I.

FUNDAMENTAL PRINCIPLES AND POLICIES

A.

Consti.

ARTICLE II
DECLARATION OF PRINCIPLES AND STATE POLICIES PRINCIPLES
Section 9. The State shall promote a just and dynamic social order that will ensure
the prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full employment, a
rising standard of living, and an improved quality of life for all.
Section 10. The State shall promote social justice in all phases of national
development.
Section 11. The State values the dignity of every human person and guarantees full
respect for human rights.
Section 13. The State recognizes the vital role of the youth in nation-building and
shall promote and protect their physical, moral, spiritual, intellectual, and social wellbeing. It shall inculcate in the youth patriotism and nationalism, and encourage their
involvement in public and civic affairs.
Section 14. The State recognizes the role of women in nation-building, and shall
ensure the fundamental equality before the law of women and men.
Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
Section 20. The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments
ARTICLE III
BILL OF RIGHTS
Section 1. No person shall be deprived of life, liberty, or property without due process
of law, nor shall any person be denied the equal protection of the laws.
Section 4. No law shall be passed abridging the freedom of speech, of expression, or
of the press, or the right of the people peaceably to assemble and petition the
government for redress of grievances.
Section 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents and papers pertaining to

official acts, transactions, or decisions, as well as to government research data used

as basis for policy development, shall be afforded the citizen, subject to such
limitations as may be provided by law.
Section 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to law
shall not be abridged
Section 10. No law impairing the obligation of contracts shall be passed.
Section 16. All persons shall have the right to a speedy disposition of their cases
before all judicial, quasi-judicial, or administrative bodies.
Section 18. There shall be a Commission on Appointments consisting of the
President of the Senate, as ex officio Chairman, twelve Senators, and twelve
Members of the House of Representatives, elected by each House on the basis of
proportional representation from the political parties and parties or organizations
registered under the party-list system represented therein. The chairman of the
Commission shall not vote, except in case of a tie. The Commission shall act on all
appointments submitted to it within thirty session days of the Congress from their
submission. The Commission shall rule by a majority vote of all the Members.
Section 18.
1.
2.

No person shall be detained solely by reason of his political beliefs and

aspirations.
No involuntary servitude in any form shall exist except as a
punishment for a crime whereof the party shall have been duly
convicted.
ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS

Section 1. The Congress shall give highest priority to the enactment of measures that
protect and enhance the right of all the people to human dignity, reduce social,
economic, and political inequalities, and remove cultural inequities by equitably
diffusing wealth and political power for the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition
of property and its increments.
Section 2. The promotion of social justice shall include the commitment to create
economic opportunities based on freedom of initiative and self-reliance.
LABOR

Section 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.

C.

Labor

It shall guarantee the rights of all workers to self-organization, collective bargaining

and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.

Art. 3. Declaration of basic policy. The State shall afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or
creed and regulate the relations between workers and employers. The State shall
assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work.

The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.

Art. 4. Construction in favor of labor. All doubts in the implementation and

interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Title II

The State shall regulate the relations between workers and employers, recognizing
the right of labor to its just share in the fruits of production and the right of enterprises
to reasonable returns to investments, and to expansion and growth.

EMPLOYEES COMPENSATION AND STATE INSURANCE FUND

Chapter I

Section 13. The State shall establish a special agency for disabled person for their
rehabilitation, self-development, and self-reliance, and their integration into the
mainstream of society.
WOMEN
Section 14. The State shall protect working women by providing safe and healthful
working conditions, taking into account their maternal functions, and such facilities
and opportunities that will enhance their welfare and enable them to realize their full
potential in the service of the nation.

POLICY AND DEFINITIONS

Art. 166. Policy. The State shall promote and develop a tax-exempt employees
compensation program whereby employees and their dependents, in the event of
work-connected disability or death, may promptly secure adequate income benefit
and medical related benefits.

BOOK FIVE
LABOR RELATIONS
B.

Title I
POLICY AND DEFINITIONS

Civ

Art. 19. Every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
Art. 1700. The relations between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages, working conditions,
hours of labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.

Chapter I
POLICY
Art. 211. Declaration of Policy.
1.

It is the policy of the State:

1.) To promote and emphasize the primacy of free collective
bargaining and negotiations, including voluntary arbitration,
mediation and conciliation, as modes of settling labor or industrial
disputes;

2.)

3.)
4.)
5.)
6.)
7.)

2.

To promote free trade unionism as an instrument for the

enhancement of democracy and the promotion of social justice and
development;
To foster the free and voluntary organization of a strong and united
labor movement;
To promote the enlightenment of workers concerning their rights
and obligations as union members and as employees;
To provide an adequate administrative machinery for the
expeditious settlement of labor or industrial disputes;
To ensure a stable but dynamic and just industrial peace; and
To ensure the participation of workers in decision and policymaking processes affecting their rights, duties and welfare.

To encourage a truly democratic method of regulating the relations between

the employers and employees by means of agreements freely entered into
through collective bargaining, no court or administrative agency or official
shall have the power to set or fix wages, rates of pay, hours of work or other
terms and conditions of employment, except as otherwise provided under
this Code. (As amended by Section 3, Republic Act No. 6715, March 21,
1989)
Chapter II
DEFINITIONS

Art. 212. Definitions.

"Commission" means the National Labor Relations Commission or any of its
divisions, as the case may be, as provided under this Code.
"Bureau" means the Bureau of Labor Relations and/or the Labor Relations Divisions
in the regional offices established under Presidential Decree No. 1, in the Department
of Labor.
"Board" means the National Conciliation and Mediation Board established under
Executive Order No. 126.
"Council" means the Tripartite Voluntary Arbitration Advisory Council established
under Executive Order No. 126, as amended.
"Employer" includes any person acting in the interest of an employer, directly or
indirectly. The term shall not include any labor organization or any of its officers or
agents except when acting as employer.

"Employee" includes any person in the employ of an employer. The term shall not be
limited to the employees of a particular employer, unless the Code so explicitly states.
It shall include any individual whose work has ceased as a result of or in connection
with any current labor dispute or because of any unfair labor practice if he has not
obtained any other substantially equivalent and regular employment.
"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.
"Legitimate labor organization" means any labor organization duly registered with the
Department of Labor and Employment, and includes any branch or local thereof.
"Company union" means any labor organization whose formation, function or
administration has been assisted by any act defined as unfair labor practice by this
Code.
"Bargaining representative" means a legitimate labor organization whether or not
employed by the employer.
"Unfair labor practice" means any unfair labor practice as expressly defined by the
Code.
"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 employer and
employee.
"Managerial employee" is one who is vested with the 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.
"Voluntary Arbitrator" means any person accredited by the Board as such or any
person named or designated in the Collective Bargaining Agreement by the parties to
act as their Voluntary Arbitrator, or one chosen with or without the assistance of the
National Conciliation and Mediation Board, pursuant to a selection procedure agreed
upon in the Collective Bargaining Agreement, or any official that may be authorized
by the Secretary of Labor and Employment to act as Voluntary Arbitrator upon the
written request and agreement of the parties to a labor dispute.

"Strike" means any temporary stoppage of work by the concerted action of employees
as a result of an industrial or labor dispute.
"Lockout" means any temporary refusal of an employer to furnish work as a result of
an industrial or labor dispute.

"Internal union dispute" includes all disputes or grievances arising from any violation
of or disagreement over any provision of the constitution and by laws of a union,
including any violation of the rights and conditions of union membership provided for
in this Code.
"Strike-breaker" means any person who obstructs, impedes, or interferes with by
force, violence, coercion, threats, or intimidation any peaceful picketing affecting
wages, hours or conditions of work or in the exercise of the right of self-organization
or collective bargaining.
"Strike area" means the establishment, warehouses, depots, plants or offices,
including the sites or premises used as runaway shops, of the employer struck
against, as well as the immediate vicinity actually used by picketing strikers in moving
to and fro before all points of entrance to and exit from said establishment. (As
amended by Section 4, Republic Act No. 6715, March 21, 1989)
Art. 255. Exclusive bargaining representation and workers participation in
policy and decision-making. The labor organization designated or selected by the
majority of the employees in an appropriate collective bargaining unit shall be the
exclusive representative of the employees in such unit for the purpose of collective
bargaining. However, an individual employee or group of employees shall have the
right at any time to present grievances to their employer.
Any provision of law to the contrary notwithstanding, workers shall have the right,
subject to such rules and regulations as the Secretary of Labor and Employment may
promulgate, to participate in policy and decision-making processes of the
establishment where they are employed insofar as said processes will directly affect
their rights, benefits and welfare. For this purpose, workers and employers may form
labor-management councils: Provided, That the representatives of the workers in
such labor-management councils shall be elected by at least the majority of all
employees in said establishment. (As amended by Section 22, Republic Act No.
6715, March 21, 1989)
Art. 277. Miscellaneous provisions.

All unions are authorized to collect reasonable membership fees, union dues,
assessments and fines and other contributions for labor education and research,
mutual death and hospitalization benefits, welfare fund, strike fund and credit and
cooperative undertakings. (As amended by Section 33, Republic Act No. 6715, March
21, 1989)
Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations
promulgated pursuant to guidelines set by the Department of Labor and Employment.
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. The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer.
The Secretary of the Department of Labor and Employment may suspend the effects
of the termination pending resolution of the dispute in the event of a prima facie
finding by the appropriate official of the Department of Labor and Employment before
whom such dispute is pending that the termination may cause a serious labor dispute
or is in implementation of a mass lay-off. (As amended by Section 33, Republic Act
No. 6715, March 21, 1989)
Any employee, whether employed for a definite period or not, shall, beginning on his
first day of service, be considered as an employee for purposes of membership in any
labor union. (As amended by Section 33, Republic Act No. 6715)
No docket fee shall be assessed in labor standards disputes. In all other disputes,
docket fees may be assessed against the filing party, provided that in bargaining
deadlock, such fees shall be shared equally by the negotiating parties.
The Minister of Labor and Employment and the Minister of the Budget shall cause to
be created or reclassified in accordance with law such positions as may be necessary
to carry out the objectives of this Code and cause the upgrading of the salaries of the
personnel involved in the Labor Relations System of the Ministry. Funds needed for
this purpose shall be provided out of the Special Activities Fund appropriated by
Batas Pambansa Blg. 80 and from annual appropriations thereafter. (Incorporated by
Batas Pambansa Bilang 130, August 21, 1981)
A special Voluntary Arbitration Fund is hereby established in the Board to subsidize
the cost of voluntary arbitration in cases involving the interpretation and
implementation of the Collective Bargaining Agreement, including the Arbitrators

fees, and for such other related purposes to promote and develop voluntary
arbitration. The Board shall administer the Special Voluntary Arbitration Fund in
accordance with the guidelines it may adopt upon the recommendation of the Council,
which guidelines shall be subject to the approval of the Secretary of Labor and
Employment. Continuing funds needed for this purpose in the initial yearly amount of
fifteen million pesos (P15,000,000.00) shall be provided in the 1989 annual general
appropriations acts.

