
1990])

Liabilities for an Illegal Strike

A UNION OFFICER who knowingly participates in an illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be declared to have
lost their employment status. An ordinary STRIKING WORKER cannot be terminated for mere
participation in an illegal strike. There must be proof that he committed illegal acts during a strike. A
union officer, on the other hand, may be terminated from work when he knowingly participates in an
illegal strike, and like other workers, when he commits an illegal act during a strike. (Gold City
Integrated Port Service, Inc. vs. NLRC [G.R. No. 103560, 06 July 1995])
[I]f the existence of force (acts of violence) while the strike lasts is not pervasive and widespread,
nor consistently and deliberately resorted to as a matter of policy, responsibility for serious acts of
violence should be individual and not collective. (Shell Oil Workers Union vs. Shell Company Of The
Phil. [G.R. No. L-30658-59, 31 March 1976])

Nevertheless, we are constrained to uphold the respondent Secretary's ruling that responsibility for
these illegal acts must be on an individual and not collective basis. Therefore, although the strike was
illegal because of the commission of illegal acts, only the union officers and strikers who engaged in
violent, illegal and criminal acts against the employer are deemed to have lost their employment status.
Union members who were merely instigated to participate in the illegal strike should be treated
differently. (First City Interlink Transportation Co., Inc., vs. Roldan-Confesor [G.R. No. 106316, 05 May
1997])

Thus, although rejecting that PNOC and its subsidiaries were guilty of discrimination, the NLRC
reiterated the policy enunciated in several labor cases "that a strike does not automatically carry the
stigma of illegality even if no unfair labor practice were committed by the employer. It suffices if such a
belief in good faith is entertained by labor as the inducing factor for staging a strike." Indeed, the
presumption of legality prevails even if the allegation of unfair labor practice is subsequently found to be
untrue, provided that the union and its members believed in good faith in the truth of such averment.
(PNOC Dockyard vs. NLRC [G.R. No. 118223, 26 June 1998])

Injunction

The right to picket as a means of communicating the facts of a labor dispute is a phrase of the
freedom of speech guaranteed by the constitution. If peacefully carried out, it cannot be curtailed even
in the absence of employer-employee relationship.
The right is, however, not an absolute one. While peaceful picketing is entitled to protection as an
exercise of free speech, we believe that courts are not without power to confine or localize the sphere
of communication or the demonstration to the parties to the labor dispute, including those with related
interest, and to insulate establishments or persons with no industrial connection or having interest
totally foreign to the context of the dispute. Thus, the right may be regulated at the instance of third
parties or "innocent bystanders" if it appears that the inevitable result of its exercise is to create an
 impression that a labor dispute with which they have no connection or interest exists between them and
the picketing union or constitute an invasion of their rights. In one case decided by this Court, we
upheld a trial court's injunction prohibiting the union from blocking the entrance to a feed mill located
within the compound of a flour mill with which the union had a dispute. Although sustained on a different
ground, no connection was found other than their being situated in the same premises. It is to be noted
that in the instances cited, peaceful picketing has not been totally banned but merely regulated. And in
one American case, a picket by a labor union in front of a motion picture theater with which the union
had a labor dispute was enjoined by the court from being extended in front of the main entrance of the
building housing the theater wherein other stores operated by third persons were located.
(PAFLU vs. Cloribel [L-25878, 28 March 1969])
Among the powers expressly conferred on the Commission by Article 218 is the power to "enjoin or
restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require the
performance of a particular act in any labor dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render ineffectual any decision in favor of such party
. . ." (IBM vs. NLRC, [G.R. No. 91980, 27 June 1991]
As a rule such restraining orders or injunctions do not issue ex parte, but only after compliance with
the following requisites, to wit:
a) a hearing held "after due and personal notice thereof has been served, in such manner as the
Commission shall direct, to all known persons against whom relief is sought, and also to the Chief
Executive and other public officials of the province or city within which the unlawful acts have been
threatened or committed charged with the duty to protect complainant's property;"
b) reception at the hearing of "testimony of witnesses, with opportunity for cross-examination, in
support of the allegations of a complaint made under oath," as well as "testimony in opposition
thereto, if offered . . .;
c) a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have been threatened and will be committed and will be
continued unless restrained, but no injunction or temporary restraining order shall be
issued on account of any threat, prohibited or unlawful act, except against the person or
persons, association or organization making the threat or committing the prohibited or
unlawful act or actually authorizing or ratifying the same after actual knowledge thereof;
(2) That substantial and irreparable injury to complainant's property will follow;
(3) That as to each item of relief to be granted, greater injury will be inflicted upon complainant
by the denial of relief than will be inflicted upon defendants by the granting of relief;
(4) That complainant has no adequate remedy at law; and
(5) That the public officers charged with the duty to protect complainant's property are unable
or unwilling to furnish adequate protection.
However, a temporary restraining order may be issued ex parte under the following conditions:
a) the complainant "shall also allege that, unless a temporary restraining order shall be issued without
notice, a substantial and irreparable injury to complainant's property will be unavoidable;
b) there is "testimony under oath, sufficient, if sustained, to justify the Commission in issuing a
temporary injunction upon hearing after notice;"
c) the "complainant shall first file an undertaking with adequate security in an amount to be fixed by
the Commission sufficient to recompense those enjoined for any loss, expense or damage caused
by the improvident or erroneous issuance of such order or injunction, including all reasonable costs,
together with a reasonable attorney's fee, and expense of defense against the order or against the
granting of any injunctive relief sought in the same proceeding and subsequently denied by the
Commission;" and
d) the "temporary restraining order shall be effective for no longer than twenty (20) days and shall
become void at the expiration of said twenty (20) days.
(IBM vs. NLRC, [G.R. No. 91980, 27 June 1991]

Liability of Employer for backwages

[T]he distinction earlier made between discriminatorily dismissed employees and those who struck,
albeit in protest against the company's unfair labor practice. Discriminatorily dismissed employees
 received backpay from the date of the act of discrimination, that is from the day of their discharge. On
this score, the award of backpay to Gaddi, Andrada and the salesmen may be justified. The salesmen,
as already stated, were practically locked out when they were ordered to put their trucks in the garage;
they did not voluntarily strike. (See Macleod & Co. of the Phil. v. Progressive Federation of Labor, G.R.
No. L-7887, May 31, 1955) Hence, the award of backwages.
In contrast, the rest of the employees struck as a voluntary act of protest against what they
considered unfair labor practices of the company. The stoppage of their work was not the direct
consequence of the company's unfair labor practice. Hence their economic loss should not be shifted to
the employer. (See Dinglasan v. National Labor Union, G.R. No. L-14183, Nov. 28, 1959) As explained
by the National Labor Relations Board in the case of American Manufacturing Co., NLRB 443, "When
employees voluntarily go on strike, even if in protest against unfair labor practices, it has been our
policy not to award them backpay during the strike. However, when the strikers abandon the strike and
apply for reinstatement despite the unfair labor practices and the employer either refuses to reinstate
them or imposes upon their reinstatement new conditions that constitute unfair labor practices, We are
of the opinion that the considerations impelling our refusal to award backpay are no longer controlling.
Accordingly, We hold that where, as in this case, an employer refuses to reinstate strikers except upon
their acceptance of the new conditions that discriminate against them because of their union
membership or activities, the strikers who refuse to accept the conditions and are consequently refused
reinstatement are entitled to be made whole for any losses of pay they may have suffered by reason of
the respondent's discriminatory acts." (Quoted in Teller, 2 Labor Disputes and Collective Bargaining,
Sec. 371, pp. 997-998)
(Cromwell Commercial Employees vs. CIR [G.R. No. L-19778, 30 September 1964])

TERMINATION OF EMPLOYMENT

By Employee
(a) An employee may terminate without just cause the employee-employer relationship by serving a
written notice on the employer at least one month in advance. The employer upon whom no such notice
was served may hold the employee liable for damages.
(b) An employee may put an end to the relationship without serving any notice on the employer for
any of the following just causes:
(1) Serious insult by the employer or his representative on the honor and person of the
employee;
(2) Inhuman and unbearable treatment accorded the employee by the employer or his
representative;
(3) Commission of a crime or offense by the employer or his representative against the
person of the employee or any of the immediate members of his family; and
(4) Other causes analogous to any of the foregoing.
(Article 285 of the Labor Code)

Resignation
The Court cannot uphold and give weight to private respondent's resignation letter which appears to
have been written and submitted at the instance of petitioner. Its form is of the company's and its
wordings are more of a waiver and quitclaim. Moreover, the supposed resignation was not
acknowledged before a notary public. Petitioner's failure to deny that Sugarland is its sister company
and that petitioner absorbed Sugarland's security contract and security personnel assumes overriding
significance over the resignation theorized upon, evincing petitioner's design to ignore or violate labor
laws through the use of the veil of corporate personality. The Court cannot sanction the practice of
some companies which, shortly after a worker has become a regular employee, effects the transfer of
the same employee to another entity whose owners are the same, or identical, in order to deprive
subject employee of the benefits and protection he is entitled to under the law. (A' Prime Security
Services, Inc. vs. NLRC [G.R. No. 107320, 19 January 2000])
By Employer
Under Section 1, Rule XIV of the Implementing Rules and Regulations of the Labor Code, the
dismissal of an employee must be for a just or authorized cause and after due process.
The two requirements of this legal provision are:
1. The legality of the act of dismissal, that is, dismissal under the ground provided under Article
282 (Just Causes) or Articles 283 and 284 (Authorized Causes) of the Labor Code; and
2. The legality in the manner of dismissal, that is, with observance of the procedural
requirements of notice and hearing.

Just Cause

An employer may terminate an employment for any of the following just 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 his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
(Article 282 of the Labor Code)

To be lawful, the cause for termination must be a serious and grave malfeasance to justify the
deprivation of a means of livelihood. This is merely in keeping with the spirit of our Constitution and
laws which lean over backwards in favor of the working class, and mandate that every doubt must be
resolved in their favor. (Hongkong & Shanghai Banking Corp. vs. NLRC [G.R. No. 116542, 30 July
1996])
In labor-management relations, there can be no higher penalty than dismissal from employment.
Dismissal severs employment ties and could well be the economic death sentence of an employee.
Dismissal prejudices the socio-economic well being of the employee's family and threatens the
industrial peace. Due to its far reaching implications, our Labor Code decrees that an employee cannot
be dismissed, except for the most serious causes. The overly concern of our laws for the welfare of
employees is in accord with the social justice philosophy of our Constitution. (Cebu Filveneer vs. NLRC
[G.R. No. 126601, 24 February 1998]

Serious misconduct or willful disobedience by the

employee of the lawful orders of his employer or
representative in connection with his work;
[I]n order that an employer may terminate an employee on the ground of willful disobedience to the
former's orders, regulations or instructions, it must be established that the said orders, regulations or
instructions are (a) reasonable and lawful, (b) sufficiently known to the employee, and (c) in connection
with the duties which the employee has been engaged to discharge. (Manebo vs. NLRC [G.R. No.
107721, 10 January 1994])
Misconduct is improper or wrong conduct. It is 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. The misconduct to be serious within the meaning of the Act must be of such
a grave and aggravated character and not merely trivial or unimportant. Such misconduct, however
serious, must, nevertheless, be in connection with the employee's work to constitute just cause for his
separation. In this case however, the misconduct has no relation to the work of petitioners; hence, not a
valid ground. (Cosep vs. NLRC [G.R. No. 124966, 16 June 1998])
Serious misconduct in the form of drunkenness and disorderly and violent behavior, habitual neglect
of duty, and insubordination or willful disobedience of the lawful order of his superior officer, are just
causes for the dismissal of an employee. [Seahorse Maritime Corporation vs. NLRC [173 SCRA 390,
1989])
 [W]here a violation of company policy or breach of company rules and regulations was found to
have been tolerated by management, then the same could not serve as a basis for termination (Tide
Water Associated Oil Co. v. Victory Employees [85 PHIL 166, 1949])
The employee admits that she had asked someone to punch-in her time card because at that time
she was doing an errand for one of the company’s officers, Richard Tan, and that was with the
permission of William Chua. She maintains that she did it in good faith believing that she was anyway
accommodating the request of a company executive and done for the benefit of the company with the
acquiescence of her boss. Besides, the practice was apparently tolerated as the employees were not
getting any reprimand for doing so. (Philippine Aeolus Automotive vs. NLRC [G.R. No. 124617, 29 April
2000])
Such dismissal, in our view, was too harsh a penalty for an unintentional infraction, not to mention
that it was his first offense committed without malice, and committed also by others who were not
equally penalized.
It is clear that the alleged false entry in private respondent's DTR was actually the result of having
logged his scheduled time-out in advance on July 31, 1994. But it appears that when he timed in, he
had no idea that his work schedule (night shift) would be cancelled. When it was confirmed at 10:00
p.m. that there was no "butchering" of tuna to be done, those who reported for work were allowed to go
home, including private respondent. In fact, Filoteo even obtained permission to leave from the
Assistant Production Manager.
Considering the factory practice which management tolerated, we are persuaded that Filoteo, in his
rush to catch the service vehicle, merely forgot to correct his initial time-out entry. Nothing is shown to
prove he deliberately falsified his daily time record to deceive the company. The NLRC found that even
management's own evidence reflected that a certain Felix Pelayo, a co-worker of private respondent,
was also allowed to go home that night and like private respondent logged in advance 7:00 a.m. as his
time-out. This supports Filoteo's claim that it was common practice among night-shift workers to log in
their usual time-out in advance in the daily time record.
(Permex vs. NLRC [G.R. No. 125031, 24 January 2000])
The act of private respondent in asking a co-employee to punch-in her time card although a
violation of company rules, likewise does not constitute serious misconduct. Firstly, it was done in good
faith considering that she was asked by an officer to perform a task outside the office, which is for the
benefit of the company, with the consent of the plant manager. Secondly, it eas her first time to commit
such infraction during her five (5)-year service in the company. Finally, the company did not lose
anything by reason thereof as the offense was immediately known and corrected. (Philippine Aeolus
Automotive vs. NLRC [G.R. No. 124617, 29 April 2000])

An ordinary employee, quite understandably, examines her pay slip every time she receives her
salary. But we cannot always expect the employee to go further as to determine if her overtime pay,
which is not much anyway, was properly computed up to the last centavo or whether the overtime pay
pertained to a particular day the work was rendered. The amount in controversy was only P254.90.
Considering the employee’s salary was not fixed as it fluctuated from time to time due to varying
amounts of tips, commissions and overtime pay received, it would not have been right to assume
always that the employee would examine every detail of the computation of her salary. Needless to say,
the same should not be laid solely on the employee because the mistake is not hers alone. The mistake
resulted from the collective laxity of petitioner’s accounting personnel and inadvertence on the part of
the respondent. (Shangri-La Hotel vs. Dialogo [G.R. No. 141900, 20 April 2001])

Gross and habitual neglect by the employee of his

duties;

Sleeping on the job

Petitioner's reliance on the authorities it cited that sleeping on the job is always a valid ground for
dismissal, is misplaced. The authorities cited involved security guards whose duty necessitates that
they be awake and watchful at all times inasmuch as their function, to use the words in Luzon
Stevedoring Corp. v. CIR, is "to protect the company from pilferage or loss." Accordingly, the doctrine
laid down in those cases is not applicable to the case at bar.
 While an employer enjoys a wide latitude of discretion in the promulgation of policies, rules and
regulations on work-related activities of the employees, those directives, however, must always be fair
and reasonable, and the corresponding penalties, when prescribed, must be commensurate to the
offense involved and to the degree of the infraction. In the case at bar, the dismissal meted out on
private respondent for allegedly sleeping on the job, under the attendant circumstances, appears to be
too harsh a penalty, considering that he was being held liable for first time, after nine (9) long years of
unblemished service, for an alleged offense which caused no prejudice to the employer, aside from
absence of substantiation of the alleged offense. The authorities cited by petitioner are also irrelevant
for the reason that there is no evidence on the depravity of conduct, willfulness of the disobedience, or
conclusiveness of guilt on the part of private respondent. Neither was it shown that private respondent's
alleged negligence or neglect of duty, if any, was gross and habitual. Thus, reinstatement is just and
proper.
(VH Manufacturing, Inc. vs. NLRC [G.R. No. 130957, 19 January 2000])

Abandonment

For abandonment to constitute a valid cause for termination of employment, there must be a
deliberate unjustified refusal of the employee to resume his employment. This refusal must be clearly
shown. Mere absence is not sufficient; it must be accompanied by overt acts pointing to the fact that the
employee simply does not want to work anymore. (Davies, Inc. vs. NLRC [G.R. No. 106915, 31 August
1993])

As found by the Labor Arbiter, private respondent's physician advised him to rest for 30 days before
reporting back for work in order to recuperate. Private respondent heeded this advise and even
exceeded the number of days recommended by his doctor for his recuperation. In fact, he reported
back for work 50 days after his operation. This would clearly show that private respondent was ready to
assume his responsibilities considering that he had fully recovered from the operation. Furthermore, the
filing of a complaint for illegal dismissal by private respondent is inconsistent with the allegation of
petitioners that he had abandoned his job. Surely, an employee's posture will be illogical if he abandons
his work and then immediately files an action for his reinstatement (Remerco Garments v. Minister, 135
SCRA 167 [1985]).
We have consistently ruled that a charge of abandonment is totally inconsistent with the immediate
filing of a complaint for illegal dismissal. (Icawat vs.NLRC [GR No. 133573, 2002])
Undeniable is the over-reliance of both the Labor Arbiter and the NLRC on the notion that the filing
of a complaint for illegal dismissal is inconsistent with the employer's defense of abandonment by the
employee of his work. While the burden of refuting a complaint for illegal dismissal is upon the
employer, fair play as well requires that, where the employer proffers substantial evidence of the fact
that it had not, in the first place, terminated the employee but simply laid him off due to valid reasons,
neither the Labor Arbiter nor the NLRC may simply ignore such evidence on the pretext that the
employee would not have filed the complaint for illegal dismissal if he had not indeed been dismissed.
This is clearly a non sequitur reasoning that can never validly take the place of the evidence of both the
employer and the employee.
xxx xxx xxx
The Labor Arbiter and the NLRC similarly answered the question with the alleged truism: private
respondent filed the complaint for illegal dismissal because he was illegally dismissed. We, however,
believe that private respondent's motivation in filing the complaint for illegal dismissal despite his
refusal to return to work, is revealed by the following averment in his position paper before the Labor
Arbiter:
Before delving into the issues of the above entitled case, complainant would like to request
the Honorable Commissioner to take judicial notice of the fabricated and manufactured criminal
case filed by the respondents in retaliation to the institution of this case and in fact the latter had
confronted the former to drop this case in exchange of the dropping of the fabricated and
manufactured criminal case.
(Arc-Men Food Industries vs. NLRC [G.R. No. 113721, 07 May 1997])
In this case, the following circumstances clearly manifest private respondent's intention to sever his
ties with petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at
 Cesar's Palace Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-
workers. Second, he surrendered the shop's keys and took away all his things from the shop. Third, he
did not report anymore to the shop without giving any valid and justifiable reason for his absence.
Fourth, he immediately sought a regular employment in another barbershop, despite previous
assurance that he could remain in petitioners' employ. Fifth, he filed a complaint for illegal dismissal
without praying for reinstatement.
Moreover, public respondent's assertion that the institution of the complaint for illegal dismissal
manifests private respondent's lack of intention to abandon his job is untenable. The rule that
abandonment of work is inconsistent with the filing of a complainant for illegal dismissal is not
applicable in this case. Such rule applies where the complainant seeks reinstatement as a relief.
Corollarily, it has no application where the complainant does not pray for reinstatement and just asks for
separation pay instead as in the present case. It goes without saying that the prayer for separation pay,
being the alternative remedy to reinstatement, contradicts private respondent's stance. (Jo vs. NLRC
[G.R. No. 121605, 02 February 2000])
[T]he evidence on record indubitably shows that Leonardo abandoned his work with the
respondents. As sufficiently established by respondents, complainant, after being pressed by
respondent to present the customer regarding his unauthorized solicitation of sideline work from the
latter and whom he claims to be his aunt, he never reported back to work anymore. This finding is
further bolstered by the fact that after he left the respondent, he got employed with Dennis Motors
Corporation as Air-Con Mechanic….
It must be stressed that while Leonardo alleges that he was illegally dismissed from his employment
by the respondents, surprisingly he never stated any reason why the respondents would want to ease
him out from his job. Moreover, why did it take him ten (10) long months to file his case if he indeed was
aggrieved by the respondents. All the above facts clearly point that the filing of the case is a mere
afterthought on the part of complainant Leonardo.
(Leonardo vs. NLRC [G.R. No. 125303, 16 June 2000])
Excessive absences
In the case at bench, it is undisputed that respondent Edwin P. Sabuya had within a span of almost
six (6) years been repeatedly admonished, warned and suspended for incurring excessive
unauthorized absences. Worse, he was not at home but was out driving a pedicab to earn extra income
when the company nurse visited his residence after he filed an application for sick leave. Such conduct
of respondent Edwin P. Sabuya undoubtedly constitutes gross and habitual neglect of duties.
(Worldwide Papermills vs. NLRC [G.R. No. 113081, 12 May 1995])
Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;

Loss of confidence as a ground for dismissal does not entail proof beyond reasonable doubt of the
employee's misconduct. It is enough that there be "some basis" for such loss of confidence or that "the
employer has reasonable grounds to believe, if not to entertain the moral conviction that the employee
concerned is responsible for the misconduct and that the nature of his participation therein rendered
him absolutely unworthy of the trust and confidence demanded by his position" (Reyes vs. Zamora, 90
SCRA 92, 111 [1979]; Galsim vs. PNB, 29 SCRA 293 [1969])

To be a valid ground for dismissal, loss of trust and confidence must be based on a willful breach of
trust. And, as realistically stressed by the Solicitor General, unless based on a ground provided by law
and supported by substantial evidence, dismissal will be disallowed, for what is at stake is not only the
employee's position, but also his means of livelihood. Considering that private respondent was acting in
good faith, his dismissal would run counter to such established doctrinal rulings. (PCI Bank vs. NLRC
[G.R. No. 114920, 23 August 1995])
The employee’s failure to detect and report to the respondent company the fraudulent activities in
her division as well as her failure to give a satisfactory explanation on the irregularities constitute “fraud
or willful breach of trust reposed on her by her employer or duly authorized representative” – one of the
just causes in terminating employment as provided for under paragraph c, Article 283 of the Labor
Code, as amended. Concomitantly, the employee’s actuations betrayed the utmost trust and confidence
reposed upon her by the respondent company. We cannot, therefore, compel private respondents to
retain the employment of the employee who is shown to be lacking in candor, honesty and efficiency
required of her position. (Nokom vs. NLRC [G.R. No. 140043, 18 July 2000])
We have consistently held that loss of confidence is a recognized ground for the discharge of an
employee from employment. But such ground must be founded on facts established by substantial
evidence. The burden of establishing such facts as reasonably cause loss of confidence in an
employee such facts are reasonably generate belief by the employer that the employee was connected
with some misconduct and the nature of his participation therein is such as to render him unworthy of
trust and confidence demanded of his position is on the employer. In this case, the records are bereft of
any showing that private respondent Jemina is responsible, solely or partly, for the loss of the
P100,000.00 in the vault of petitioner Bank's Binondo Branch. Both the Labor Arbiter and the NLRC
analyzed the employer's proofs and came to the reasoned conclusion that they did not adequately
demonstrate Jemina's connection with the said loss. True, Jemina is a possible suspect. After all, the
cash operations of the branch were under his control and supervision. He had joint custody with the
Branch Manager over all cash and properties inside the vault. He had access to the vault where the
monies of the bank were kept. Indeed, petitioner Bank has every reason to suspect Jemina for the
P100,000.00 shortage in its vault. But suspicion has never been a valid ground for the dismissal of an
employee. The employee's fate cannot, in justice, be hinged upon conjectures and surmises. (Pilipinas
Bank vs. NLRC [G.R. No. 101372, 13 November 1992])
That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that "you're
fully aware that the company is not accepting married women employee (sic), as it was verbally
instructed to you." Again, in the termination notice sent to her by the same branch supervisor, private
respondent was made to understand that her severance from the service was not only by reason of her
concealment of her married status but, over and on top of that, was her violation of the company's
policy against marriage ("and even told you that married women employees are not applicable [sic] or
accepted in our company.") Parenthetically, this seems to be the curious reason why it was made to
appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor
and not by its highest ranking officers who would otherwise be solidarily liable with the corporation.
Verily, private respondent's act of concealing the true nature of her status from PT & T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly
because she wanted to retain a permanent job in a stable company. In other words, she was practically
forced by that very same illegal company policy into misrepresenting her civil status for fear of being
disqualified from work. While loss of confidence is a just cause for termination of employment, it should
not be simulated. It must rest on an actual breach of duty committed by the employee and not on the
employer's caprices. Furthermore, it should never be used as a subterfuge for causes which are
improper, illegal, or unjustified.
(PT&T vs. NLRC [G.R. No. 118978, 23 May 1997])
[T]he rules on termination of employment, penalties for infractions, and resort to concerted actions,
insofar as managerial employees are concerned, are not necessarily the same as those applicable to
termination of employment of ordinary employees. Employers, generally, are allowed a wider latitude of
discretion in terminating the employment of managerial personnel or those of similar rank performing
functions which by their nature require the employer's trust and confidence, than in the case of ordinary
rank-and-file employees (Cruz vs. Medina [1989]).
As regards a managerial employee, moreover, mere existence of a basis for believing that such
employee has breached the trust of his employer would suffice for dismissal. Proof beyond reasonable
doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as
when the employer has reasonable ground to believe that the employee concerned is responsible for
the purported misconduct, and the nature of his participation therein renders him unworthy of the trust
and confidence demanded by his position.
In the case at bar, petitioner, is tasked to perform key functions; he is bound by an exacting work
ethic. He should have realized that his position requires the full trust and confidence of his employer in
every exercise of managerial discretion insofar as the conduct of his employer's business is concerned.
However, as found a quo, he committed acts which betrayed the trust and confidence reposed on him
 by tampering with very sensitive equipment at the joint terminal facility. In doing so, he exposed the
terminal complex and the residents in adjacent communities to the danger of a major disaster that may
be caused by tank explosions and conflagration. Verily, he committed acts inimical to the interest of his
employer which is mandated by law to observe extraordinary diligence in its operations to ensure the
safety of the public. Indeed, we are constrained to conclude that petitioner's admitted infraction as well
his past violation of safety regulations is more than sufficient ground for respondent company to
terminate the employment of petitioner.
(Deles vs. NLRC [G.R. No. 121348, 09 March 2000])
A perusal of RCPI's dismissal notice reveals that it merely stated a conclusion to the effect that the
withholding was deliberately done to hide alleged malversation or misappropriation without, however,
stating the circumstances in support thereof. It further mentioned that the position of cashier requires
utmost trust and confidence but failed to allege the breach of trust on the part of petitioner and how the
alleged breach was committed. On the assumption that there was indeed a breach, there is no
evidence that petitioner was a managerial employee of respondent RCPI. It should be facts noted that
the term 'trust and managerial employees. It may not even be presumed that when there is a shortage,
there is also a corresponding breach of trust. Cash shortages in a cashier's work may happen, and
when there is no proof that the same was deliberately done for a fraudulent or wrongful purpose, it
cannot constitute breach of trust so as to render the dismissal from work invalid. (Farrol vs. CA [G.R.
No. 133259, 10 February 2000])