Despite the expiration of the applicable mandatory period, the aforesaid officials shall,
without prejudice to any liability which may have been incurred as a consequence
thereof, see to it that the case or matter shall be decided or resolved without any
further delay. (Incorporated by Section 33, Republic Act No. 6715, March 21, 1989)

The amount of subsidy in appropriate cases shall be determined by the Board in

accordance with established guidelines issued by it upon the recommendation of the
Council.

The Fund shall also be utilized for the operation of the Council, the training and
education of Voluntary Arbitrators, and the Voluntary Arbitration Program. (As
amended by Section 33, Republic Act No. 6715, March 21, 1989)
The Ministry shall help promote and gradually develop, with the agreement of labor
organizations and employers, labor-management cooperation programs at
appropriate levels of the enterprise based on the shared responsibility and mutual
respect in order to ensure industrial peace and improvement in productivity, working
conditions and the quality of working life. (Incorporated by Batas Pambansa Bilang
130, August 21, 1981)
In establishments where no legitimate labor organization exists, labor-management
committees may be formed voluntarily by workers and employers for the purpose of
promoting industrial peace. The Department of Labor and Employment shall
endeavor to enlighten and educate the workers and employers on their rights and
responsibilities through labor education with emphasis on the policy thrusts of this
Code. (As amended by Section 33, Republic Act No. 6715, March 21, 1989)
To ensure speedy labor justice, the periods provided in this Code within which
decisions or resolutions of labor relations cases or matters should be rendered shall
be mandatory. For this purpose, a case or matter shall be deemed submitted for
decision or resolution upon the filing of the last pleading or memorandum required by
the rules of the Commission or by the Commission itself, or the Labor Arbiter, or the
Director of the Bureau of Labor Relations or Med-Arbiter, or the Regional Director.
Upon expiration of the corresponding period, a certification stating why a decision or
resolution has not been rendered within the said period shall be issued forthwith by
the Chairman of the Commission, the Executive Labor Arbiter, or the Director of the
Bureau of Labor Relations or Med-Arbiter, or the Regional Director, as the case may
be, and a copy thereof served upon the parties.

II.

Recruitment and Placement

2.

He would be paid with a monthly basic salary of $808.00 and a

fixed overtime pay of $404.00 or a total of $1,212.00 per month
during the employment period commencing on 6 November 1991;

3.

On 8 November 1991, he joined the vessel MV Stolt Aspiration;

4.

On February 1992 or for nearly three (3) months of rendering

service and while the vessel was at Batangas, he was ordered by
the ships master to disembark the vessel and repatriated back to
Manila for no reason or explanation;

5.

Upon his return to Manila, he immediately proceeded to the

petitioners office where he was transferred employment with
another vessel named MV Stolt Pride under the same terms and
conditions of the First Contract;

6.

On 23 April 1992, the Second Contract was noted and approved by

the POEA;

7.

The POEA, without knowledge that he was not deployed with the
vessel, certified the Second Employment Contract on 18
September 1992.

8.

Despite the commencement of the Second Contract on 21 April

1992, petitioners failed to deploy him with the vessel MV Stolt
Pride;
He made a follow-up with the petitioner but the same refused to
comply with the Second Employment Contract.

SECOND DIVISION
G.R. No. 177498
STOLT-NIELSEN TRANSPORTATION GROUP,
INC. AND CHUNG GAI SHIP MANAGEMENT,
Petitioners,
-versusSULPECIO MEDEQUILLO, JR.,
Respondent.

DECISION
PEREZ, J.:
1

Before the Court is a Petition for Review on Certiorari of the Decision of the
First Division of the Court of Appeals in CA-G.R. SP No. 91632 dated 31 January
2007, denying the petition for certiorari filed by Stolt-Nielsen Transportation Group,
Inc. and Chung Gai Ship Management (petitioners) and affirming the Resolution of
the National Labor Relations Commission (NLRC). The dispositive portion of the
assailed decision reads:
WHEREFORE, the petition is hereby DENIED.
Accordingly, the assailed Decision promulgated on February 28,
3
2003 and the Resolution dated July 27, 2005 are AFFIRMED.
The facts as gathered by this Court follow:
On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before
the Adjudication Office of the Philippine Overseas Employment Administration
(POEA) against the petitioners for illegal dismissal under a first contract and for failure
4
to deploy under a second contract. In his complaint-affidavit, respondent alleged
that:
1.

On 6 November 1991(First Contract), he was hired by Stolt-Nielsen

Marine Services, Inc on behalf of its principal Chung-Gai Ship
Management of Panama as Third Assistant Engineer on board the
vessel Stolt Aspiration for a period of nine (9) months;

9.

10. On 22 December 1994, he demanded for his passport, seamans

book and other employment documents. However, he was only
allowed to claim the said documents in exchange of his signing a
document;
11. He was constrained to sign the document involuntarily because
without these documents, he could not seek employment from
other agencies.
He prayed for actual, moral and exemplary damages as well as attorneys
fees for his illegal dismissal and in view of the Petitioners bad faith in not complying
with the Second Contract.
The case was transferred to the Labor Arbiter of the DOLE upon the
effectivity of the Migrant Workers and Overseas Filipinos Act of 1995.

The parties were required to submit their respective position papers before
the Labor Arbiter. However, petitioners failed to submit their respective pleadings
5
despite the opportunity given to them.
On 21 July 2000, Labor Arbiter Vicente R. Layawen rendered a
6
judgment finding that the respondent was constructively dismissed by the petitioners.
The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby
rendered, declaring the respondents guilty of constructively
dismissing the complainant by not honoring the employment
contract. Accordingly, respondents are hereby ordered jointly and
solidarily to pay complainant the following:
1.

$12,537.00 or its peso equivalent at the time of payment.

The Labor Arbiter found the first contract entered into by and between the
complainant and the respondents to have been novated by the execution of the
second contract. In other words, respondents cannot be held liable for the first
contract but are clearly and definitely liable for the breach of the second
8
contract. However, he ruled that there was no substantial evidence to grant the
9
prayer for moral and exemplary damages.
The petitioners appealed the adverse decision before the National Labor Relations
Commission assailing that they were denied due process, that the respondent cannot
be considered as dismissed from employment because he was not even deployed yet
and the monetary award in favor of the respondent was exorbitant and not in
10
accordance with law.

The NLRC ruled that records showed that attempts to serve the various notices of
hearing were made on petitioners counsel on record but these failed on account of
their failure to furnish the Office of the Labor Arbiter a copy of any notice of change of
address. There was also no evidence that a service of notice of change of address
13
was served on the POEA.
The NLRC upheld the finding of unjustified termination of contract for failure on the
part of the petitioners to present evidence that would justify their non-deployment of
14
the respondent. It denied the claim of the petitioners that the monetary award
should be limited only to three (3) months for every year of the unexpired term of the
contract. It ruled that the factual incidents material to the case transpired within 19911992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers and
15
Overseas Filipinos Act of 1995 which provides for such limitation.
However, the NLRC upheld the reduction of the monetary award with respect to the
16
deletion of the overtime pay due to the non-deployment of the respondent.
The Partial Motion for Reconsideration filed by the petitioners was denied by
17
the NLRC in its Resolution dated 27 July 2005.
The petitioners filed a Petition for Certiorari before the Court of Appeals
alleging grave abuse of discretion on the part of NLRC when it affirmed with
modification the ruling of the Labor Arbiter. They prayed that the Decision and
Resolution promulgated by the NLRC be vacated and another one be issued
dismissing the complaint of the respondent.
Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the
Decision of the labor tribunal.
The Courts Ruling

On 28 February 2003, the NLRC affirmed with modification the Decision of

the Labor Arbiter. The dispositive portion reads:

The following are the assignment of errors presented before this Court:
WHEREFORE, premises considered, the decision under
review is hereby, MODIFIED BY DELETING the award of overtime
pay in the total amount of Three Thousand Six Hundred Thirty Six
US Dollars (US $3,636.00).
In all other respects, the assailed decision so stands as,
11
AFFIRMED.
Before the NLRC, the petitioners assailed that they were not properly notified of the
hearings that were conducted before the Labor Arbiter. They further alleged that after
the suspension of proceedings before the POEA, the only notice they received was a
12
copy of the decision of the Labor Arbiter.

I.
THE COURT A QUO ERRED IN FINDING THAT THE SECOND
CONTRACT NOVATED THE FIRST CONTRACT.
1.

THERE WAS NO NOVATION OF THE FIRST CONTRACT BY

THE SECOND CONTRACT; THE ALLEGATION OF ILLEGAL
DISMISSAL UNDER THE FIRST CONTRACT MUST BE
RESOLVED SEPARATELY FROM THE ALLEGATION OF
FAILURE TO DEPLOY UNDER THE SECOND CONTRACT.

2.

THE ALLEGED ILLEGAL DISMISSAL UNDER THE FIRST

CONTRACT TRANSPIRED MORE THAN THREE (3) YEARS
AFTER THE CASE WAS FILED AND THEREFORE HIS
CASE SHOULD HAVE BEEN DISMISSED FOR BEING
BARRED BY PRESCRIPTION.
II.

3. There must be the extinguishment of the old contract, and

4. There must be the validity of the new contract.

In its ruling, the Labor Arbiter clarified that novation had set in between the first and
second contract. To quote:
xxx [T]his office would like to make it clear that the first contract
entered into by and between the complainant and the respondents
is deemed to have been novated by the execution of the second
contract. In other words, respondents cannot be held liable for the
first contract but are clearly and definitely liable for the breach of
20
the second contract.

THE COURT A QUO ERRED IN RULING THAT THERE WAS

CONSTRUCTIVE DISMISSAL UNDER THE SECOND
CONTRACT.
1.

19

IT IS LEGALLY IMPOSSIBLE TO HAVE CONSTRUCTIVE

DISMISSAL WHEN THE EMPLOYMENT HAS NOT YET
COMMENCED.

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

2.