Commission of a crime or offense by the employee

against the person of his employer or any
immediate member of his family or his duly
authorized representative;

Petitioners cannot downgrade the seriousness of their offenses. They committed falsifications.
These are crimes punished by the Revised Penal Code itself. Their commission constitutes serious
misconduct. Nor can petitioners avoid liability by claiming that the SN Forms are not company records
but SSS documents. Their use is covered by Item No. 12 of the Schedule of Offenses and Penalties
which provides ". . . knowingly using falsified record or document." Petitioners knew that the
commission of this offense is punishable by dismissal in view of its seriousness. They cannot therefore
complain of its harshness. (Farrol vs. NLRC [G.R. No. 133259, 10 February 2000])

Other causes analogous to the foregoing.

In the case of Nadura vs. Benguet Consolidated Inc., this Court speaking through Justice Arsenio
Dizon held inter alia that a cursory reading of Section 1, R.A. 1787, which enumerates the just causes
for which an employer may terminate an employment with a definite period, is sufficient to convince
anyone that illness cannot be included as an analogous cause "by any stretch of the imagination."
(Soriano vs. PNR [G.R. No. L-43224, 23 August 1978)
'The employer cannot rightfully dismiss the employee who is sick even if he complies with the
requirement of the Act as to the service of the required notice or payment of the corresponding
separation pay, because sickness is not willful or voluntary on the part of the employee.' (Eugenio
Nadura v. Benguet Consolidated, Inc. [G.R. No. L-17780, 24 August 1962])
(Hence to constitute an “analogous cause” under Article 282 of the Labor Code, the act must be willful
and voluntary on the part of the employee [and illness is not])
We cannot but agree with PEPSI that "gross inefficiency" falls within the purview of "other causes
analogous to the foregoing," the constitutes, therefore, just cause to terminate an employee under
Article 282 of the Labor Code. One is analogous to another if it is susceptible of comparison with the
latter either in general or in some specific detail; or has a close relationship with the latter. "Gross
inefficiency" is closely related to "gross neglect," for both involve specific acts of omission on the part
of the employee resulting in damage to the employer or to his business. (Lim vs. NLRC [G.R. No.
118434, 26 July 1996])
Totality of Infractions
Petitioner also assails the severity of the penalty imposed upon him alleging that he should have
merited a suspension only considering his past performance.
Unfortunately, petitioner does not appear to be a first offender. Aside from the infractions he was
found to have committed, it appears that petitioner falsified the truth when he made a false report about
the incident to private respondent SMC to cover up for his misdeeds. Moreover on previous occasions,
petitioner committed violations of company rules and regulations concerning pricing as a salesman of
the company in a way that is detrimental to his employer. On one occasion, he failed to remit
collections, so that in 1986, he was suspended for thirty days. Thus, the totality of the infractions that
petitioner has committed justifies the penalty of dismissal. (Mendoza vs. NLRC [G.R. No. 94294, 22
March 1991])

Habituality

In other words, considerations of first offense and length of service are overshadowed by the
seriousness of the offense. As to whether an offense is minor or serious will have to be determined
according to the peculiar facts of each case. And to a shipping company engaged in the transportation
of passengers and cargoes any delay of its vessels may greatly affect its business and reputation and
expose the company to unmitigated lawsuits for breach of contract and damages. (Villeno vs. NLRC
[G.R. No. 108153, 26 December 1995])

Where the totality of the evidence was sufficient to warrant the dismissal of the employees the law
warrants their dismissal without making any distinction between a first offender and a habitual
delinquent. Under the law, respondent Minister is duly mandated to equally protect and respect not only
the labor or workers' side but also the management and/or employers' side. The law, in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction of the employer. (Colgate-
Palmolive Philippines, Inc. v. Ople)

Sexual Harassment
REPUBLIC ACT NO. 7877
15 February 1995

AN ACT DECLARING SEXUAL HARASSMENT UNLAWFUL IN THE EMPLOYMENT, EDUCATION OR

TRAINING ENVIRONMENT, AND FOR OTHER PURPOSES

Section 1. Title. This Act shall be known as the "Anti-Sexual Harassment Act of 1995."
Section 2. Declaration of Policy. The State shall value the dignity of every individual, enhance the
development of its human resources, guarantee full respect for human rights, and uphold the dignity of
workers, employees, applicants for employment, students or those undergoing training, instruction or
education. Towards this end, all forms of sexual harassment in the employment, education or training
environment are hereby declared unlawful.

Section 3. Work Education or Training-related Sexual Harassment Defined. Work, education of

training-related sexual harassment is committed by an employer, employee, manager, supervisor, agent of
the employer, teacher, instructor, professor, coach, trainor, or any other person who, having authority,
influence or moral ascendancy over another in a work or training or education environment, demands,
requests or otherwise requires any sexual favor from the other, regardless of whether the demand, request
or requirement for submission is accepted by the object of said Act.

(a) In a work-related or employment environment, sexual harassment is committed when:

(1) The sexual favor is made as a condition in the hiring or in the employment, re-employment or
continued employment of said individual, or in granting said individual favorable
compensation, terms, conditions, promotions, or privileges; or the refusal to grant the sexual
favor results in limiting, segregating or classifying the employee which in any way would
discriminate, deprive or diminish employment opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employee's rights or privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or offensive environment for the
employee.

(b) In an education or training environment, sexual harassment is committed:

(1) Against one who is under the care, custody or supervision of the offender;
(2) Against one whose education, training, apprenticeship or tutorship is entrusted to the offender;
(3) When the sexual favor is made a condition to the giving of a passing grade, or the granting of
honors and scholarships, or the payment of a stipend, allowance or other benefits, privileges
or considerations; or
(4) When the sexual advances result in an intimidating, hostile or offensive environment for the
student, training or apprentice.
Any person who directs or induces another to commit any act of sexual harassment as herein defined,
or who cooperates in the commission thereof by another without which it would not have been committed,
shall also be held liable under this Act.

Section 4. Duty of the Employer or Head of Office in a Work-related, Education or Training

Environment. It shall be the duty of the employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of acts of sexual harassment and to provide
the procedures for the resolution, settlement or prosecution of acts of sexual harassment . Towards this
end, the employer or head of office shall:
(a) Promulgate appropriate rules and regulations in consultation with an jointly approved by the
employees or students or trainees, through their duly designated representatives, prescribing the
procedure for the investigation of sexual harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the proper courts for unlawful acts of
sexual harassment.
The said rules and regulations issued pursuant to this sub-section (a) shall include, among others,
guidelines on proper decorum in the workplace and educational or training institutions.
(b) Create a committee on decorum and investigation of cases on sexual harassment. The committee
shall conduct meetings, as the case may be, with officers and employees, teachers, instructors, professors,
coaches, trainors and students or trainees to increase understanding and prevent incidents of sexual
harassment. It shall also conduct the investigation of alleged cases constituting sexual harassment.
In the case of a work-related environment, the committee shall be composed of at least one (1)
representative each from the management, the union, if any, the employees form the supervisory rank, and
from the rank and file employees.
In the case of the educational or training institution, the committee shall be composed of at least one (1)
representative from the administration, the trainors, teachers, instructors, professors or coaches and
students or trainees, as the case may be.
The employer or head of office, educational or training institution shall disseminate or post a copy of this
Act for the information of all concerned.
Section. Liability of the Employer, Head of Office, Educational or Training Institution. The employer
or head of office, educational or training institution shall be solidarity liable for damages arising from the
acts of sexual harassment committed in the employment, education or training environment if the employer
or head of office, educational or training institution is informed of such acts by the offended party and no
immediate action is taken thereon.
Section 6. Independent Action for Damages. Nothing in this Act shall preclude the victim of work,
education or training-related sexual harassment from instituting a separate and independent action for
damages and other affirmative relief.
Section 7. Penalties. Any person who violates the provisions of this Act shall, upon conviction, be
penalized by imprisonment of not less than one (1) month nor more than six (6) months, or a fine of not
less than Ten thousand pesos (P10,000) nor more than Twenty thousand pesos (P20,000) or both such
fine and imprisonment at the discretion of the court.
Any action arising from the violation of the provisions of this Act shall prescribe in three (3) years.
 With the finding that there is no substantial evidence of the imputed immoral acts, it follows that the
alleged violation of the Code of Ethics governing school teachers would have no basis. Private
respondent utterly failed to show that petitioner took advantage of her position to court her student. If
the two eventually fell in love, despite the disparity in their ages and academic levels, this only lends
substance to the truism that the heart has reasons of its own which reason does not know. But,
definitely, yielding to this gentle and universal emotion is not to be so casually equated with immorality.
The deviation of the circumstances of their marriage from the usual societal pattern cannot be
considered as a defiance of contemporary social mores.
It would seem quite obvious that the avowed policy of the school in rearing and educating children
is being unnecessarily bannered to justify the dismissal of petitioner. This policy, however, is not at odds
with and should not be capitalized on to defeat the security of tenure granted by the Constitution to
labor. In termination cases, the burden of proving just and valid cause for dismissing an employee rests
on the employer and his failure to do so would result in a finding that the dismissal is unjustified.
(Chua-Qua vs. Clave [G.R. No. 49549, 30 August 1990])

Authorized Causes

Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this title, by serving a written notice on
the workers and the 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 closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year. (Article 283 of the Labor Code)

Disease as ground for termination. - An employer may terminate the services of an employee who
has been found to be suffering from any disease and whose continued employment is prohibited by law
or is prejudicial to his health as well as the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one month salary or to one-half month salary for every year of
service, whichever is greater, a fraction of at least six months being considered as one whole year.
(Article 284 of the Labor Code)
Authorized causes for the termination of employment:
(a) installation of labor-saving devices;
(b) redundancy;
(c) retrenchment to prevent losses; and
(d) closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of law.
(e) disease which renders continued employment prohibited by law or prejudicial to his
health or to the health of his fellow employees.

Installation of labor-saving devices

The installation of labor-saving devices contemplates the installation of machinery to effect
economy and efficiency in its method of production. (Edge Apparel, Inc. vs. NLRC [G.R. No. 121314, 12
February 1998] citing Phil. Sheet Metal Workers' Union vs. Court of Industrial Relations [83 Phil. 453])

Redundancy

Redundancy exists where the services of an employee are in excess of what would reasonably be
demanded by the actual requirements of the enterprise. A position is redundant when it is superfluous,
and superfluity of a position or positions could be the result of a number of factors, such as the
overhiring of workers, a decrease in the volume of business or the dropping of a particular line or
 service previously manufactured or undertaken by the enterprise. An employer has no legal obligation
to keep on the payroll employees more than the number needed for the operation of the business.
(Edge Apparel, Inc. vs. NLRC [G.R. No. 121314, 12 February 1998])

The prerogative of management to conduct its own business affairs to achieve its purposes cannot
be denied. Management is at liberty, absent any malice on its part, to abolish positions which it deems
no longer necessary (Great Pacific Life vs. NLRC, 188 SCRA 139 [1990]).

Moreover, the records of the present case clearly show that respondent court's decision is amply
supported by evidence and it did not err in its findings, including the reason for the retrenchment:
When defendant-appellant was faced with the world-wide recession of the airline industry
resulting in a slow down in the company's growth particularly in the regional operation (Asian
Area) where the Airbus 300 operates. It had no choice but to adopt cost cutting measures,
such as cutting down services, number of frequencies of flights, and reduction of the number
of flying points for the A-300 fleet. As a result, defendant-appellant had to lay off A-300 pilots,
including plaintiff-appellee, which it found to be in excess of what is reasonably needed.
All these considered, we find sufficient factual and legal basis to conclude that petitioner's
termination from employment was for an authorized cause, for which he was given ample notice and
opportunity to be heard, by respondent company. No error nor grave abuse of discretion, therefore,
could be attributed to respondent appellate court.
(Laureano vs. CA [G.R. No. 114776, 02February 2000])

Retrenchment

Retrenchment, is used interchangeably with the term "lay-off." It is the termination of employment
initiated by the employer through no fault of the employee's and without prejudice to the latter, resorted
to by management during periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned 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. Simply put, it is an act of the employer of dismissing employees because of losses in the
operation of a business, lack of work, and considerable reduction on the volume of his business, a right
consistently recognized and affirmed by this Court. (Sebuguero vs. NLRC [G.R. No. 115394, 27
September 1995])

[T]here are three basic requisites for a valid retrenchment:

(1) the retrenchment is necessary to prevent losses and such losses are proven;
(2) written notice to the employees and to the Department of Labor and Employment at least
one month prior to the intended date of retrenchment; and
(3) payment of separation pay equivalent to one month pay or at least 1/2 month pay for every
year of service, whichever is higher.
As for the FIRST REQUISITE, whether or not an employer would imminently suffer serious or
substantial losses for economic reasons is essentially a question of fact for the Labor Arbiter and the
NLRC to determine. Here, both the Labor Arbiter and the NLRC found that the private respondent was
suffering and would continue to suffer serious losses, thereby justifying the retrenchment of some of its
employees, including the petitioners. We are not prepared to disregard this finding of fact. It is settled
that findings of quasi-judicial agencies which have acquired expertise in the matters entrusted to their
jurisdiction are accorded by this Court not only with respect but with finality if they are supported by
Substantial Evidence. ….
The REQUIREMENT OF NOTICE to both the employees concerned and the Department of Labor
and Employment (DOLE) is mandatory and must be written and given at least one month before the
intended date of retrenchment. In this case, it is undisputed that the petitioners were given notice of the
temporary lay-off. There is, however, no evidence that any written notice to permanently retrench them
was given at least one month prior to the date of the intended retrenchment. The NLRC found that GTI
conveyed to the petitioners the impossibility of recalling them due to the continued unavailability of
work. But what the law requires is a written notice to the employees concerned and that requirement is
mandatory. The notice must also be given at least one month in advance of the intended date of
retrenchment to enable the employees to look for other means of employment and therefore to ease
the impact of the loss of their jobs and the corresponding income. That they were already on temporary
lay-off at the time notice should have been given to them is not an excuse to forego the one-month
written notice because by this time, their lay-off is to become permanent and they were definitely losing
their employment.
There is also nothing in the records to prove that a written notice was ever given to the DOLE as
required by law. GTI's position paper, offer of exhibits, Comment to the Petition, and Memorandum in
this case do not mention of any such written notice. The law requires two notices one to the employee/s
concerned and another to the DOLE not just one. The notice to the DOLE is essential because the right
to retrench is not an absolute prerogative of an employer but is subject to the requirement of law that
retrenchment be done to prevent losses. The DOLE is the agency that will determine whether the
planned retrenchment is justified and adequately supported by facts.
With respect to the PAYMENT OF SEPARATION PAY, the NLRC found that GTI offered to give the
petitioners their separation pay but that the latter rejected such offer which was accepted only by 22 out
of the 38 original complainants in this case. As to when this offer was made was not, however, proven.
All that the parties, the Labor Arbiter and the NLRC stated in their respective pleadings and decisions
was that the offer and payment were made during the pendency of the illegal dismissal case with the
Labor Arbiter. But with or without this offer of separation pay, our conclusion would remain the same:
that the retrenchment of the petitioners is defective in the face of our finding that the required notices to
both the petitioners and the DOLE were not given.
(Sebuguero vs. NLRC [G.R. No. 115394, 27 September 1995])

In its ordinary connotation, the phrase "TO PREVENT LOSSES" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the employer
sometime before the anticipated losses are actually sustained or realized. It is not, in other words, the
intention of the lawmaker to compel the employer to stay his hand and keep all his employees until after
losses shall have in fact materialized. If such an intent were expressly written into the law, that law may
well be vulnerable to constitutional attack as unduly taking property from one man to be given to
another.
At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is
sufficient legal warrant for the reduction of personnel. In the nature of things, the possibility of incurring
losses is constantly present, in greater or lesser degree, in the carrying on of business operations,
since some, indeed many, of the factors which impact upon the profitability or viability of such
operations may be substantially outside the control of the employer.
(Revidad vs. NLRC [G.R. No. 111105, 27 June 1995])

Anent the mandatory written notice to be filed with the labor department one month before
retrenchment, we are of the considered opinion that the proceedings had before the voluntary arbitrator,
where both parties were given the opportunity to be heard and present evidence in their favor,
constitute substantial compliance with the requirement of the law. The purpose of this notice
requirement is to enable the proper authorities to ascertain whether the closure of the business is being
done in good faith and is not just a pretext for evading compliance with the just obligations of the
employer to the affected employees. In fact, the voluntary arbitration proceedings more than satisfied
the intendment of the law considering that the parties were accorded the benefit of a hearing, in
addition to the right to present their respective position papers and documentary evidence. (Revidad vs.
NLRC [G.R. No. 111105, 27 June 1995])

Retrenchment, in contrast to redundancy, is an economic ground to reduce the number of

employees. In order to be justified, the termination of employment by reason of retrenchment must be
due to business losses or reverses which are serious, actual and real. Not every loss incurred or
expected to be incurred by the employer will justify retrenchment, since, in the nature of things, the
possibility of incurring losses is constantly present, in greater or lesser degree, in carrying on the
business operations. Retrenchment is normally resorted to by management during periods of business
reverses and economic difficulties occasioned by such events as recession, industrial depression, or
seasonal fluctuations. It is an act of the employer of reducing the work force because of losses in the
operation of the enterprise, lack of work, or considerable reduction on the volume of business.
Retrenchment is, in many ways, a measure oflast resort when other less drastic means have been tried
and found to be inadequate. A lull caused by lack of orders or shortage of materials must be of such
nature as would severely affect the continued business operations of the employer to the detriment of
all and sundry if not properly addressed. The institution of "new methods or more efficient machinery, or
of automation" is technically a ground for termination of employment by reason of installation of labor-
saving devices but where the introduction of these methods is resorted to not merely to effect greater
efficiency in the operations of the business but principally because of serious business reverses and to
avert further losses, the device could then verily be considered one of retrenchment. (Edge Apparel,
Inc. vs. NLRC [G.R. No. 121314, 12 February 1998])

Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988 and
the 28 February 1989 were due to closure, the law requires the granting of the same amount of
separation benefits to the affected employees in any of the cases. The respondent argued that the
giving of more separation benefit to the second and third batches of employees separated was their
expression of gratitude and benevolence to the remaining employees who have tried to save and make
the company viable in the remaining days of operations. This justification is not plausible. There are
workers in the first batch who have rendered more years of service and could even be said to be more
efficient than those separated subsequently, yet they did not receive the same recognition.
Understandably, their being retained longer in their job and be not included in the batch that was first
terminated, was a concession enough and may already be considered as favor granted by the
respondents to the prejudice of the complainants. As it happened, there are workers in the first batch
who have rendered more years in service but received lesser separation pay, because of that
arrangement made by the respondents in paying their termination benefits. . .
Clearly, there was impermissible discrimination against the private respondents in the payment of
their separation benefits. The law requires an employer to extend equal treatment to its employees. It
may not, in the guise of exercising management prerogatives, grant greater benefits to some and less
to others. Management prerogatives are not absolute prerogatives but are subject to legal limits,
collective bargaining agreements, or general principles of fair play and justice (UST vs. NLRC, 190
SCRA 758). Article 283 of the Labor Code, as amended, protects workers whose employment is
terminated because of closure of the establishment or reduction of personnel ((Businessday
Information vs. NLRC [G.R. No. 103575, 05 April 1993])

Although, as a general rule, Respondent company has the prerogative and right to resort to
temporary lay-off, such right is likewise limited to a period of six (6) months applying Art. 286 of the
Labor Code on suspension of employer-employee relationship not exceeding six (6) months.
In this case, respondent company was justified in the temporary lay-off of some of its employees.
However, Respondent company should have recalled them after the end of the six month period or at
the least reasonably informed them (complainants) that the Respondent company is still not in a
position to recall them due to the continuous drop of demand in the export market (locally or
internationally), thereby extending the temporary lay-off with a definite period of recall and if the same
cannot be met, then the company should implement retrenchment and pay its employees separation
pay. Failing in this regard, respondent company chose not to recall nor send notice to the complainants
after the lapse of the six (6) month period. Hence, there is in this complaint a clear case of constructive
dismissal. While there is a valid reason for the temporary lay-off, the same is also limited to a duration
of six months. Thereafter the employees, complainants herein, are entitled under the law (Art. 286) to
be recalled back to work. As result thereof, the temporary lay-off of the complainants from January 22,
1991 (date of lay-off) to July 22, 1991 is valid, however, thereafter complainants are already entitled to
backwages, in view of constructive dismissal, due to the fact that they were no longer recalled back to
work. Complainants cannot be placed on temporary lay-off forever. The limited period of six (6) months
is based provisionally too prevent circumvention on the right to security of tenure and to prevent grave
abuse of discretion on the part of the employer. However, since during the trial it was proven, as
testified by the Vice-President for marketing and personnel manager, that the lack of work and selection
of personnel continued to persist and considering the antagonism and hostility displayed by both
litigants, as observed by this Arbiter, during the trial of this case and in view of the strained relations
between the parties, reinstatement of the complainants would not be prudent.
(Sebuguero vs. NLRC [G.R. No. 115394, 27 September 1995])
Closure
Under Article 283 of the Labor Code, the closure of a business establishment or reduction of
personnel is a ground for the termination of the services of any employee unless the closing or
retrenching is for the purpose of circumventing the provision of the law. But while business reverses
can be a just cause for terminating employees, these must be sufficiently proved by the employer.
The case of Sugar Lopez Corporation v. Federation of Free Workers, lays down the general
standards under which an employer may retrench or reduce the number of his employees. FIRSTLY,
the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment would appear to be seriously in question.
SECONDLY, the substantial loss apprehended must be reasonably imminent, as such imminence can
be perceived objectively and in good faith by the employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences
for the livelihood of the employees retired or otherwise laid-off. Because of the far-reaching nature of
the retrenchment, it must, THIRDLY, be reasonably necessary and likely to effectively prevent the
expected losses.
LASTLY, but certainly not the least important, the alleged losses if already incurred, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and convincing
evidence.
(Balasbas vs. NLRC [G.R. No. 85286, 24 August 1992])
Article 283 of the Labor Code, however, speaks of a permanent retrenchment as opposed to a
temporary lay-off as is the case here. There is no specific provision of law which treats of a temporary
retrenchment or lay-off and provides for the requisites in effecting it or a period or duration therefor.
These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article
286 may be applied but only by analogy to set a specific period that employees may remain temporarily
laid-off or in floating status. Six months is the period set by law that the operation of a business or
undertaking may be suspended thereby suspending the employment of the employees concerned. The
temporary lay-off wherein the employees likewise cease to work should also not last longer than six
months. After six months, the employees should either be recalled to work or permanently retrenched
following the requirements of the law, and that failing to comply with this would be tantamount to
dismissing the employees and the employer would thus be liable for such dismissal. (Sebuguero vs.
NLRC [G.R. No. 115394, 27 September 1995])
We note that Section 2 of Rule XIV quoted above requires the notice to specify "the particular acts
or omissions constituting the ground for his dismissal", a requirement which is obviously applicable
where the ground for dismissal is the commission of some act or omission falling within Article 282 of
the Labor Code. Again, Section 5 gives the employee the right to answer and to defend himself against
"the allegations stated against him in the notice of dismissal". It is such allegations by the employer and
any counter-allegations that the employee may wish to make that need to be heard before dismissal is
effected. Thus, Section 5 may be seen to envisage charges against an employee constituting one or
more of the just causes for dismissal listed in Article 282 of the Labor Code. Where, as in the instant
case, the ground for dismissal or termination of services does not relate to a blameworthy act or
omission on the part of the employee, there appears to us no need for an investigation and hearing to
be conducted by the employer who does not, to begin with, allege any malfeasance or non-feasance on
the part of the employee. In such case, there are no allegations which the employee should refute and
defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private respondent
would have had the right to be present, on the business and financial circumstances compelling
retrenchment and resulting in redundancy, would be to impose upon the employer an unnecessary and
inutile hearing as a condition for legality of termination. (Wiltshire File Co., Inc. vs. NLRC [G.R. No.
82249, 07 February 1991])
Broadly speaking, there appears no complete dissolution of petitioner's business undertaking but
the relocation of petitioner's plant to Batangas, in our view, amounts to cessation of petitioner's
business operations in Makati. It must be stressed that the phrase "closure or cessation of operation of
an establishment or undertaking not due to serious business losses or reverses" under Article 283 of
the Labor Code includes both the complete cessation of all business operations and the cessation of
only part of a company's business. In Philippine Tobacco Flue-Curing & Redrying Corp. vs. NLRC, a
company transferred its tobacco processing plant in Balintawak, Quezon City to Candon, Ilocos Sur.
The company therein did not actually close its entire business but merely relocated its tobacco
processing and redrying operations to another place. Yet, this Court considered the transfer as closure
not due to serious business losses for which the workers are entitled to separation pay.
There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration
of the lease contract on the premises it occupied. That is its prerogative. But even though the transfer
was due to a reason beyond its control, petitioner has to accord its employees some relief in the form of
severance pay. Thus, in E. Razon, Inc. vs. Secretary, petitioner therein provides arrastre services in all
piers in South Harbor, Manila, under a management contract with the Philippine Ports Authority. Before
the expiration of the term of the contract, the PPA cancelled the said contract resulting in the
termination of employment of workers engaged by petitioner. Obviously, the cancellation was not
sought, much less desired by petitioner. Nevertheless, this Court required petitioner therein to pay its
workers separation pay in view of the cessation of its arrastre operations.
(Cheniver Deco Print Technics Corporation vs. NLRC [G.R. No. 122876, 17 February 2000])
It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and
reduction of personnel. The peculiar circumstances in the case at bar, however, involves neither the
closure of an establishment nor a reduction of personnel as contemplated under the aforesaid article.
When the Patalon Coconut Estate was closed because a large portion of the estate was acquired by
DAR pursuant to CARP, the ownership of that large portion of the estate was precisely transferred to
PEARA and ultimately to the petitioners as members thereof and as agrarian lot beneficiaries. Hence,
Article 283 of the Labor Code is not applicable to the case at bench.
Even assuming, arguendo, that the situation in this case were a closure of the business
establishment called Patalon Coconut Estate of private respondents, still the petitioners/employees are
not entitled to separation pay. The closure contemplated under Article 283 of the Labor Code is a
unilateral and voluntary act on the part of the employer to close the business establishment as may be
gleaned from the wording of the said legal provision that "The employer may also terminate the
employment of any employee due to. . .". The use of the word "may," in a statute, denotes that it is
directory in nature and generally permissive only. The "plain meaning rule" or verba legis in statutory
construction is thus applicable in this case. Where the words of a statute are clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of
the business establishment is forced upon the employer and ultimately for the benefit of the employees.
(NFL vs. NLRC [G.R. No. 127718, 02 March 2000])