ASSUMING THERE WAS OMISSION UNDER THE SECOND

CONTRACT, PETITIONERS CAN ONLY BE FOUND AS
HAVING FAILED IN DEPLOYING PRIVATE RESPONDENT
BUT WITH VALID REASON.

Guided by the foregoing legal precepts, it is evident that

novation took place in this particular case. The parties impliedly
extinguished the first contract by agreeing to enter into the second
contract to placate Medequillo, Jr. who was unexpectedly
dismissed and repatriated to Manila. The second contract would not
have been necessary if the petitioners abided by the terms and
conditions of Madequillo, Jr.s employment under the first contract.
nd
The records also reveal that the 2 contract extinguished the first
contract by changing its object or principal. These contracts were
for overseas employment aboard different vessels. The first
contract was for employment aboard the MV Stolt Aspiration while
the second contract involved working in another vessel, the MV
Stolt Pride. Petitioners and Madequillo, Jr. accepted the terms
and conditions of the second contract. Contrary to petitioners
assertion, the first contract was a previous valid contract since it
had not yet been terminated at the time of Medequillo, Jr.s
repatriation to Manila. The legality of his dismissal had not yet been
resolved with finality. Undoubtedly, he was still employed under the
first contract when he negotiated with petitioners on the second
contract. As such, the NLRC correctly ruled that petitioners could
21
only be held liable under the second contract.

III.
THE COURT A QUO ERRED IN FAILING TO FIND THAT EVEN
ASSUMING THERE WAS BASIS FOR HOLDING PETITIONER
LIABLE FOR FAILURE TO DEPLOY RESPONDENT, THE POEA
RULES PENALIZES SUCH OMISSION WITH A MERE
18
REPRIMAND.
The petitioners contend that the first employment contract between them
and the private respondent is different from and independent of the second contract
subsequently executed upon repatriation of respondent to Manila.
We do not agree.
Novation is the extinguishment of an obligation by the substitution or change
of the obligation by a subsequent one which extinguishes or modifies the first, either
by changing the object or principal conditions, or, by substituting another in place of
the debtor, or by subrogating a third person in the rights of the creditor. In order for
novation to take place, the concurrence of the following requisites is indispensable:
1. There must be a previous valid obligation,

We concur with the finding that there was a novation of the first employment
contract.
We reiterate once more and emphasize the ruling in Reyes v. National Labor
22
Relations Commission, to wit:

2. There must be an agreement of the parties concerned to a new

contract,

x x x [F]indings of quasi-judicial bodies like the NLRC, and affirmed

by the Court of Appeals in due course, are conclusive on this Court,
which is not a trier of facts.
xxxx
x x x Findings of fact of administrative agencies and quasijudicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally
accorded not only respect, but finality when affirmed by the
Court of Appeals. Such findings deserve full respect and, without
justifiable reason, ought not to be altered, modified or
23
reversed.(Emphasis supplied)

With the finding that respondent was still employed under the first contract
24
when he negotiated with petitioners on the second contract, novation became an
unavoidable conclusion.
Equally settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their jurisdiction, are generally
accorded not only respect but even finality by the courts when supported by
substantial evidence, i.e., the amount of relevant evidence which a reasonable mind
25
might accept as adequate to justify a conclusion. But these findings are not
infallible. When there is a showing that they were arrived at arbitrarily or in disregard
26
of the evidence on record, they may be examined by the courts. In this case, there
was no showing of any arbitrariness on the part of the lower courts in their findings of
facts. Hence, we follow the settled rule.
We need not dwell on the issue of prescription. It was settled by the Court of
Appeals with its ruling that recovery of damages under the first contract was already
time-barred. Thus:
Accordingly, the prescriptive period of three (3) years
within which Medequillo Jr. may initiate money claims under the
st
1 contract commenced on the date of his repatriation. xxx The
start of the three (3) year prescriptive period must therefore be
reckoned on February 1992, which by Medequillo Jr.s own
admission was the date of his repatriation to Manila. It was at this
point in time that Medequillo Jr.s cause of action already accrued
under the first contract. He had until February 1995 to pursue a
st
case for illegal dismissal and damages arising from the 1 contract.
With the filing of his Complaint-Affidavit on March 6, 1995, which
was clearly beyond the prescriptive period, the cause of action
st
27
under the 1 contract was already time-barred.

The issue that proceeds from the fact of novation is the consequence of the
non-deployment of respondent.
The petitioners argue that under the POEA Contract, actual deployment of
the seafarer is a suspensive condition for the commencement of the
28
employment. We agree with petitioners on such point. However, even without actual
deployment, the perfected contract gives rise to obligations on the part of petitioners.
A contract is a meeting of minds between two persons whereby one binds
29
himself, with respect to the other, to give something or to render some service. The
contracting parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good
30
customs, public order, or public policy.
The POEA Standard Employment Contract provides that employment shall
commence upon the actual departure of the seafarer from the airport or seaport in
31
the port of hire. We adhere to the terms and conditions of the contract so as to
credit the valid prior stipulations of the parties before the controversy started. Else,
the obligatory force of every contract will be useless. Parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences
32
which, according to their nature, may be in keeping with good faith, usage and law.
Thus, even if by the standard contract employment commences only upon
actual departure of the seafarer, this does not mean that the seafarer has no remedy
in case of non-deployment without any valid reason. Parenthetically, the contention of
the petitioners of the alleged poor performance of respondent while on board the first
ship MV Stolt Aspiration cannot be sustained to justify the non-deployment, for no
33
evidence to prove the same was presented.
We rule that distinction must be made between the perfection of the
employment contract and the commencement of the employer-employee relationship.
The perfection of the contract, which in this case coincided with the date of execution
thereof, occurred when petitioner and respondent agreed on the object and the
cause, as well as the rest of the terms and conditions therein. The commencement of
the employer-employee relationship, as earlier discussed, would have taken place
had petitioner been actually deployed from the point of hire. Thus, even before the
start of any employer-employee relationship, contemporaneous with the perfection of
the employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party. Thus, if the reverse
had happened, that is the seafarer failed or refused to be deployed as agreed upon,
34
he would be liable for damages.
Further, we do not agree with the contention of the petitioners that the
penalty is a mere reprimand.

35

The POEA Rules and Regulations Governing Overseas Employment dated

31 May 1991 provides for the consequence and penalty against in case of nondeployment of the seafarer without any valid reason. It reads:

We thus decree the application of Section 10 of Republic Act No. 8042

(Migrant Workers Act) which provides for money claims by reason of a contract
involving Filipino workers for overseas deployment. The law provides:
Sec. 10. Money Claims. Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have 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. x x x
(Underscoring supplied)

Section 4. Workers Deployment. An agency shall deploy its

recruits within the deployment period as indicated below:
xxx
b. Thirty (30) calendar days from the date of processing by the
administration of the employment contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed
period without valid reasons shall be a cause for suspension
or cancellation of license or fine. In addition, the agency shall
return all documents at no cost to the worker.(Emphasis and
underscoring supplied)

36

The appellate court correctly ruled that the penalty of reprimand provided
under Rule IV, Part VI of the POEA Rules and Regulations Governing the
Recruitment and Employment of Land-based Overseas Workers is not applicable in
this case. The breach of contract happened on February 1992 and the law applicable
at that time was the 1991 POEA Rules and Regulations Governing Overseas
Employment. The penalty for non-deployment as discussed is suspension or
cancellation of license or fine.
Now, the question to be dealt with is how will the seafarer be compensated
by reason of the unreasonable non-deployment of the petitioners?
The POEA Rules Governing the Recruitment and Employment of
Seafarers do not provide for the award of damages to be given in favor of the
employees. The claim provided by the same law refers to a valid contractual claim for
compensation or benefits arising from employer-employee relationship or for any
personal injury, illness or death at levels provided for within the terms and conditions
of employment of seafarers. However, the absence of the POEA Rules with regard to
the payment of damages to the affected seafarer does not mean that the seafarer is
precluded from claiming the same. The sanctions provided for non-deployment do not
end with the suspension or cancellation of license or fine and the return of all
documents at no cost to the worker. As earlier discussed, they do not forfend a
seafarer from instituting an action for damages against the employer or agency which
37
has failed to deploy him.

Following the law, the claim is still cognizable by the labor arbiters of the
NLRC under the second phrase of the provision.
Applying the rules on actual damages, Article 2199 of the New Civil Code
provides that one is entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. Respondent is thus liable to pay
petitioner actual damages in the form of the loss of nine (9) months worth of salary as
38
provided in the contract. This is but proper because of the non-deployment of
respondent without just cause.

WHEREFORE, the appeal is DENIED. The 31 January 2007 Decision of the

Court of Appeals in CA-G.R. SP. No. 91632 is hereby AFFIRMED. The Petitioners
are hereby ordered to pay Sulpecio Medequillo, Jr., the award of actual damages
equivalent to his salary for nine (9) months as provided by the Second Employment
Contract.
SO ORDERED.

10

PERT/CPM MANPOWER EXPONENT CO., INC., Petitioner, versus ARMANDO A.

VINUYA, LOUIE M. ORDOVEZ, ARSENIO S. LUMANTA,. JR., ROBELITO S.
ANIPAN, VIRGILIO R. ALCANTARA, MARINO M. ERA, SANDY O. ENJAMBRE
and NOEL T. LADEA, Respondents.
G.R. No. 197528 | 2012-09-05
SECOND DIVISION
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the decision2
dated May 9, 2011 and the resolution3dated June 23, 2011 of the Court of Appeals
(CA) in CA-G.R. SP No. 114353.
The Antecedents
On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez,
Arsenio S. Lumanta, Jr., Robelito S. Anipan, Virgilio R. Alcantara, Marino M. Era,
Sandy O. Enjambre and Noel T. Ladea (respondents) filed a complaint for illegal
dismissal against the petitioner Pert/CPM Manpower Exponent Co., Inc. (agency),
and its President Romeo P. Nacino.
The respondents alleged that the agency deployed them between March 29,
2007 and May 12, 2007 to work as aluminum fabricator/installer for the agency's
principal, Modern Metal Solution LLC/MMS Modern Metal Solution LLC (Modern
Metal) in Dubai, United Arab Emirates.
The respondents' employment contracts,4 which were approved by
the Philippine Overseas Employment Administration (POEA), provided for a two-year
employment, nine hours a day, salary of 1,350 AED with overtime pay, food
allowance, free and suitable housing (four to a room), free transportation, free
laundry, and free medical and dental services. They each paid a P15,000.00
processing fee.5
On April 2, 2007, Modern Metal gave the respondents, except Era, appointment
letters6 with terms different from those in the employment contracts which they
signed at the agency's office in the Philippines. Under the letters of appointment, their
employment was increased to three years at 1,000 to 1,200 AED and food allowance
of 200 AED.