Broadly speaking, there appears no complete dissolution of petitioner's business undertaking but
the relocation of petitioner's plant to Batangas, in our view, amounts to cessation of petitioner's
business operations in Makati. It must be stressed that the phrase "closure or cessation of operation of
an establishment or undertaking not due to serious business losses or reverses" under Article 283 of
the Labor Code includes both the complete cessation of all business operations and the cessation of
only part of a company's business. In Philippine Tobacco Flue-Curing & Redrying Corp. vs. NLRC, a
company transferred its tobacco processing plant in Balintawak, Quezon City to Candon, Ilocos Sur.
The company therein did not actually close its entire business but merely relocated its tobacco
processing and redrying operations to another place. Yet, this Court considered the transfer as closure
not due to serious business losses for which the workers are entitled to separation pay. (Cheniver Deco
Print Technics Corporation vs. NLRC [G.R. No. 122876, 17 February 2000])

Disease
The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI, of
the Rules and Regulations Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from 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 his employment unless
there is a certification by a competent public health authority that the 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 be cured within the period, the
employer shall not terminate the employee but shall ask the employee to take a leave. The
employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health.
The record does not contain the certification required by the above rule. The medical certificate
offered by the petitioner came from its own physician, who was not a "competent public health
authority," and merely stated the employee's disease, without more. We may surmise that if the
required certification was not presented, it was because the disease was not of such a nature or
seriousness that it could not be cured within a period of six months even with proper medical treatment.
If so, dismissal was unquestionably a severe and unlawful sanction.
(Cebu Royal Plant vs. Deputy Minister Of Labor [G.R. No. L-58639, 12 August 1987])

Due Process

The essence of due process is simply an opportunity to be heard, or as applied to administrative

proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the
action or ruling complained of.
A formal or trial-type hearing is not at all times and in all instances essential. The requirements are
satisfied where the parties are fair and reasonable opportunity to explain their side of the controversy at
hand. What is frowned upon is the absolute lack of notice and hearing…..
(Stayfast Philippines Corp. vs. NLRC [218 SCRA 596, 1993])

A formal trial-type hearing is not at all times and in all instances essential to due process. It is
enough that the parties are given a fair and reasonable opportunity to explain their respective sides of
the controversy and to present supporting evidence on which a fair decision can be based. According to
Llora Motors Inc. vs. Drilon, this type of hearing is not even mandatory in cases of complainants lodged
before the Labor Arbiter. And in Sajonas vs. NLRC, we observed as follows:
Finally, on the matter of due process which petitioners claim was denied them by private
respondents during the investigation which led to their dismissal, we agree with respondents
that although the aforesaid investigations were not conducted in the manner of a regular trial in
court, the elements of due process, namely the right to be informed of the charges, to be
present and to be heard, were accorded petitioners. In said investigations, petitioners freely and
voluntarily answered the questions and even made further statements in their defense during
the concluding stages thereof.
(Aberia vs. NLRC [G.R. No. 102023, 06 November 1992])
"AMPLE OPPORTUNITY" connotes every kind of assistance that management must accord the
employee to enable him to prepare adequately for his defense including legal representation. (Manebo
vs. NLRC [G.R. No. 107721, 10 January 1994])

The record of this case is bereft of any indication that a hearing or other gathering was in fact held
where private respondent Calangi was given a reasonable opportunity to confront his accuser(s) and to
defend against the charges made by the latter. Petitioner Corporation's "prior consultation" with the
labor union with which private respondent Calangi was affiliated, was legally insufficient. So far as the
record shows, neither petitioner nor the labor union actually advised Calangi of the matters at issue.
The Memorandum of petitioner's Personnel Manager certainly offered no helpful particulars. It is
important to stress that the rights of an employee whose services are sought to be terminated to be
informed beforehand of his proposed dismissal (or suspension) as well as of the reasons therefor, and
to be afforded an adequate opportunity to defend himself from the charges levelled against him, are
rights PERSONAL TO THE EMPLOYEE. Those rights were not satisfied by petitioner Corporation's
obtaining the consent of or consulting with the labor union; such consultation or consent was not a
substitute for actual observance of those rights of private respondent Calangi. The employee can waive
those rights, if he so chooses, but the union cannot waive them for him. That the private respondent
simply 'kept silent" all the while, is not adequate to show an effective waiver of his rights. Notice and
opportunity to be heard must be accorded by an employer even though the employee does not
affirmatively demand them. (Century Textile Mills, Inc. vs. NLRC [G.R. No. 77859, 25 May 1988])
WENPHIL Doctrine

The Court holds that the policy of ordering the reinstatement to the service of an employee without
loss of seniority and the payment of his wages during the period of his separation until his actual
reinstatement but not exceeding three (3) years without qualification or deduction, when it appears he
was not afforded due process, although his dismissal was found to be for just and authorized cause in
an appropriate proceeding in the Ministry of Labor and Employment, should be re-examined. It will be
highly prejudicial to the interests of the employer to impose on him the services of an employee who
has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed, it
will demoralize the rank and file if the undeserving, if not undesirable, remains in the service.
Thus in the present case, where the private respondent, who appears to be of violent temper,
caused trouble during office hours and even defied his superiors as they tried to pacify him, should not
be rewarded with re-employment and back wages. It may encourage him to do even worse and will
render a mockery of the rules of discipline that employees are required to observe. Under the
circumstances the dismissal of the private respondent for just cause should be maintained. He has no
right to return to his former employer.
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for
its failure to give a formal notice and conduct an investigation as required by law before dismissing
petitioner from employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on the facts of each
case and the gravity of the omission committed by the employer. (WENPHIL vs. NLRC [G.R. No.
80587, 08 February 1989])

WENPHIL Doctrine abandoned by Serrano vs. NLRC

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the
termination of employment was due to an authorized cause, then the employee concerned should not
be ordered reinstated even though there is failure to comply with the 30-day notice requirement.
Instead, he must be granted separation pay in accordance with Art. 283,…
xxx xxx xxx
If the employee's separation is without cause, instead of being given separation pay, he should be
reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid
full backwages if he has been laid off without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the
employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with
that article, he should not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of employment is for a just cause
because the failure to hear him before he is dismissed renders the termination of his employment
without legal effect.
(Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

Violation of procedural due process not a violation of the Due Process Clause of the Constitution

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process
by the State, which is not the case here. There are three reasons why, on the other hand, violation by
the employer of the notice requirement cannot be considered a denial of due process resulting in the
nullity of the employee's dismissal or layoff.
The FIRST is that the Due Process Clause of the Constitution is a limitation on governmental
powers. It does not apply to the exercise of private power, such as the termination of employment under
the Labor Code. This is plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only the State
has authority to take the life, liberty, or property of the individual. The purpose of the Due Process
Clause is to ensure that the exercise of this power is consistent with what are considered civilized
methods.
The SECOND REASON is that notice and hearing are required under the Due Process Clause
before the power of organized society are brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is
not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to
determine whether economic causes do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is
not to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial
stage. Then that is the time we speak of notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement before he dismisses an employee does
not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any
decision taken by the employer shall be without prejudice to the right of the worker to contest the
validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which
gave either party to the employer-employee relationship the right to terminate their relationship by
giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month. 28 This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052,
otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the
law was amended by R.A. No. 1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service.
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the
purpose of which was to give the employer the opportunity to find a replacement or substitute, and the
employee the equal opportunity to look for another job or source of employment. Where the termination
of employment was for a just cause, no notice was required to be given to the, employee. 30 It was only
on September 4, 1981 that notice was required to be given even where the dismissal or termination of
an employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No.
6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee.
Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause
and without prior notice to his employer, his act should be void instead of simply making him liable for
damages.
The THIRD REASON why the notice requirement under Art. 283 can not be considered a
requirement of the Due Process Clause is that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in termination of employment for a just cause
under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of
the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer,
commission of crime against the employer or the latter's immediate family or duly authorized
representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have
been won by employees before the grievance committees manned by impartial judges of the company."
The grievance machinery is, however, different because it is established by agreement of the employer
and the employees and composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. ·v. Court of Appeals, which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement between him and [his
employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation
of his property without due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery. Accordingly in Montemayor v.
Araneta University Foundation, although a professor was dismissed without a hearing by his university,
 his dismissal for having made homosexual advances on a student was sustained, it appearing that in
the NLRC, the employee was fully heard in his defense.
(Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

Effect of Lack of Notice; Termination INEFFECTUAL

Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a procedure
to be followed before a right granted to a party can be exercised. Others are simply an application of
the Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen. Such is the notice requirement in Arts. 282-
283. The consequence of the failure either of the employer or the employee to live up to this precept is
to make him liable in damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should have received were it not
for the termination of his employment without prior notice. If warranted, nominal and moral damages
may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a
procedure for the termination of employment which makes the termination of employment merely
INEFFECTUAL. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191,
of the Civil Code in rescinding a contract for the sale of immovable property. Under these provisions,
while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in
cases involving the sale of immovable property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand. Consequently, a notice of rescission given in the letter of an
attorney has no legal effect, and the vendee can make payment even after the due date since no valid
notice of rescission has been given.
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment
can make the dismissal of an employee illegal.
xxx xxx xxx
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal
and, therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno
and Panganiban do, that even if the termination is for a just or authorized cause the employee
concerned should be reinstated and paid backwages would be to amend Art. 279 by adding another
ground for considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it
is the employee who fails to give a written notice to the employer that he is leaving the service of the
latter, at least one month in advance, his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for damages. This disparity in legal treatment,
which would result from the adoption of the theory of the minority cannot simply be explained by
invoking resident Ramon Magsaysay's motto that "he who has less in life should have more in law."
That would be a misapplication of this noble phrase originally from Professor Thomas Reed Powell of
the Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC, in support of his view that an illegal
dismissal results not only from want of legal cause but also from the failure to observe "due process."
The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was, therefore, illegal, not because there was a
denial of due process, but because the dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the dismissal with illegality" was merely a
dictum thrown in as additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is
the payment of backwages for the period when the employee is considered not to have been effectively
dismissed or his employment terminated. The sanction is not the payment alone of nominal damages
as Justice Vitug contends.
(Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

Effect of Lack of Notice: backwages until determination of just cause

 Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the
sanction of fine for an employer's disregard of the notice requirement. We do not agree, however, that
disregard of this requirement by an employer renders the dismissal or termination of employment null
and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such rule was
abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who
is guilty, for example, of an attempt on the life of the employer or the latter's family, or when the
employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to notice before he is dismissed
or laid off, at the same time acknowledges the right of the employer to dismiss for any of the just
causes enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned
in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring employer violations of the
notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the
employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e.,
installation of a labor-saving device, but the employer did not give him and the DOLE a 30-day written
notice of termination in advance, then the termination of his employment should be considered
ineffectual and he should be paid backwages. However, the termination of his employment should not
be considered void but he should simply be paid separation pay as provided in Art. 283 in addition to
backwages.
(Serrano vs. NLRC [G.R. No. 117040, 27 January 2000])

Corporate Liability
A corporate officer is not personally liable for the money claims of discharged corporate employees
unless he acted with evident malice and bad faith in terminating their employment. There is no
evidence in this case that Locsin acted in bad faith or with malice in carrying out the retrenchment and
eventual closure of the company, hence, he may not be held personally and solidarily liable with the
company for the satisfaction of the judgment in favor of the retrenched employees. (Businessday vs.
NLRC [G.R. No. 103575, 05 April 1993])
This is not a case of dismissal. The situation is that of a corporate office having been declared
vacant, and of TAN's not having been elected thereafter. The matter of whom to elect is a prerogative
that belongs to the Board, and involves the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship of a person to a corporation, whether as
officer or agent or employee, is not determined by the nature of the services performed, but by the
incidents of the relationship as they actually exist.
We agree with petitioners, however, that the NLRC erred in holding Centeno jointly and severally
liable with MAM. A corporation, being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct
accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the following cases:
 1. When directors and trustees or, in appropriate cases, the officers of a corporation
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders
or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally
and solidarily liable with the Corporation.
4 When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with the
corporation for the termination of employment of employees done with malice or in bad faith.
(MAM Realty vs. NLRC [G.R. No. 114787, 02 June 1995])

The fact that complainant is a corporate officer, an elective position under the corporate by-laws and
her non-election is an intra-corporate controversy cognizable by the SEC and not by the NLRC,
petitioner bank can no longer raise the issue of jurisdiction under the principle of estoppel. The bank
participated in the proceedings from start to finish. It filed its position paper with the Labor Arbiter. When
the decision of the Labor Arbiter was adverse to it, the bank appealed to the NLRC. When the NLRC
decided in its favor, the bank said nothing about jurisdiction. Even before the CA, it never questioned
the proceedings on the ground of lack of jurisdiction. It was only when the CA ruled in favor of public
respondent did it raise the issue of jurisdiction. The bank actively participated in the proceedings before
the Labor Arbiter, the NLRC and the CA. While it is true that jurisdiction over the subject matter of a
case may be raised at any time of the proceedings, this rule presupposes that laches or estoppel never
supervened. (Prudential Bank vs. Reyes [G.R. No. 141093, 20 February 2001

Sale/Merger or Consolidation

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb
the transferor employees as there is no law compelling such absorption. The most that the transferee
may do, for reasons of public policy and social justice, is to give preference to the qualified separated
employees in the filling of vacancies in the facilities of the purchaser. (Manlimos vs. NLRC [G.R. No.
113337, 02 March 1995])

The rule is that unless expressly assumed, labor contracts such as employment contracts and
collective bargaining agreements are not enforceable against a transferee of an enterprise, labor
contracts being in personam, thus binding only between the parties. A labor contract merely creates an
action in personally and does not create any real right which should be respected by third parties. This
conclusion draws its force from the right of an employer to select his employees and to decide when to
engage them as protected under our Constitution, and the same can only be restricted by law through
the exercise of the police power.
As a general rule, there is no law requiring a bona fide purchaser of assets of an on-going concern
to absorb in its employ the employees of the latter.
However, although the purchaser of the assets or enterprise is not legally bound to absorb in its
employ the employers of the seller of such assets or enterprise, the parties are liable to the employees
if the transaction between the parties is colored or clothed with bad faith.
(Sundowner Dev. Corp. vs. Drilon [G.R. No. 82341, 06 December 1989])
 We disagree with the Labor Arbiter's reliance on the case of Mobil Employees Association vs.
NLRC. The NLRC was correct in holding that Mobil was not applicable because Mobil involved the
termination of employment under Article 283 (before Article 284) of the Labor Code and not termination
of employment as a result of the change of corporate ownership, as in the case of private respondent
Super Mahogany Plywood Corporation. In Mobil, the original employer; Mobil Oil Philippines, Inc.,
completely withdrew from business and was even dissolved. In the case at bar, there was only a
change of ownership of Super Mahogany Plywood Corporation which resulted in a change of
ownership. In short, the corporation itself, as a distinct and separate juridical entity, continues to exist.
The issue of whether there was a closing or cessation of business operations which could have
operated as a just cause for the termination of employment was not material. The change in ownership
of the management was done bona fide and the petitioners did not for any moment before the filing of
their complaints raise any doubt on the motive for the change. On the contrary, upon being informed
thereof and of their eventual termination from employment, they freely and voluntarily accepted their
separation pay and other benefits and individually executed the Release or Waiver which they
acknowledged before no less than a hearing officer of the DOLE. (Manlimos vs. NLRC [G.R. No.
113337, 02 March 1995])

Special Circumstances

Constructive Dismissal

CONSTRUCTIVE DISMISSAL as a quitting because continued employment is rendered impossible,

unreasonable or unlikely; as, an offer involving a demotion in rank and a diminution in pay. (Philippine
Japan Active Carbon Corporation vs. NLRC)

There is a constructive dismissal when the reassignment of an employee involves a demotion in

rank or a diminution in pay (Lemery Savings and Loan Bank v. National Labor Relations Commission,
205 SCRA 492 [1992]; Philippine Japan Active Carbon Corporation v. National Labor Relations
Commission, 171 SCRA 164 [1989]).
In the case at bench, the demotion of private respondent is tantamount to constructive dismissal.
One does not need to stretch his imagination to distinguish the work of a security guard and that of a
common agricultural laborer in a sugar plantation. Likewise, there was a diminution of salary, for a
security guard is paid on a monthly basis while a laborer in the sugar plantation is paid either on a daily
or piece work basis. Laborers do not work year round but only when needed and on off-season months,
they are not required to work at all.
(Oscar Ledesma & Co. vs. NLRC [G.R. No. 110930, 13 July 1995])

Preventive Suspension

Sections 3 and 4, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code,
Termination of Employment, provide:

Sec. 3. Preventive suspension. The employer may place the worker concerned under
preventive suspension if his continued employment poses a serious and imminent threat to the
life or property of the employer or of his co-workers.

Sec. 4 Period of suspension. No preventive suspension shall last longer than 30 days.
The employer shall thereafter reinstate the worker in his former or in a substantially equivalent
position of the employer may extend the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the worker. In such case, the worker shall
not be bound to reimburse the amount paid to him during the extension if the employer decides,
after completion of the hearing, to dismiss the worker.

Section 4, Rule XIV, Book V of the Omnibus Rules provides that preventive suspension cannot be
more than the maximum period of 30 days. Hence, after the 30-day period of suspension beyond the
 maximum period amounts to constructive dismissal. (Hyatt Taxi Services vs. Catinoy [G.R. No. 143204,
26 June 2001])

Burden of Proof in Labor Cases

Private respondent's documentary evidence showing the culpability of petitioners should prevail
over petitioners' uncorroborated explanations and self-serving denials regarding their involvement in
the pilferages. All administrative determinations require only substantial proof and not clear and
convincing evidence. Proof beyond reasonable doubt of the employee's misconduct is not required, it
being sufficient that there is some basis for the same or that the employer has reasonable ground to
believe that the employee is responsible for the misconduct, and his participation therein renders him
unworthy of the trust and confidence demanded by his position. Thus, petitioners cannot assert that the
public respondent closed its eyes to their evidence. The latter's findings are supported by substantial
evidence which goes beyond the minimum evidentiary support required by law. (Segismundo vs. NLRC
[G.R. No. 112203, 13 December 1994])
The fact that Santos neglected to substantiate his claim for night shift differentials is not prejudicial
to his cause. After all, the burden of proving payment rests on petitioner NSC. Santos' allegation of non-
payment of this benefit, to which he is by law entitled, is a negative allegation which need not be
supported by evidence unless it is an essential part of his cause of action. It must be noted that his
main cause of action is his illegal dismissal, and the claim for night shift differential is but an incident of
the protest against such dismissal. Thus, the burden of proving that payment of such benefit has been
made rests upon the party who will suffer if no evidence at all is presented by either party. National
Semiconductor (HK) Distribution, Ltd. vs. NLRC [G.R. No. 123520, 26 June 1998])
The reason for this rule is that the pertinent personnel files, payrolls, records, remittance and other
similar documents – which will show that overtime, differentials, service incentive leave and other
claims of workers have been paid – are not in the possession of the worker but in the custody and
absolute control of the employer. Thus, in choosing not to present evidence to prove that it had paid all
the monetary claims of petitioners, HI-TECH failed once again to discharge the onus probandi.
Consequently, we have no choice but to award those claims to petitioners. (Villar vs. NLRC [G.R. No.
130935, 11 May 2009])

Quitclaims

The requisites of a valid quitclaim are: That -

(a) It was voluntarily entered into by the parties;
(b) There was no fraud or deceit on the part of any of the parties;
(c) The consideration of the quitclaim is credible and reasonable; and,
(d) The contract is not contrary to law, public order, public policy, morals or good customs or
prejudicial to a third person with a right recognized by law.
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily
entered into and represents a reasonable settlement, it is binding on the parties and may not later be
disowned simply because of a change of mind. It is only where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its
face, that the law will step in to annul the questionable transaction. But where it is shown that the
person making the waiver did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a
valid and binding undertaking. (Periquet v. NLRC)
"Dire necessity" is not an acceptable ground for annulling the releases, especially since it has not
been shown that the employees had been forced to execute them. It has not even been proven that the
considerations for the quitclaims were unconscionably low and that the petitioners had been tricked into
accepting them. (Veloso v. DOLE)
First, even if a clear majority of the union members agreed to a settlement with the employer, the
union has no authority to compromise the individual claims of members who did not consent to such
settlement. Rule 138 Section 23 of the 1964 Revised Rules of Court requires a special authority before
 an attorney may compromise his client's litigation. "The authority to compromise cannot lightly be
presumed and should be duly established by evidence."
In the case at bar, minority union members did not authorize the union to compromise their
individual claims. Absent a showing of the union's special authority to compromise the individual claims
of private respondents for reinstatement and back wages, there is no valid waiver of the aforesaid
rights. As private respondents did not authorize the union to represent them not bound by the terms
thereof.
(Golden Donuts, Inc. vs. NLRC [G.R. Nos. 113666-68, 19 January 2000])

The mere fact that the employee was not physically coerced or intimidated does not necessarily
imply that he freely or voluntarily consented to the terms of the quitclaim. Under Article 1330 of the Civil
Code, consent may be vitiated not only through intimidation or violence but also by mistake, undue
influence or fraud. Moreover, it is the employer and not the employee who has the burden of proving
that the quitclaim was voluntarily entered into. (Philippine Carpet Employees Association vs. PCMC
[G.R. No.140269-70, 14 September 2000])

Reliefs under the Labor Code

Reinstatement plus backwages

Since private respondent's dismissal was for just and valid cause, the order of public respondent for
the reinstatement of private respondent with award of backwages has no factual and legal basis. (PAL
vs. NLRC [G.R. No. 126805, 16 March 2000])

[A]n employee who is unjustly dismissed is entitled to his full backwages computed from the time
his compensation was withheld from him up to the time of his reinstatement. Mere offer to reinstate a
dismissed employee, given the circumstances in this case, is not enough. If petitioner were sincere in
its intention to reinstate private respondent, petitioner should have at the very least reinstated him in its
payroll right away. We are thus constrained to conclude that private respondent should be paid by
petitioner not only the sum of P26,866.64 awarded by the NLRC, but the petitioner should be held liable
for the entire amount of backwages due the private respondent from the day he was illegally dismissed
up to the date of his reinstatement. Only then could observance of labor laws be promoted and social
justice upheld. (Condo Suite Club Travel, Inc. vs. NLRC [G.R. No. 125671, 28 January 2000])

We agree that no full backwages from the time their pay was withheld up to the time of actual
reinstatement can be ordered paid to petitioners. R.A. No. 6715, which amended Art. 279 of the Labor
Code by requiring that an employee who is illegally dismissed shall be paid "his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement," has no retroactive
effect and does not apply to cases of illegal dismissal taking place before its effectivity on March 21,
1989. Since petitioners were dismissed in 1987, they cannot demand payment of full backwages until
they were actually reinstated. BALLADARES vs. NLRC G.R. No. 111342 [19 June 1995]