The respondents claimed that they were shocked to find out what their working
and living conditions were in Dubai. They were required to work from 6:30 a.m. to
6:30 p.m., with a break of only one hour to one and a half hours. When they rendered
overtime work, they were most of the time either underpaid or not paid at all. Their
housing accommodations were cramped and were shared with 27 other occupants.
The lodging house was in Sharjah, which was far from their jobsite in Dubai, leaving
them only three to four hours of sleep a day because of the long hours of travel to and
from their place of work; there was no potable water and the air was polluted.
When the respondents received their first salaries (at the rates provided in their
appointment letters and with deductions for placement fees) and because of their
difficult living and working conditions, they called up the agency and complained
about their predicament. The agency assured them that their concerns would be
promptly addressed, but nothing happened.
On May 5, 2007, Modern Metal required the respondents to sign
new employment contracts,7 except for Era who was made to sign later. The
contracts reflected the terms of their appointment letters. Burdened by all the
expenses and financial obligations they incurred for their deployment, they were left
with no choice but to sign the contracts. They raised the matter with the agency,
which again took no action.
On August 5, 2007, despondent over their unbearable living and working
conditions and by the agency's inaction, the respondents expressed to Modern Metal
their desire to resign. Out of fear, as they put it, that Modern Metal would not give
them their salaries and release papers, the respondents, except Era, cited
personal/family problems for their resignation.8 Era mentioned the real reason "because I dont (sic) want the company policy"9 - for his resignation.
It took the agency several weeks to repatriate the respondents to the
Philippines. They all returned to Manila in September 2007. Except for Ordovez and
Enjambre, all the respondents shouldered their own airfare.
For its part, the agency countered that the respondents were not illegally
dismissed; they voluntarily resigned from their employment to seek a better paying
job. It claimed that the respondents, while still working for Modern Metal, applied with
another company which offered them a higher pay. Unfortunately, their supposed
employment failed to materialize and they had to go home because they had already
resigned from Modern Metal.
The agency further alleged that the respondents even voluntarily signed
affidavits of quitclaim and release after they resigned. It thus argued that their claim
for benefits, under Section 10 of Republic Act No. (R.A.) 8042, damages and
attorney's fees is unfounded.

11

The Compulsory Arbitration Rulings

On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a decision10

dismissing the complaint, finding that the respondents voluntarily resigned from their
jobs. He also found that four of them - Alcantara, Era, Anipan and Lumanta - even
executed a compromise agreement (with quitclaim and release) before the POEA. He
considered the POEA recourse a case of forum shopping.
The respondents appealed to the National Labor Relations Commission
(NLRC). They argued that the labor arbiter committed serious errors in (1) admitting
in evidence the quitclaims and releases they executed in Dubai, which were mere
photocopies of the originals and which failed to explain the circumstances behind
their execution; (2) failing to consider that the compromise agreements they signed
before the POEA covered only the refund of their airfare and not all their money
claims; and (3) ruling that they violated the rule on non-forum shopping.
On May 12, 2009, the NLRC granted the appeal.11 It ruled that the
respondents had been illegally dismissed. It anchored its ruling on the new
employment contracts they were made to sign in Dubai. It stressed that it is illegal for
an employer to require its employees to execute new employment papers, especially
those which provide benefits that are inferior to the POEA-approved contracts.
The NLRC rejected the quitclaim and release executed by the respondents in
Dubai. It believed that the respondents executed the quitclaim documents under
duress as they were afraid that they would not be allowed to return to the Philippines
if they did not sign the documents. Further, the labor tribunal disagreed with the labor
arbiter's opinion that the compromise agreement they executed before the POEA had
effectively foreclosed the illegal dismissal complaint before the NLRC and that the
respondents had been guilty of forum shopping. It pointed out that the POEA case
involved pre-deployment issues; whereas, the complaint before the NLRC is one for
illegal dismissal and money claims arising from employment.
Consequently, the NLRC ordered the agency, Nacino and Modern Metal to
pay, jointly and severally, the respondents, as follows:
WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and
SET ASIDE, a new Decision is hereby issued ordering the respondents PERT/CPM
MANPOWER EXPONENTS CO., INC., ROMEO NACINO, and MODERN METAL
SOLUTIONS, INC. to jointly and severally, pay the complainants the following:

TOTAL

6,850 AED US$3,200 64,800 AED P400,000.00

or their peso equivalent at the time of actual payment plus attorney[']s fees equivalent
to 10% of the judgment award.12
The agency moved for reconsideration, contending that the appeal was never
perfected and that the NLRC gravely abused its discretion in reversing the labor
arbiter's decision.
The respondents, on the other hand, moved for partial reconsideration,
maintaining that their salaries should have covered the unexpired portion of their
employment contracts, pursuant to the Court's ruling in Serrano v. Gallant Maritime
Services, Inc.13
The NLRC denied the agency's motion for reconsideration, but granted the
respondents' motion.14 It sustained the respondents' argument that the award
needed to be adjusted, particularly in relation to the payment of their salaries,
consistent with the Court's ruling in Serrano. The ruling declared unconstitutional the
clause, "or for three (3) months for every year of the unexpired term, whichever is
less," in Section 10, paragraph 5, of R.A. 8042, limiting the entitlement of illegally

12

dismissed overseas Filipino workers to their salaries for the unexpired term of their
contract or three months, whichever is less. Accordingly, it modified its earlier
decision and adjusted the respondents' salary entitlement based on the following
matrix:

The appellate court likewise refused to give credit to the compromise

agreements that the respondents executed before the POEA. It agreed with the
NLRC's conclusion that the agreements pertain to the respondents' charge of
recruitment violations against the agency distinct from their illegal dismissal
complaint, thus negating forum shopping by the respondents.

Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon
being reminded by the respondents), by adjusting the respondents' salary award on
the basis of the unexpired portion of their contracts, as enunciated in the Serrano
case.
The agency moved for, but failed to secure, a reconsideration of the CA
decision.18
The Petition
The agency is now before the Court seeking a reversal of the CA dispositions,
contending that the CA erred in:
1. affirming the NLRC's finding that the respondents were illegally dismissed;
2. holding that the compromise agreements before the POEA pertain only to the
respondents' charge of recruitment violations against the agency; and
Again, the agency moved for reconsideration, reiterating its earlier arguments
and, additionally, questioning the application of the Serranoruling in the case because
it was not yet final and executory. The NLRC denied the motion, prompting the
agency to seek recourse from the CA through a petition for certiorari.
The CA Decision
The CA dismissed the petition for lack of merit.16 It upheld the NLRC ruling
that the respondents were illegally dismissed. It found no grave abuse of discretion in
the NLRC's rejection of the respondents' resignation letters, and the accompanying
quitclaim and release affidavits, as proof of their voluntary termination of employment.
The CA stressed that the filing of a complaint for illegal dismissal is inconsistent
with resignation. Moreover, it found nothing in the records to substantiate the
agency's contention that the respondents' resignation was of their own accord; on the
contrary, it considered the resignation letters "dubious for having been lopsidedlyworded to ensure that the petitioners (employer[s]) are free from any liability."17

3. affirming the NLRC's award to the respondents of their salaries for the unexpired
portion of their employment contracts, pursuant to the Serrano ruling.
The agency insists that it is not liable for illegal dismissal, actual or
constructive. It submits that as correctly found by the labor arbiter, the respondents
voluntarily resigned from their jobs, and even executed affidavits of quitclaim and
release; the respondents stated family concerns for their resignation. The agency
posits that the letters were duly proven as they were written unconditionally by the
respondents. It, therefore, assails the conclusion that the respondents resigned under
duress or that the resignation letters were dubious.
The agency raises the same argument with respect to the compromise
agreements, with quitclaim and release, it entered into with Vinuya, Era, Ladea,
Enjambre, Ordovez, Alcantara, Anipan and Lumanta before the POEA, although it
submitted evidence only for six of them. Anipan, Lumanta, Vinuya and Ladea signing
one document;19 Era20 and Alcantara21signing a document each. It points out that
the agreement was prepared with the assistance of POEA Conciliator Judy Santillan,

13

and was duly and freely signed by the respondents; moreover, the agreement is not
conditional as it pertains to all issues involved in the dispute between the parties.
On the third issue, the agency posits that the Serrano ruling has no
application in the present case for three reasons. First, the respondents were not
illegally dismissed and, therefore, were not entitled to their money claims. Second,
the respondents filed the complaint in 2007, while the Serrano ruling came out on
March 24, 2009. The ruling cannot be given retroactive application. Third, R.A. 10022,
which was enacted on March 8, 2010 and which amended R.A. 8042, restored the
subject clause in Section 10 of R.A. 8042, declared unconstitutional by the Court.
The Respondents' Position
In their Comment (to the Petition) dated September 28, 2011,22 the
respondents ask the Court to deny the petition for lack of merit. They dispute the
agency's insistence that they resigned voluntarily. They stand firm on their submission
that because of their unbearable living and working conditions in Dubai, they were left
with no choice but to resign. Also, the agency never refuted their detailed narration of
the reasons for giving up their employment.
The respondents maintain that the quitclaim and release affidavits,23which the
agency presented, betray its desperate attempt to escape its liability to them. They
point out that, as found by the NLRC, the affidavits are ready-made documents; for
instance, in Lumanta's24 and Era's25affidavits, they mentioned a certain G & A
International Manpower as the agency which recruited them - a fact totally
inapplicable to all the respondents. They contend that they had no choice but to sign
the documents; otherwise, their release papers and remaining salaries would not be
given to them, a submission which the agency never refuted.
On the agency's second line of defense, the compromise agreement (with
quitclaim and release) between the respondents and the agency before the POEA,
the respondents argue that the agreements pertain only to their charge of recruitment
violations against the agency. They add that based on the agreements, read and
considered entirely, the agency was discharged only with respect to the recruitment
and pre-deployment issues such as excessive placement fees, non-issuance of
receipts and placement misrepresentation, but not with respect to post-deployment
issues such as illegal dismissal, breach of contract, underpayment of salaries and
underpayment and nonpayment of overtime pay. The respondents stress that the
agency failed to controvert their contention that the agreements came about only to
settle their claim for refund of their airfare which they paid for when they were
repatriated.
Lastly, the respondents maintain that since they were illegally dismissed, the CA
was correct in upholding the NLRC's award of their salaries for the unexpired portion