Strained relations

"Strained relations," as amplified in Employee's Association of the Philippine American Life

Insurance Company v. NLRC, 199 SCRA 628 [1991], must be of such a nature or degree as to
preclude reinstatement. But, where the differences between the parties are neither personal nor
physical, nor serious, then there is no reason why the illegally dismissed employee should not be
reinstated rather than simply given separation pay and backwages. More so if the cause of the
perceived 'strained relations' is the filing of a complaint for illegal dismissal. (Kunting vs. NLRC [G.R.
No. 101427, 08 November 1993])

A careful scrutiny of the records of the case at bench, however, readily discloses the existence of
strained relationship between the petitioner and private respondents.
 Firstly, petitioner consistently refused to re-admit private respondents in his establishment.
Petitioner even replaced private respondents with a new set of workers to perform the tasks of private
respondents; Moreover, although petitioner ostensibly argued in his supplemental motion for
reconsideration that reinstatement should have been the proper remedy in the case at bench on his
premise that the existence of strained relationship was not adequately established, yet petitioner never
sincerely intended to effect the actual reinstatement of private respondents. For if petitioner were to
pursue further the entire logic of his argument, the prayer in his supplemental motion for
reconsideration should have contained not just the mere deletion of the award of separation pay, but
precisely, the reinstatement of private respondents. Quite obviously then, notwithstanding petitioner's
argument for reinstatement he was only interested in the deletion of the award of separation pay to
private respondents.
xxx xxx xxx
And secondly, private respondents themselves, from the very start, had already indicated their
aversion to their continued employment in petitioner's establishment. The very filing of their second
case before Labor. (Congson vs. NLRC [G.R. No. 114250, 05 April 1995])

As the Court held in Globe-Mackay Cable and Radio Corporation v. NLRC, 206 SCRA 701 [1992],
citing]; Sibal v. Notre Dame of Greater Manila, 182 SCRA 538 [1990]:Obviously, the principle of "strained
relations" cannot be applied indiscriminately. Otherwise reinstatement can never be possible simply
because some hostility is invariably engendered between the parties as a result of litigation. That is
human nature.
Besides, no strained relations should arise from a valid and legal act of asserting one's right;
otherwise an employee who shall assert his right could be easily separated from the service, by merely
paying his separation pay on the pretext that his relationship with his employer had already been
strained. (Anscor Transport and Terminals v. NLRC [190 SCRA 147, 1990])

Moral and exemplary damages

Private respondent is not entitled to the recovery of moral damages since these are recoverable
only where the dismissal of the employee was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.
(Spartan Security Detective Agency, Inc. v. NLRC [213 SCRA 528, 1992])

Unfair labor practices violate the constitutional rights of workers and employees to self-organization,
are inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect; and
disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations. As
the conscience of the government, it is the Court's sworn duty to ensure that none trifles with labor
rights.
For this reason, we find it proper in this case to impose moral and exemplary damages on private
respondent. However, the damages awarded by the labor arbiter, to our mind, are excessive. In
determining the amount of damages recoverable, the business, social and financial position of the
offended parties and the business and financial position of the offender are taken into account. It is our
view that herein private respondents had not fully acted in good faith. However, we are cognizant that a
cooperative promotes the welfare of its own members. The economic benefits filter to the cooperative
members. Either equally or proportionally, they are distributed among members in correlation with the
resources of the association utilized. Cooperatives help promote economic democracy and support
community development. Under these circumstances, we deem it proper to reduce moral damages to
only P10,000.00 payable by private respondent NEECO I to each individual petitioner. We also deem it
sufficient for private respondent NEECO I to pay each individual petitioner P5,000.00 to answer for
exemplary damages, based on the provisions of Articles 2229 and 2232 of the Civil Code.
(Nueva Ecija I Electric Cooperative, Inc. vs. NLRC [G.R. No. 116066, 24 January 2000])

Separation Pay
 Finally, we hold that the contention of Sweet Lines that separation pay and back wages are
inconsistent with each other is not well-taken. Separation pay is granted where reinstatement is no
longer advisable because of strained relations between the employee and the employer. Back wages
represent compensation that should have been earned but were not collected because of the unjust
dismissal. The bases for computing the two are different, the first being usually the length of the
employee's service and the second the actual period when he was unlawfully prevented from working.
We have ordered the payment of both in proper case as otherwise the employee might be deprived
of benefits justly due him. Thus, if an employee who has worked only one year is sustained by the labor
court after three years from his unjust dismissal, granting him separation pay only would entitle him to
only one month salary. There is no reason why he should not also be paid three years back wages
corresponding to the period when he could not return to his work or could not find employment
elsewhere. (Lim vs. NLRC [G.R. No. 79907, 16 March 1989])
There should be no question that where it comes to such valid but not iniquitous causes as failure
to comply with work standards, the grant of separation pay to the dismissed employee may be both just
and compassionate, particularly if he has worked for some time with the company. For example, a
subordinate who has irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who
has to be frequently absent because she has also to take care of her child may also be removed
because of her poor attendance, this being another authorized ground. It is not the employee's fault if
he does not have the necessary aptitude for his work but on the other hand the company cannot be
required to maintain him just the same at the expense of the efficiency of its operations. He too may be
validly replaced. Under these and similar circumstances, however, the award to the employee of
separation pay would be sustainable under the social justice policy even if the separation is for cause.
But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning. There is no doubt it is compassionate to give separation pay to a
salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to
dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he
was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company
premises, the situation is changed completely. This is not only inefficiency but immorality and the grant
of separation pay would be entirely unjustified.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal
only and that the separation pay has nothing to do with the wrong he has committed. Of course it has.
Indeed, if the employee who steals from the company is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a similar offense in his next employment because he
thinks he can expect a little leniency if he is again found out. This kind of misplaced compassion is not
going to do labor in general any good as it will encourage the infiltration of its ranks by those who do
not deserve the protection and concern of the Constitution. (PLDT vs. NLRC [G.R. No. 80609, 23
August 1988])
Thus, petitioner pointed out that the SEC's order suspending all claims against it pending before
any other court, tribunal or body was pursuant to the rehabilitation receivership proceedings. Such
order was necessary to enable the rehabilitation receiver to effectively exercise its powers free from
any judicial or extra-judicial interference that might unduly hinder the rescue of the distressed company.
Since receivership proceedings have ceased and petitioner's rehabilitation receiver and liquidator,
Ledesma Saludo & Associates, has been given the imprimatur to proceed with corporate liquidation, the
cited order of the Securities and Exchange Commission has been rendered functus officio. Thus, there
 is no legal impediment for the execution of the decision of the Labor Arbiter for the payment of
separation pay.
Considering that petitioner's monetary obligation to private respondent is long overdue and that
petitioner has signified its willingness to comply with such obligation by entering into an agreement with
private respondent as to the amount and manner of payment, petitioner can not delay satisfaction of
private respondent's claim. However, due to events subsequent to the filing of this petition, private
respondent must present its claim with the rehabilitation receiver and liquidator of petitioner, subject to
the rules on preference of credits.
(Alemar's Sibal & Sons, Inc. vs. NLRC [G.R. No. 114761, 19 January 2000])
It must be emphasized that the right of employee to demand separation pay and backwages is
always premised on the fact that the employee was terminated either legally of illegally. The award of
backwages belongs to an illegally dismissed employee by direct provision of law and it is awarded on
grounds of equity for earnings which a worker or employee has lost due to illegal dismissal. Separation
pay, on the other hand, is awarded as an alternative to illegal dismissed employees where
reinstatement is no longer possible. (Jo Cinema vs. Abellana [G.R. No. 132837, 28 June 2001])

Financial Assistance

With regards to the award of financial assistance to petitioner, We find that the same is not justified.
Petitioner's willful disobedience of the orders of her employer constitutes serious misconduct. As We
held in the case of Del Monte Phils., Inc. vs. NLRC, "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". Hence, the employer, CLUB,
may not be required to give the petitioner separation pay, or financial assistance, or whatever other
name it is called, on the ground of social justice. (Aguilar vs. NLRC [G.R. No. 100878, 02 December
1992])

Neither could we allow the award of P5,000.00 as financial assistance on equitable consideration
as decreed by the labor arbiter. As we have consistently held in previous cases, such monetary award
is justified only in those instances where the employee is validly dismissed for causes other than
serious misconduct or those adversely affecting his moral character. Thus, if the reason for the valid
dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft, fraud,
falsification or illicit sexual relations with a fellow worker, separation pay or financial assistance, or by
whatever other name it is called, may not be allowed. (PAL vs. NLRC [G.R. No. 126805, 16 March
2000])

Retirement
In the instant case, the complaints of private respondents were still being resolved on the labor
arbiter level when R.A. No. 7641 took effect. However, it was quite clear, and both the Labor Arbiter and
the NLRC so held, that private respondents had ceased to be employees of petitioner, by reason of
voluntary resignation, before the statute went into effect. Moreover, it appears that private respondents
did not qualify for the benefits of R.A. No. 7641 under the terms of this law itself. The Court notes that
when private respondents filed their complaints more than one (1) year after they had been allegedly
illegally dismissed, respondent Ausan, Jr. was fifty-seven (57) years old while respondent Alanan was
sixty (60) years old. That would make Ausan, Jr. fifty-five (55) years old and Alanan fifty-eight (58) years
old at the time their services with petitioner were ended by their resignation. Since the record does not
show any retirement plan or collective bargaining agreement providing for retirement benefits to
petitioner's employees, the applicable retirement age is the optional retirement age of sixty (60) years
according to Article 287, which would qualify the retiree to retirement benefits equivalent to one-half
(1/2) month's salary for every year of service. Unfortunately, at the time private respondents stopped
working for petitioner, they had not yet reached the age of sixty (60) years.
We stress, however, that there is nothing to prevent petitioner from voluntarily giving private
respondents some financial assistance on an ex gratia basis.
(CJC Trading, Inc. vs. NLRC [G.R. No. 115884, 20 July 1995])
Worker preference

Worker preference in case of bankruptcy. - In the event of bankruptcy or liquidation of an employer's

business, his workers shall enjoy first preference as regards their unpaid wages and other monetary
claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims
shall be paid in full before the claims of the Government and other creditors may be paid. (Article 110 of
the Labor Code)

(1) Article 110 of the Labor Code, as amended, must be viewed and read in conjunction with the
provisions of the Civil Code on concurrence and preferences of credits;
(2) The aforesaid provisions of the Civil Code, including Article 110 of the Labor Code, require judicial
proceedings in rem in adjudication of creditors' claims against the debtor's assets to become
operative;
(3) Republic Act No. 6715 has the effect of expanding the "worker preference" to cover not only unpaid
wages but also other monetary claims of laborers, to which even claims of the Government must
be deemed subordinate; and
(4) The amendatory provisions of Republic Act 6715, which took effect on 21 March 1989, should only
be given prospective application.
(DBP vs. NLRC [G.R. No. 86227, 19 January 1994])
PD No. 902-A is clear that “all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly.” The law did not make any exception in favor of labor claims.
The justification for the automatic stay of all pending actions for claims is to enable the
management committee or the rehabilitation receiver to effectively exercise its/his powers free from any
judicial or extrajudicial interference that might unduly hinder or prevent the “rescue” of the debtor
company. To allow such actions to continue would only add to the burden of the management
committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending
claims against the corporation instead of being directed towards its restructuring and rehabilitation.
Thus, the labor case would defeat the purpose of the automatic stay. To rule otherwise would open the
floodgates to numerous claims and would defeat the rescue efforts of the management committee.
(Rubberworld vs. NLRC [305 SCRA 721])

JURISDICTION

Regional Director
 Recovery of wages, simple money claims and other benefits. — Upon complaint of any interested
party, the Regional Director of the Department of Labor and Employment or any of the duly authorized
hearing officers of the Department is empowered, through summary proceeding and after due notice, to
hear and decide any matter involving the recovery of wages and other monetary claims and benefits,
including legal interest, owing to an employee or person employed in domestic or household service or
househelper under this Code, arising from employer-employee relations: Provided, That such complaint
does not include a claim for reinstatement: Provided, further, That the aggregate money claims of each
employee or househelper do not exceed five thousand pesos (P5,000). The Regional Director or
hearing officer shall decide or resolve the complaint within thirty (30) calendar days from the date of the
filing of the same. Any sum thus recovered on behalf of any employee or househelper pursuant to this
Article shall be held in a special deposit account by, and shall be paid, on order of the Secretary of
Labor and Employment or the Regional Director directly to the employee or househelper concerned.
Any such sum not paid to the employee or househelper, because he cannot be located after diligent
and reasonable effort to locate him within a period of three (3) years, shall be held as a special fund of
the Department of Labor and Employment to be used exclusively for the amelioration and benefit of
workers.
Any decision or resolution of the Regional Director or hearing officer pursuant to this provision may
be appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days
from receipt of a copy of said decision or resolution, to the National Labor Relations Commission which
shall resolve the appeal within ten (10) calendar days from the submission of the last pleading required
or allowed under its rules.
The Secretary of Labor and Employment or his duly authorized representative may supervise the
payment of unpaid wages and other monetary claims and benefits, including legal interest, found owing
to any employee or househelper under this Code. (Article 129 of the Labor Code)