of their employment contracts, as enunciated in Serrano. They point out that the
Serrano ruling is curative and remedial in nature and, as such, should be given
retroactive application as the Court declared in Yap v. Thenamaris Ship's
Management.26Further, the respondents take exception to the agency's contention
that the Serrano ruling cannot, in any event, be applied in the present case in view of
the enactment of R.A. 10022 on March 8, 2010, amending Section 10 of R.A. 8042.
The amendment restored the subject clause in paragraph 5, Section 10 of R.A. 8042
which was struck down as unconstitutional in Serrano.
The respondents maintain that the agency cannot raise the issue for the first
time before this Court when it could have raised it before the CA with its petition for
certiorari which it filed on June 8, 2010;27 otherwise,their right to due process will be
violated. The agency, on the other hand, would later claim that it is not barred by
estoppel with respect to its reliance on R.A. 10022 as it raised it before the CA in CAG.R. SP No. 114353.28They further argue that RA 10022 cannot be applied in their
case, as the law is an amendatory statute which is, as a rule, prospective in
application, unless the contrary is provided.29 To put the issue to rest, the
respondents ask the Court to also declare unconstitutional Section 7 of R.A. 10022.
Finally, the respondents submit that the petition should be dismissed outright
for raising only questions of fact, rather than of law.
The Court's Ruling
The procedural question
We deem it proper to examine the facts of the case on account of the
divergence in the factual conclusions of the labor arbiter on the one hand, and, of the
NLRC and the CA, on the other.30 The arbiter found no illegal dismissal in the
respondents' loss of employment in Dubai because they voluntarily resigned;
whereas, the NLRC and the CA adjudged them to have been illegally dismissed
because they were virtually forced to resign.
The merits of the case
We find no merit in the petition. The CA committed no reversible error
and neither did it commit grave abuse of discretion in affirming the NLRC's
illegal dismissal ruling.
The agency and its principal, Modern Metal, committed flagrant violations of the
law on overseas employment, as well as basic norms of decency and fair play in an
employment relationship, pushing the respondents to look for a better employment
and, ultimately, to resign from their jobs.

14

First. The agency and Modern Metal are guilty of contract substitution.
The respondents entered into a POEA-approved two-year employment
contract,31with Modern Metal providing among others, as earlier discussed, for
a monthly salary of 1350 AED. On April 2, 2007, Modern Metal issued to them
appointment letters32 whereby the respondents were hired for a longer threeyear period and a reduced salary, from 1,100 AED to 1,200 AED, among other
provisions. Then, on May 5, 2007, they were required to sign new employment
contracts33 reflecting the same terms contained in their appointment letters,
except that this time, they were hired as "ordinary laborer," no longer aluminum
fabricator/installer. The respondents complained with the agency about the
contract substitution, but the agency refused or failed to act on the matter.
The fact that the respondents' contracts were altered or substituted at the
workplace had never been denied by the agency. On the contrary, it admitted that the
contract substitution did happen when it argued, "[a]s to their claim for
[underpayment] of salary, their original contract mentioned 1350 AED monthly salary,
which includes allowance while in their Appointment Letters, they were supposed to
receive 1,300 AED. While there was [a] difference of 50 AED monthly, the same
could no longer be claimed by virtue of their Affidavits of Quitclaims and
Desistance[.]"34
Clearly, the agency and Modern Metal committed a prohibited practice and
engaged in illegal recruitment under the law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for any individual, entity,
licensee, or holder of authority:
xxxx
(i) To substitute or alter employment contracts approved andverified by the
Department of Labor from the time of actual signing thereof by the parties up to and
including the periods of expiration of the same without the approval of the Secretary
of Labor[.]
Further, Article 38 of the Labor Code, as amended by R.A. 8042,35defined "illegal
recruitment" to include the following act:
(i) To substitute or alter to the prejudice of the worker,employment contracts
approved and verified by the Department of Labor and Employment from the time of
actual signing thereof by the parties up to and including the period of the expiration of
the same without the approval of the Department of Labor and Employment[.]
Second. The agency and Modern Metal committed breach of contract.
Aggravating the contract substitution imposed upon them by their employer,

the respondents were made to suffer substandard (shocking, as they put it)
working and living arrangements. Both the original contracts the respondents
signed in the Philippines and the appointment letters issued to them by Modern
Metal in Dubai provided for free housing and transportation to and from the
jobsite. The original contract mentioned free and suitable housing.36 Although
no description of the housing was made in the letters of appointment except:
"Accommodation: Provided by the company," it is but reasonable to think that
the housing or accommodation would be "suitable."
As earlier pointed out, the respondents were made to work from 6:30 a.m. to
6:30 p.m., with a meal break of one to one and a half hours, and their overtime work
was mostly not paid or underpaid. Their living quarters were cramped as they shared
them with 27 other workers. The lodging house was in Sharjah, far from the jobsite in
Dubai, leaving them only three to four hours of sleep every workday because of the
long hours of travel to and from their place of work, not to mention that there was no
potable water in the lodging house which was located in an area where the air was
polluted. The respondents complained with the agency about the hardships that they
were suffering, but the agency failed to act on their reports. Significantly, the agency
failed to refute their claim, anchored on the ordeal that they went through while in
Modern Metal's employ.
Third. With their original contracts substituted and their oppressive working and
living conditions unmitigated or unresolved, the respondents' decision to resign is not
surprising. They were compelled by the dismal state of their employment to give up
their jobs; effectively, they were constructively dismissed. A constructive dismissal or
discharge is "a quitting because continued employment is rendered impossible,
unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in
pay."37
Without doubt, the respondents' continued employment with Modern Metal had
become unreasonable. A reasonable mind would not approve of a substituted
contract that pays a diminished salary - from 1350 AED a month in the original
contract to 1,000 AED to 1,200 AED in the appointment letters, a difference of 150
AED to 250 AED (not just 50 AED as the agency claimed) or an extended
employment (from 2 to 3 years) at such inferior terms, or a "free and suitable" housing
which is hours away from the job site, cramped and crowded, without potable water
and exposed to air pollution.
We thus cannot accept the agency's insistence that the respondents voluntarily
resigned since they personally prepared their resignationletters38in their own
handwriting, citing family problems as their common ground for resigning. As the CA
did, we find the resignation letters "dubious,"39not only for having been lopsidedly
worded to ensure that the employer is rendered free from any liability, but also for the

15

odd coincidence that all the respondents had, at the same time, been confronted with
urgent family problems so that they had to give up their employment and go home.
The truth, as the respondents maintain, is that they cited family problems as reason
out of fear that Modern Metal would not give them their salaries and their release
papers. Only Era was bold enough to say the real reason for his resignation - to
protest company policy.
We likewise find the affidavits40 of quitclaim and release which the
respondents executed suspect. Obviously, the affidavits were prepared as a follow
through of the respondents' supposed voluntary resignation. Unlike the resignation
letters, the respondents had no hand in the preparation of the affidavits. They must
have been prepared by a representative of Modern Metal as they appear to come
from a standard form and were apparently introduced for only one purpose - to lend
credence to the resignation letters. In Modern Metal's haste, however, to secure the
respondents' affidavits, they did not check on the model they used. Thus, Lumanta's
affidavit41 mentioned a G & A International Manpower as his recruiting agency, an
entity totally unknown to the respondents; the same thing is true for Era's affidavit.42
This confusion is an indication of the employer's hurried attempt to avoid liability to
the respondents.

The respondents' position is well-founded. The NLRC itself had the same
impression, which we find in order and hereunder quote:
The acts of respondents of requiring the signing of new contracts upon reaching the
place of work and requiring employees to sign quitclaims before they are paid and
repatriated to the Philippines are all too familiar stories of despicable labor practices
which our employees are subjected to abroad. While it is true that quitclaims are
generally given weight,however, given the facts of the case, We are of the opinion
that the complainants-appellants executed the same under duress and fear that they
will not be allowed to return to the Philippines.43
Fourth. The compromise agreements (with quitclaim and
release)44between the respondents and the agency before the POEA did not
foreclose their employer-employee relationship claims before the NLRC. The
respondents, except Ordovez and Enjambre, aver in this respect that they all
paid for their own airfare when they returned home45 and that the compromise
agreements settled only their claim for refund of their airfare, but not their other
claims.46 Again, this submission has not been refuted or denied by the agency.
On the surface, the compromise agreements appear to confirm the agency's
position, yet a closer examination of the documents would reveal their true nature.
Copy of the compromise agreement is a standard POEA document, prepared in

advance and readily made available to parties who are involved in disputes before the
agency, such as what the respondents filed with the POEA ahead (filed in 2007) of
the illegal dismissal complaint before the NLRC (filed on March 5, 2008).
Under the heading "Post-Deployment," the agency agreed to pay Era47 and
Alcantara48 P12,000.00 each, purportedly in satisfaction of the respondents' claims
arising from overseas employment, consisting of unpaid salaries, salary differentials
and other benefits, including money claims with the NLRC. The last document was
signed by (1) Anipan, (2) Lumanta, (3) Ladea, (4) Vinuya, (5) Jonathan Nangolinola,
and (6) Zosimo Gatchalian (the last four signing on the left hand side of the
document; the last two were not among those who filed the illegal dismissal
complaint).49The agency agreed to pay them a total of P72,000.00. Although there
was no breakdown of the entitlement for each of the six, but guided by the
compromise agreement signed by Era and Alcantara, we believe that the agency paid
them P12,000.00 each, just like Era and Alcantara.
The uniform insubstantial amount for each of the signatories to the agreement
lends credence to their contention that the settlement pertained only to their claim for
refund of the airfare which they shouldered when they returned to the Philippines. The
compromise agreement, apparently, was intended by the agency as a settlement with
the respondents and others with similar claims, which explains the inclusion of the
two (Nangolinola and Gatchalian) who were not involved in the case with the NLRC.
Under the circumstances, we cannot see how the compromise agreements can be
considered to have fully settled the respondents' claims before the NLRC - illegal
dismissal and monetary benefits arising from employment. We thus find no reversible
error nor grave abuse of discretion in the rejection by the NLRC and the CA of said
agreements.
Fifth. The agency's objection to the application of the Serrano ruling in the
present case is of no moment. Its argument that the ruling cannot be given retroactive
effect, because it is curative and remedial, is untenable. It points out, in this respect,
that the respondents filed the complaint in 2007, while the Serrano ruling was handed
down in March 2009. The issue, as the respondents correctly argue, has been
resolved in Yap v. Thenamaris Ship's Management,50where the Court sustained the
retroactive application of the Serrano ruling which declared unconstitutional the
subject clause in Section 10, paragraph 5 of R.A. 8042, limiting to three months the
payment of salaries to illegally dismissed Overseas Filipino Workers.
Undaunted, the agency posits that in any event, the Serrano ruling has been
nullified by R.A. No. 10022, entitled "An Act Amending Republic Act No. 8042,
Otherwise Known as the Migrant Workers and Overseas Filipinos Act of 1995, As
Amended, Further Improving the Standard of Protection and Promotion of the Welfare
of Migrant Workers, Their Families and Overseas Filipinos in Distress, and For Other

16

Purposes."51It argues that R.A. 10022, which lapsed into law (without the Signature
of the President) on March 8, 2010, restored the subject clause in the 5thparagraph,
Section 10 of R.A. 8042. The amendment, contained in Section 7 of R.A. 10022,
reads as follows:
In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, or any unauthorized deductions from the migrant
worker's salary, the worker shall be entitled to the full reimbursement "of" his
placement fee and the deductions made 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.52(emphasis
ours)
This argument fails to persuade us. Laws shall have no retroactive effect,
unless the contrary is provided.53 By its very nature, the amendment introduced by
R.A. 10022 - restoring a provision of R.A. 8042 declared unconstitutional - cannot be
given retroactive effect, not only because there is no express declaration of
retroactivity in the law, but because retroactive application will result in an impairment
of a right that had accrued to the respondents by virtue of the Serrano ruling entitlement to their salaries for the unexpired portion of their employment contracts.