Labor Arbiter
Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this
Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for decision without extension, even
in the absence of stenographic notes, the following cases involving all workers, whether agricultural or
non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes; (Subject to Art 261 - VA's jurisdiction over unbresolved grievance from
CBA/company personel policies)
(3) If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rate of pay, hours of work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;
(5) Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
(6) Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00), whether or not accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and
those arising from the interpretation or enforcement of company personnel policies shall be disposed of
by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may
be provided in said agreements. (Article 217 of the Labor Code)
Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
 The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims
or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall themselves be jointly
and solidarily liable with the corporation or partnership for the aforesaid claims and damages.
xxx xxx xxx
In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest
at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.
xxx xxx xxx
(Section 10 of Republic Act No. 8042 [Migrant Workers and Overseas Filipinos Act of 1995])

Bureau of Labor Relations

The Bureau of Labor Relations and the Labor Relations Divisions in the regional offices of the
Department of Labor and Employment shall have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-management relations in all workplaces
whether agricultural or non-agricultural, except those arising from the implementation or interpretation
of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary
arbitration.
The Bureau shall have fifteen (15) calendar days to act on labor cases before it, subject to
extension by agreement of the parties. (Article 226 of the Labor Code)
Clearly, the Secretary of Labor and Employment has no jurisdiction to entertain the appeal of ABBOTT.
The appellate jurisdiction of the Secretary of Labor and Employment is limited only to a review of
cancellation proceedings decided by the BLR in the exercise of its exclusive and original jurisdiction. The
Secretary of Labor and Employment has no jurisdiction over decisions of the BLR rendered in the exercise
of its appellate power to review the decision of the Regional Director in a petition to cancel the union's
certificate of registration, said decisions being final and inappealable.
xxx xxx xxx
It is clear then that the Secretary of Labor and Employment did not commit grave abuse of discretion in
not acting an ABBOTT's appeal. The decisions of the BLR on cases brought before it on appeal from the
Regional Director are final and executory. Hence, the remedy of the aggrieved party is to seasonably avail
of the special civil action of certiorari under Rule 65 of the Rules of Court.
(Abbott Laboratories vs. Abbott Laboratories Employees Union [G.R. No. 131374, 26 January 2000.)

Voluntary arbitrator
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies referred to in the immediately preceding Article.
Accordingly, violations of a Collective Bargaining Agreement, except those which are gross in character,
shall no longer be treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this Article, gross violations of a Collective
Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic
provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators and shall immediately dispose and
refer the same to the grievance machinery or voluntary arbitration provided in the collective bargaining
agreement.
(Article 261 of the Labor Code)

Appeal
From Labor Arbiter to NLRC

Article 221 of the Labor Code mandates that technical rules of evidence in courts of law shall not be
controlling in any of the proceedings before the Commission or the Labor Arbiters. Further, the
Commission is required to use every reasonable means to ascertain the facts without regard to
technicalities or procedure. Technical rules may be relaxed to prevent miscarriage of justice. They must
not be allowed to stand in the way of equitably and completely resolving the rights and obligations of
the parties.
In the case at bar, petitioner had the opportunity to rebut the truth of these additional documents.
Respondent NLRC, on appeal, correctly accorded weight to these documents considering their nature
and character. These were daily time records, certifications from the postmaster, etc., whose
trustworthiness can be relied upon.
(Cañete vs. NLRC [G.R. No. 114161, 23 November 1995])

Grounds for Appeal

(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter;
(b) If the decision, order or award was secured through fraud or coercion, including graft and
corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which would cause grave or irreparable
damage or injury to the appellant.

Grave Abuse of Discretion

The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled
meaning in the jurisprudence of procedure. It means such capricious and whimsical exercise of
judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of power.
(Arroyo vs. De Venecia [277 SCRA 268, (1997])

Private respondent, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter who
rendered the decision and expressed dismay over the judgment. Neither notice of appeal was filed nor
cash or surety bond was posted by private respondent. Nevertheless, the labor tribunal took
cognizance of the letter from private respondent and treated said letter as private respondent's appeal.
In a certiorari action before this Court, we ruled that the labor tribunal acted with grave abuse of
discretion in treating a mere letter from private respondent as private respondent's appeal in clear
violation of the rules on appeal prescribed under Section 3(a), Rule VI of the Rules of Procedure of
NLRC. (Garcia vs. NLRC [264 SCRA 261, 1996])
The labor arbiter committed grave abuse of discretion when he failed to resolve immediately by
written order a motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the NLRC. Philippine
Airlines Inc. vs. NLRC [263 SCRA 638, 1996])
The NLRC gravely abused its discretion by allowing and deciding an appeal without an appeal bond
having been filed as required under Article 223 of the Labor Code. (Unicane Workers Union-CLUP vs.
NLRC [261 SCRA 573, 1996])
The labor arbiter gravely abused its discretion in disregarding the rule governing position papers. In
this case, the parties have already filed their position papers and even agreed to consider the case
submitted for decision, yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced
therein and the documents attached thereto. (Mañebo vs. NLRC [229 SCRA 240, 1994])
The NLRC gravely abused its discretion in treating the motion to set aside judgment and writ of
execution as a petition for relief of judgment. In doing so, public respondent had, without sufficient
basis, extended the reglementary period for filing petition for relief from judgment contrary to prevailing
rule and case law. (Gesulgon vs. NLRC [219 SCRA 561, 1993])
Appeal Bond
Appeal. Decisions, awards, or orders of the Labor Artiber 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. Such appeal may be entertained only on any of the following grounds:
xxx xxx xxx
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 reputable bonding company duly accredited
by the Commission in the amount equivalent to the monetary award in the judgment appealed from.
(Article 223 of the Labor Code)
The requirement that the employer post a cash or surety bond to perfect its/his appeal is apparently
intended to assure the workers that if they prevail in the case, they will receive the money judgment in
their favor upon the dismissal of the employer's appeal. It was intended to discourage employers from
using an appeal to delay, or even evade, their obligation to satisfy their employee's just and lawful
claims. (Viron Garments Mfg., Co. vs. NLRC [G.R. No. 97357, 18 March 1992])

There is a clear distinction between the filing of an appeal within the reglementary period and its
perfection. The latter may transpire after the end of the reglementary period for filing the appeal.
Under Article 223 of the Labor Code, an appeal to the NLRC from the decisions, awards or orders
of the Labor Arbiter must be made "within ten (10) calendar days from receipt of such decisions,
awards or orders." Under Section 3(a) of Rule VI of the New Rules of Procedure of the NLRC, the
appeal fees must be paid and the memorandum of appeal must be filed within the ten-day reglementary
period.
Neither the Labor Code nor its implementing rules specifically provide for a situation where the
appellant moves for a reduction of the appeal bond.
Inasmuch as in practice the NLRC allows the reduction of the appeal bond upon motion of appellant
and on meritorious grounds, it follows that a motion to that effect may be filed within the reglementary
period for appealing. Such motion may be filed in lieu of a bond which amount is being contested. In the
meantime, the appeal is not deemed perfected and the Labor Arbiter retains jurisdiction over the case
until the NLRC has acted on the motion and appellant has filed the bond as fixed by the NLRC. (Star
Angel Handicraft vs. NLRC [G.R. No. 108914, 20 September 1994])

The precipitate filing of this special civil action for certiorari without first moving for reconsideration
of the assailed judgment of NLRC warrants the outright dismissal of this case. As we consistently held
in numerous cases, a motion for reconsideration is indispensable for it affords the NLRC an opportunity
to rectify errors or mistakes it might have committed before resort to the courts can be had.
It is settled that certiorari will lie only if there is no appeal or any other plain, speedy and adequate
remedy in the ordinary course of law against acts of public respondent. 5 In the case at bar, the plain
and adequate remedy expressly provided by law was a motion for reconsideration of the impugned
decision, based on palpable or patent errors, to be made under oath and filed within ten (10) days from
receipt of the questioned judgment of the NLRC, a procedure which is jurisdictional. Hence, original
action of certiorari, as in this case will not prosper.
Further, not having filed a motion for reconsideration within the ten-day reglementary period, the
questioned order, resolution or decision of NLRC, becomes final and executory after ten (10) calendar
days from receipt thereof. Thus, as regards petitioner, the decision of NLRC became final and
executory on December 7, 1995. Consequently, the merits of the case can no longer be reviewed to
determine if the respondent NLRC could be faulted of grave abuse of discretion. (Lagera vs. NLRC
[G.R. No. 123636, 31 March 2000])

Generally, certiorari as a special civil action will not lie unless a motion for reconsideration is filed
before the respondent tribunal to allow it an opportunity to correct its imputed errors. However, the
following have been recognized as exceptions to the rule: Where -
1. The order is a patent nullity, as where the court a quo has no jurisdiction;
2. The questions raised in the certiorari proceedings have been duly raised and passed upon
by the lower court, or are the same as those raised and passed upon in the lower court;
 3. There is an urgent necessity for the resolution of the question and any further delay would
prejudice the Government or of the petitioner or the subject matter of the action is
perishable;
4. Under the circumstances, a motion for reconsideration would be useless;
5. Petitioner is deprived of due process and there is extreme urgency of relief;
6. In a criminal case, relief from an order of arrest is urgent and the granting of such relief by
the trial court is improbable;
7. The proceedings in the lower court are a nullity for lack of due process;
8. The proceedings was ex parte or on which the petitioner had no opportunity to object; and
9. The issue raised is one purely of law or where public interest is involved.
(Abraham vs. NLRC [G.R. No. 143823, 06 March 2001])

From NLRC to Court of Appeals

A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there
may have been an oversight in the course of the deliberations on the said Act or an imprecision in the
terminology used therein. In fine, Congress did intend to provide for judicial review of the adjudications
of the NLRC in labor cases by the Supreme Court, but there was an inaccuracy in the term used for the
intended mode of review. This conclusion which we have reluctantly but prudently arrived at has been
drawn from the considerations extant in the records of Congress, more particularly on Senate Bill No.
1495 and the Reference Committee Report on S. No. 1495/H. No. 10452.
The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to the
Supreme Court were eliminated, the legislative intendment was that the special civil action of certiorari
was and still is the proper vehicle for judicial review of decisions of the NLRC. The use of the word
"appeal" in relation thereto and in the instances we have noted could have been a lapsus plumae
because appeals by certiorari and the original action for certiorari are both modes of judicial review
addressed to the appellate courts. The important distinction between them, however, and with which
the Court is particularly concerned here is that the special civil action of certiorari is within the
concurrent original jurisdiction of this Court and the Court of Appeals; whereas to indulge in the
assumption that appeals by certiorari to the Supreme Court are allowed would not subserve, but would
subvert, the intention of Congress as expressed in the sponsorship speech on Senate Bill No. 1495.
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the
NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for
certiorari under Rule 65. Consequently, all such petitions should hence forth be initially filed in the Court
of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for
the relief desired.
(St. Martin Funeral Home vs. NLRC [G.R. No. 130866, 16 September 1998])

Miscellaneous

[C]OMPULSORY ARBITRATION has been defined both as "the process of settlement of labor
disputes by a government agency which has the authority to investigate and to make an award which is
binding on all the parties," and as mode of arbitration where the parties are "compelled to accept the
resolution of their dispute through arbitration by the a third party." (Reformist Union Of R.B. Liner vs.
NLRC [G.R. No. 120482, 27 January 1997])

[C]OMPROMISE AGREEMENT, an agreement between two or more persons, who, for preventing
or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree
on, and which everyone of them prefers to the hope of gaining, balanced by the danger of losing.
(Reformist Union Of R.B. Liner vs. NLRC [G.R. No. 120482, 27 January 1997])

WAGE DISTORTION means a situation where an increase in prescribed wage rates results in the
elimination or severe contradiction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation. (Rules Implementing Republic Act 6727)
 SUBSTANTIAL EVIDENCE means that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. (Sebuguero vs. NLRC [G.R. No. 115394, 27
September 1995])

MERCURY DRUG RULE which limited the award of back wages of illegally dismissed workers to
three (3) years "without deduction or qualification" to obviate the need for further proceedings in the
course of execution. (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA 694 [1974])

HOLD OVER PRINCIPLE states that it shall be the duty of both parties to keep the status quo and continue in
full force and effect the terms and conditions of the existing CBA during the 60-day freedom period and/or until
a new agreement is reached by the parties. (Meralco vs. Secretary of Labor [G.R. No. 127598, 01 August
2000])