All statutes are to be construed as having only a prospective application, unless

the purpose and intention of the legislature to give them a retrospective effect are
expressly declared or are necessarily implied from the language used. 54 We thus
see no reason to nullity the application of the Serrano ruling in the present case.
Whether or not R.A. 1 0022 is constitutional is not for us to rule upon in the present
case as this is?? an issue that is not squarely before us. In other words, this is an
issue that awaits its proper day in court; in the meanwhile, we make no
pronouncement on it.
WHEREFORE, premises considered, the petition is DENIED. The assailed Decision
dated May 9, 2011 and the Resolution dated June 23, 2011 of the Court of Appeals in
CA-G.R. SP No. 114353 are AFFIRMED. Let this Decision be brought to the attention
of the Honorable Secretary of Labor and Employment and the Administrator of the
Philippine Overseas Employment Administration as a black mark in the deployment
record of petitioner Pert/CPM Manpower Exponent Co., Inc., and as a record that
should be considered in?? any similar future violations.
Costs against the petitioner.
SO ORDERED.

17

A.

Recruitment of Local and Migrant workers

1.

departures and such other matters or information as may be required by the

Secretary of Labor and Employment;

Illegal Recruitment (Sec 5, RA 10022)

illegal recruitment shall mean any act of canvassing, enlisting, contracting,

transporting, utilizing, hiring, or procuring workers and includes referring, contract
services, promising or advertising for employment abroad, whether for profit or not,
when undertaken by non-licensee or non-holder of authority contemplated under
Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, That any such non-licensee or non-holder
who, in any manner, offers or promises for a fee employment abroad to two or more
persons shall be deemed so engaged. It shall likewise include the following acts,
whether committed by any person, whether a non-licensee, non-holder, licensee or
holder of authority:
"(a) To charge or accept directly or indirectly any amount greater than that
specified in the schedule of allowable fees prescribed by the Secretary of
Labor and Employment, or to make a worker pay or acknowledge any
amount greater than that actually received by him as a loan or advance;
"(b) To furnish or publish any false notice or information or document in
relation to recruitment or employment;
"(c) To give any false notice, testimony, information or document or commit
any act of misrepresentation for the purpose of securing a license or
authority under the Labor Code, or for the purpose of documenting hired
workers with the POEA, which include the act of reprocessing workers
through a job order that pertains to nonexistent work, work different from the
actual overseas work, or work with a different employer whether registered
or not with the POEA;
"(d) To include or attempt to induce a worker already employed to quit his
employment in order to offer him another unless the transfer is designed to
liberate a worker from oppressive terms and conditions of employment;
"(e) To influence or attempt to influence any person or entity not to employ
any worker who has not applied for employment through his agency or who
has formed, joined or supported, or has contacted or is supported by any
union or workers' organization;
"(f) To engage in the recruitment or placement of workers in jobs harmful to
public health or morality or to the dignity of the Republic of the Philippines;
"(h) To fail to submit reports on the status of employment, placement
vacancies, remittance of foreign exchange earnings, separation from jobs,

"(i) To substitute or alter to the prejudice of the worker, employment

contracts approved and verified by the Department of Labor and
Employment from the time of actual signing thereof by the parties up to and
including the period of the expiration of the same without the approval of the
Department of Labor and Employment;
"(j) For an officer or agent of a recruitment or placement agency to become
an officer or member of the Board of any corporation engaged in travel
agency or to be engaged directly or indirectly in the management of travel
agency;
"(k) To withhold or deny travel documents from applicant workers before
departure for monetary or financial considerations, or for any other reasons,
other than those authorized under the Labor Code and its implementing
rules and regulations;
"(l) Failure to actually deploy a contracted worker without valid reason as
determined by the Department of Labor and Employment;
"(m) Failure to reimburse expenses incurred by the worker in connection with
his documentation and processing for purposes of deployment, in cases
where the deployment does not actually take place without the worker's fault.
Illegal recruitment when committed by a syndicate or in large scale shall be
considered an offense involving economic sabotage; and
"(n) To allow a non-Filipino citizen to head or manage a licensed
recruitment/manning agency.
"Illegal recruitment is deemed committed by a syndicate if carried out by a group of
three (3) or more persons conspiring or confederating with one another. It is deemed
committed in large scale if committed against three (3) or more persons individually or
as a group.
"In addition to the acts enumerated above, it shall also be unlawful for any person or
entity to commit the following prohibited acts:
"(1) Grant a loan to an overseas Filipino worker with interest exceeding eight
percent (8%) per annum, which will be used for payment of legal and
allowable placement fees and make the migrant worker issue, either
personally or through a guarantor or accommodation party, postdated
checks in relation to the said loan;

18

"(2) Impose a compulsory and exclusive arrangement whereby an overseas

Filipino worker is required to avail of a loan only from specifically designated
institutions, entities or persons;
"(3) Refuse to condone or renegotiate a loan incurred by an overseas
Filipino worker after the latter's employment contract has been prematurely
terminated through no fault of his or her own;
"(4) Impose a compulsory and exclusive arrangement whereby an overseas
Filipino worker is required to undergo health examinations only from
specifically designated medical clinics, institutions, entities or persons,
except in the case of a seafarer whose medical examination cost is
shouldered by the principal/shipowner;
"(5) Impose a compulsory and exclusive arrangement whereby an overseas
Filipino worker is required to undergo training, seminar, instruction or
schooling of any kind only from specifically designated institutions, entities or
persons, except fpr recommendatory trainings mandated by
principals/shipowners where the latter shoulder the cost of such trainings;

entitled to receive additional allowances as may be determined by the POEA

Administrator.
"The filing of an offense punishable under this Act shall be without prejudice to the
filing of cases punishable under other existing laws, rules or regulations."1avvphi1
a)

License v authority

b)

Elements of illegal recruitment

c)

Simple illegal recruitment

d)

Illegal recruitment in large scale

e)

Illegal recruitment as economic sabotage

f)

Illegal recruitment v estafa

g)

Liabilities

"(6) For a suspended recruitment/manning agency to engage in any kind of

recruitment activity including the processing of pending workers'
applications; and
"(7) For a recruitment/manning agency or a foreign principal/employer to
pass on the overseas Filipino worker or deduct from his or her salary the
payment of the cost of insurance fees, premium or other insurance related
charges, as provided under the compulsory worker's insurance coverage.
"The persons criminally liable for the above offenses are the principals, accomplices
and accessories. In case of juridical persons, the officers having ownership, control,
management or direction of their business who are responsible for the commission of
the offense and the responsible employees/agents thereof shall be liable.
"In the filing of cases for illegal recruitment or any of the prohibited acts under this
section, the Secretary of Labor and Employment, the POEA Administrator or their
duly authorized representatives, or any aggrieved person may initiate the
corresponding criminal action with the appropriate office. For this purpose, the
affidavits and testimonies of operatives or personnel from the Department of Labor
and Employment, POEA and other law enforcement agencies who witnessed the acts
constituting the offense shall be sufficient to prosecute the accused.
"In the prosecution of offenses punishable under this section, the public prosecutors
of the Department of Justice shall collaborate with the anti-illegal recruitment branch
of the POEA and, in certain cases, allow the POEA lawyers to take the lead in the
prosecution. The POEA lawyers who act as prosecutors in such cases shall be

1)

Local Recruitment agency

2)

Foreign employer

Theory of imputed knowledge

19

SUNACE INTERNATIONAL
MANAGEMENT SERVICES, INC.
Petitioner,

G.R. No. 161757

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES, and
TINGA, JJ.

- versus -

NATIONAL
LABOR
RELATIONS
COMMISSION,
Second
Division;HON.
ERNESTO S. DINOPOL, in his capacity as
Labor Arbiter, NLRC; NCR, Arbitration
Branch, Quezon City and DIVINA A.
MONTEHERMOZO,
Respondents.

[4]

On April 6, 2000, Divina filed her Position Paper claiming that under her
original one-year contract and the 2-year extended contract which was with the
knowledge and consent of Sunace, the following amounts representing income tax
and savings were deducted:

Year

Deduction for
Income Tax

Deduction for Savings

1997
1998
1999

NT10,450.00
NT9,500.00
NT13,300.00

NT23,100.00
NT36,000.00
[5]
NT36,000.00;

Promulgated:
January 25, 2006

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

and while the amounts deducted in 1997 were refunded to her, those deducted in
1998 and 1999 were not.
On even date, Sunace, by its Proprietor/General
[6]
Manager Maria Luisa Olarte, filed its Verified Answer and Position Paper, claiming
as follows, quoted verbatim:

DECISION

CARPIO MORALES, J.:

Petitioner, Sunace International Management Services (Sunace), a

corporation duly organized and existing under the laws of the Philippines, deployed to
Taiwan Divina A. Montehermozo (Divina) as a domestic helper under a 12-month
[1]
contract effectiveFebruary 1, 1997. The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued
working for her Taiwanese employer, Hang Rui Xiong, for two more years, after which
she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a
[2]
complaint before the National Labor Relations Commission (NLRC) against Sunace,
one Adelaide Perez, the Taiwanese broker, and the employer-foreign principal
alleging that she was jailed for three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate
[3]
Regina T. Gavin issued Summons to the Manager of Sunace, furnishing it with a
copy of Divinas complaint and directing it to appear for mandatory conference on
February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been
concluded, however.

COMPLAINANT IS NOT ENTITLED

FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3. Complainant could not anymore claim nor entitled for the
refund of her 24 months savings as she already took back her
saving already last year and the employer did not deduct any
money from her salary, in accordance with a Fascimile
Message from the respondent SUNACEs employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith
attached as ANNEX 2 hereof;
COMPLAINANT IS NOT ENTITLED
TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEYS FEES
4. There is no basis for the grant of tax refund to the
complainant as the she finished her one year contract and hence,
was not illegally dismissed by her employer. She could only lay
claim over the tax refund or much more be awarded of damages
such as attorneys fees as said reliefs are available only when the
dismissal of a migrant worker is without just valid or lawful cause as
defined by law or contract.
The rationales behind the award of tax refund and payment
of attorneys fees is not to enrich the complainant but to
compensate him for actual injury suffered. Complainant did not

20

suffer injury, hence, does not deserve to be compensated for

whatever kind of damages.
Hence, the complainant has NO cause of action against
respondent SUNACE for monetary claims, considering that she has
been totally paid of all the monetary benefits due her under her
Employment Contract to her full satisfaction.
6.
Furthermore, the tax deducted from her salary is in
compliance with the Taiwanese law, which respondent SUNACE
has no control and complainant has to obey and this Honorable
Office has no authority/jurisdiction to intervene because the power
to tax is a sovereign power which the Taiwanese Government is
supreme in its own territory. The sovereign power of taxation of a
state is recognized under international law and among sovereign
states.

7. That respondent SUNACE respectfully reserves the right

to file supplemental Verified Answer and/or Position Paper to
substantiate its prayer for the dismissal of the above case against
the herein respondent. AND BY WAY OF x x x x (Emphasis and underscoring supplied)
Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an . .
[7]
. ANSWER TO COMPLAINANTS POSITION PAPER alleging that Divinas 2-year extension of
her contract was without its knowledge and consent, hence, it had no liability
attaching to any claim arising therefrom, and Divina in fact executed a
Waiver/Quitclaim and Release of Responsibility and an Affidavit of Desistance, copy
of each document was annexed to said . . . ANSWER TO COMPLAINANTS POSITION
PAPER.
To Sunaces . . . ANSWER TO COMPLAINANTS POSITION PAPER, Divina filed a 2[8]
page reply, without, however, refuting Sunaces disclaimer of knowledge of the
extension of her contract and without saying anything about the Release, Waiver and
Quitclaim and Affidavit of Desistance.

communicating with each other and yet the matter of the

contracts extension and Sunaces alleged non-consent
thereto has not been categorically established.
What Sunace should have done was to write to
POEA about the extension and its objection thereto, copy
furnished the complainant herself, her foreign employer,
Hang Rui Xiong and the Taiwanese broker, Edmund
Wang.
And because it did not, it is presumed to have
consented to the extension and should be liable for
[10]
anything that resulted thereform (sic).
(Underscoring
supplied)
The Labor Arbiter rejected too Sunaces argument that it is not liable on
account of Divinas execution of a Waiver and Quitclaim and an Affidavit of
Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole
or any part of the dispute, the same shall be reduced to writing and
signed by the parties and their respective counsel (sic), if any,
before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter
after being satisfied that it was voluntarily entered into by the parties
and after having explained to them the terms and consequences
thereof.
A compromise agreement entered into by the parties not in
the presence of the Labor Arbiter before whom the case is pending
shall be approved by him, if after confronting the parties, particularly
the complainants, he is satisfied that they understand the terms and
conditions of the settlement and that it was entered into freely
voluntarily (sic) by them and the agreement is not contrary to law,
morals, and public policy.
And because no consideration is indicated in the
documents, we strike them down as contrary to law, morals, and
[11]
public policy.

The Labor Arbiter, rejected Sunaces claim that the extension of Divinas
contract for two more years was without its knowledge and consent in this wise:
We reject Sunaces submission that it should not
be held responsible for the amount withheld because her
contract was extended for 2 more years without its
[9]
knowledge and consent because as Annex B shows,
Sunace and Edmund Wang have not stopped

He accordingly decided in favor of Divina, by decision of October 9, 2000,

dispositive portion of which reads:

[12]

the

Wherefore, judgment is hereby rendered ordering

respondents SUNACE INTERNATIONAL SERVICES and its owner

21

ADELAIDA PERGE, both in their personal capacities and as agent

of Hang Rui Xiong/Edmund Wang to jointly and severally pay
complainant DIVINA A. MONTEHERMOZO the sum of
NT91,950.00 in its peso equivalent at the date of payment, as
refund for the amounts which she is hereby adjudged entitled to as
earlier discussed plus 10% thereof as attorneys fees since
compelled to litigate, complainant had to engage the services of
counsel.
SO
supplied)

ORDERED.

[13]

(Underescoring

On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,

the Labor Arbiters decision.

[14]

affirmed

[15]

Via petition for certiorari, Sunace elevated the case to the Court of
[16]
Appeals which dismissed it outright by Resolution of November 12, 2002, the full
text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave
abuse of discretion on the part of the public respondent amounting
to lack of jurisdiction when the NLRC affirmed the Labor Arbiters
finding that petitioner Sunace International Management Services
impliedly consented to the extension of the contract of private
respondent Divina A. Montehermozo.
It is undisputed
that petitioner was continually communicating with private
respondents foreign employer (sic). As agent of the foreign
principal, petitioner cannot profess ignorance of such extension as
obviously,the
act
of
the
principal
extending
complainant (sic) employment contract necessarily bound it.
Grave abuse of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE
[17]
COURSE and DISMISSED.
SO ORDERED.

22

3)

h)

2.

Solidary liability

3.

Remittance of foreign exchange earnings

4.

Prohibited activities

Pre-termination of contract of migrant worker

Direct hiring

B. Regulation and enforcement

1.

Suspension an cancellation of license (Art35)

2.

Regulatory and visitorial powers of the DOLE Sec

23

EASTERN MEDITERRANEAN MARITIME LTD. AND AGEMAR MANNING

AGENCY, INC., Petitioners, vs. ESTANISLAO SURIO, FREDDIE PALGUIRAN,
GRACIANO MORALES, HENRY CASTILLO, ARISTOTLE ARREOLA,
ALEXANDER YGOT, ANRIQUE BA TTUNG, GREGORIO ALDOVINO, NARCISO
FRIAS, VICTOR FLORES, SAMUEL MARCIAL, CARLITO PALGUIRAN, DUQUE
VINLUAN, .JESUS MENDEGORIN, NEIL FLORES, ROMEO MANGALIAG, JOE
GARFIN and SALESTINO SUSA, Respondents.
G.R. No. 154213 | 2012-08-22
FIRST DIVISION
DECISION
BERSAMIN, J.:
On appeal is the decision the Court of Appeals (CA) promulgated on December 21,
2001 affirming the resolution of the National Labor Relations Commission (NLRC)
declaring itself to be without appellate jurisdiction to review the decision of the
Philippine Overseas Employment Administration (POEA) involving petitioners'
complaint for disciplinary action against respondents.1
Respondents were former crewmembers of MT Seadance, a vessel owned by
petitioner Eastern Mediterranean Maritime Ltd. and manned and operated by
petitioner Agemar Manning Agency, Inc. While respondents were still on board the
vessel, they experienced delays in the payment of their wages and in the remittance
of allotments, and were not paid for extra work and extra overtime work. They
complained about the vessel's inadequate equipment, and about the failure of the
petitioners to heed their repeated requests for the improvement of their working
conditions. On December 19, 1993, when MT Seadance docked at the port of
Brofjorden, Sweden to discharge oil, representatives of the International Transport
Federation (ITF) boarded the vessel and found the wages of the respondents to be
below the prevailing rates. The ensuing negotiations between the ITF and the vessel
owner on the increase in respondents' wages resulted in the payment by the vessel
owner of wage differentials and the immediate repatriation of respondents to the
Philippines.

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 jurisdiction over such claims was previously exercised by the POEA under the
POEA Rules and Regulations of 1991 (1991 POEA Rules).
On May 23, 1996, the POEA dismissed the complaint for disciplinary action.
Petitioners received the order of dismissal on July 24, 1996.2
Relying on Section 1, Rule V, Book VII of the 1991 POEA Rules, petitioners filed a
partial appeal on August 2, 1996 in the NLRC, still maintaining that respondents
should be administratively sanctioned for their conduct while they were on board MT
Seadance.
On March 21, 1997, the NLRC dismissed petitioners' appeal for lack of jurisdiction,3
thus:
We dismiss the partial appeal.
The Commission has no jurisdiction to review cases decided by the POEA
Administrator involving disciplinary actions. Under the Migrant Workers and Overseas
Filipinos Act of 1995, the Labor Arbiter shall have jurisdiction over money claims
involving employer-employee relationship (sec. 10, R.A. 8042). Said law does not
provide that appeals from decisions arising from complaint for disciplinary action rest
in the Commission.
PREMISES CONSIDERED, instant appeal from the Order of May 23, 1996 is hereby
DISMISSED for lack of jurisdiction.
SO ORDERED.
Not satisfied, petitioners moved for reconsideration, but the NLRC denied their
motion. They received the denial on July 8, 1997.4

Subsequently, on December 23, 1993, the petitioners filed against the newlyrepatriated respondents a complaint for disciplinary action based on breach of
discipline and for the reimbursement of the wage increases in the Workers Assistance
and Adjudication Office of the POEA.

Petitioners then commenced in this Court a special civil action for certiorari and
mandamus. Citing St. Martin Funeral Homes v. National Labor Relations
Commission,5 however, the Court referred the petition to the CA on November 25,
1998.

During the pendency of the administrative complaint in the POEA, Republic Act No.
8042 (Migrant Workers and Overseas Filipinos Act of 1995) took effect on July 15,
1995. Section 10 of Republic Act No. 8042 vested original and exclusive jurisdiction
over all money claims arising out of employer-employee relationships involving
overseas Filipino workers in the Labor Arbiters, to wit:

Petitioners contended in their petition that:

Section 10. 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

THE NLRC GRAVELY ABUSED ITS DISCRETION AND/OR GRAVELY ERRED IN

DISMISSING PETITIONERS' APPEAL AND MOTION FOR RECONSIDERATION
WHEN IT REFUSED TO TAKE COGNIZANCE OF PETITIONERS' APPEAL
DESPITE BEING EMPOWERED TO DO SO UNDER THE LAW.6

24

On December 21, 2001, the CA dismissed the petition for certiorari and mandamus,
holding that the inclusion and deletion of overseas contract workers from the POEA
blacklist/watchlist were within the exclusive jurisdiction of the POEA to the exclusion
of the NLRC, and that the NLRC had no appellate jurisdiction to review the matter,
viz:
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995, provides that:
"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.

POEA to the exclusion of the public respondent. Nor has the latter appellate
jurisdiction to review the findings of the POEA involving such cases.
xxx
In fine, we find and so hold, that, no grave abuse of discretion can be imputed to the
public respondent when it issued the assailed Decision and Order, dated March 21,
1997 and June 13, 1997, respectively, dismissing petitioners' appeal from the
decision of the POEA.
WHEREFORE, finding the instant petition not impressed with merit, the same is
hereby DENIED DUE COURSE. Costs against petitioners.
SO ORDERED.7
Issue

xxxx
Petitioners still appeal, submitting to the Court the sole issue of:
Likewise, the Rules and Regulations implementing RA 8042 reiterate the jurisdiction
of POEA, thus:
"Section 28. Jurisdiction of the POEA. - The POEA shall exercise original and
exclusive jurisdiction to hear and decide:
a) All cases, which are administrative in character, involving or arising out of
violations of rules and regulations relating to licensing and registration of recruitment
and employment agencies or entities; and
b) Disciplinary action cases and other special cases, which are administrative in
character, involving employers, principals, contracting partners and Filipino migrant
workers."

WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL

CASES DECIDED BY THE POEA ON MATTERS PERTAINING TO DISCIPLINARY
ACTIONS AGAINST PRIVATE RESPONDENTS.
They contend that both the CA and the NLRC had no basis to rule that the NLRC had
no jurisdiction to entertain the appeal only because Republic Act No. 8042 had not
provided for its retroactive application.
Respondents counter that the appeal should have been filed with the Secretary of
Labor who had exclusive jurisdiction to review cases involving administrative matters
decided by the POEA.
Ruling

Further, Sections 6 and 7 Rule VII, Book VII of the POEA Rules & Regulations (1991)
provide:
"Sec. 6. Disqualification of Contract Workers. Contract workers, including seamen,
against whom have been imposed or with pending obligations imposed upon them
through an order, decision or resolution shall be included in the POEA Blacklist
Workers shall be disqualified from overseas employment unless properly cleared by
the Administration or until their suspension is served or lifted.
Sec. 7. Delisting of the Contract Worker's Name from the POEA Watchlist. The name
of an overseas worker may be excluded, deleted and removed from the POEA
Watchlist only after disposition of the case by the Administration."
Thus, it can be concluded from the afore-quoted law and rules that, public respondent
has no jurisdiction to review disciplinary cases decided by the POEA involving
contract workers. Clearly, the matter of inclusion and deletion of overseas contract
workers in the POEA Blacklist/Watchlist is within the exclusive jurisdiction of the

The petition for review lacks merit.

Petitioners' adamant insistence that the NLRC should have appellate authority over
the POEA's decision in the disciplinary action because their complaint against
respondents was filed in 1993 was unwarranted. Although Republic Act No. 8042,
through its Section 10, transferred the original and exclusive jurisdiction to hear and
decide money claims involving overseas Filipino workers from the POEA to the Labor
Arbiters, the law did not remove from the POEA the original and exclusive jurisdiction
to hear and decide all disciplinary action cases and other special cases administrative
in character involving such workers. The obvious intent of Republic Act No. 8042 was
to have the POEA focus its efforts in resolving all administrative matters affecting and
involving such workers. This intent was even expressly recognized in the Omnibus
Rules and Regulations Implementing the Migrant Workers and Overseas Filipinos Act
of 1995 promulgated on February 29, 1996, viz:
Section 28. Jurisdiction of the POEA. - The POEA shall exercise original and
exclusive jurisdiction to hear and decide:

25

(a) all cases, which are administrative in character, involving or arising out of
violations or rules and regulations relating to licensing and registration of recruitment
and employment agencies or entities; and
(b) disciplinary action cases and other special cases, which are administrative
in character, involving employers, principals, contracting partners and Filipino
migrant workers.
Section 29. Venue - The cases mentioned in Section 28(a) of this Rule, may be filed
with the POEA Adjudication Office or the DOLE/POEA regional office of the place
where the complainant applied or was recruited, at the option of the complainant. The
office with which the complaint was first filed shall take cognizance of the case.
Disciplinary action cases and other special cases, as mentioned in the preceding
Section, shall be filed with the POEA Adjudication Office.
It is clear to us, therefore, that the NLRC had no appellate jurisdiction to review the
decision of the POEA in disciplinary cases involving overseas contract workers.
Petitioners' position that Republic Act No. 8042 should not be applied retroactively to
the review of the POEA's decision dismissing their complaint against respondents has
no support in jurisprudence. Although, as a rule, all laws are prospective in
application unless the contrary is expressly provided,8 or unless the law is procedural
or curative in nature,9 there is no serious question about the retroactive applicability
of Republic Act No. 8042 to the appeal of the POEA's decision on petitioners'
disciplinary action against respondents. In a way, Republic Act No. 8042 was a
procedural law due to its providing or omitting guidelines on appeal. A law is
procedural, according to De Los Santos v. Vda. De Mangubat,10 when it Refers to the adjective law which prescribes rules and forms of procedure in order
that courts may be able to administer justice. Procedural laws do not come within the
legal conception of a retroactive law, or the general rule against the retroactive
operation of statues - they may be given retroactive effect on actions pending and
undetermined at the time of their passage and this will not violate any right of a
person who may feel that he is adversely affected, insomuch as there are no vested
rights in rules of procedure.
Republic Act No. 8042 applies to petitioners' complaint by virtue of the case being
then still pending or undetermined at the time of the law's passage, there being no
vested rights in rules of procedure.11 They could not validly insist that the reckoning
period to ascertain which law or rule should apply was the time when the disciplinary
complaint was originally filed in the POEA in 1993. Moreover, Republic Act No. 8042
and its implementing rules and regulations were already in effect when petitioners
took their appeal. A statute that eliminates the right to appeal and considers the
judgment rendered final and unappealable only destroys the right to appeal, but not
the right to prosecute an appeal that has been perfected prior to its passage, for, at
that stage, the right to appeal has already vested and cannot be impaired.12

Conversely and by analogy, an appeal that is perfected when a new statute affecting
appellate jurisdiction comes into effect should comply with the provisions of the new
law, unless otherwise provided by the new law. Relevantly, petitioners need to be
reminded that the right to appeal from a decision is a privilege established by positive
laws, which, upon authorizing the taking of the appeal, point out the cases in which it
is proper to present the appeal, the procedure to be observed, and the courts by
which the appeal is to be proceeded with and resolved.13 This is why we consistently
hold that the right to appeal is statutory in character, and is available only if granted
by law or statute.14
When Republic Act No. 8042 withheld the appellate jurisdiction of the NLRC in
respect of cases decided by the POEA, the appellate jurisdiction was vested in the
Secretary of Labor in accordance with his power of supervision and control under
Section 38(1), Chapter 7, Title II, Book III of the Revised Administrative Code of 1987,
to wit:
Section 38. Definition of Administrative Relationship. - Unless otherwise expressly
stated in the Code or in other laws defining the special relationships of particular
agencies, administrative relationships shall be categorized and defined as follows:
Supervision and Control. - Supervision and control shall include authority to act
directly whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the commission of acts; review,
approve, reverse or modify acts and decisions of subordinate officials or units;
determine priorities in the execution of plans and programs. Unless a different
meaning is explicitly provided in the specific law governing the relationship of
particular agencies, the word "control" shall encompass supervision and control as
defined in this paragraph. xxx.
Thus, Section 1, Part VII, Rule V of the 2003 POEA Rules and Regulations
specifically provides, as follows:
Section 1. Jurisdiction. - The Secretary shall have the exclusive and original
jurisdiction to act on appeals or petition for review of disciplinary action cases decided
by the Administration.
In conclusion, we hold that petitioners should have appealed the adverse decision of
the POEA to the Secretary of Labor instead of to the NLRC. Consequently, the CA,
being correct on its conclusions, committed no error in upholding the NLRC.
WHEREFORE, we AFFIRM the decision promulgated on December 21, 2001 by the
Court of Appeals; and ORDER the petitioners to pay the costs of suit.
SO ORDERED.

26

III.

Labor Standards
A.

Hours of Work

1. Coverage/ Exclusions (Art 82)

Art. 82. Coverage. The provisions of this Title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary duty consists
of the management of the establishment in which they are employed or of a
department or subdivision thereof, and to other officers or members of the managerial
staff.
"Field personnel" shall refer to non-agricultural employees who regularly perform their
duties away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable
certainty.

5. Overtime work, overtime pay

6. Night work (RA 10151), Night shift differential

Employment of Night Workers
Art. 154. Coverage. This chapter shall apply to all persons, who shall be employed
or permitted or suffered to work at night, except those employed in agriculture, stock
raising, fishing, maritime transport and inland navigation, during a period of not less
than seven (7) consecutive hours, including the interval from midnight to five oclock
in the morning, to be determined by the Secretary of Labor and Employment, after
consulting the workers representatives/labor organizations and employers.
Night worker means any employed person whose work requires performance of a
substantial number of hours of night work which exceeds a specified limit. This limit
shall be fixed by the Secretary of Labor after consulting the workers
representatives/labor organizations and employers.

2. Normal Hours of Work

7. Part-time work

Compressed work week

8. Contract for piece work

3. Meal break

4. Waiting time

27

B.

Wages

1. Wage vs Salary

On January 16, 1996, the Regional Tripartite Wages and Productivity Board-National
Capital Region (RTWPB-NCR) issued Wage Order No. NCR-04 Section 1 of which
provides, thus:
"Section 1. All private sector workers and employees
in the National Capital Region receiving the prescribed
minimum wage rate of ONE HUNDRED FORTY FIVE PESOS
per day shall receive a wage increase of twenty pesos
(P20.00) per day x x x."
On February 6, 1996, the RTWPB-NCR issued Wage Order No. NCR-04-A
prescribing a formula for wage distortion.

2. Minimum wage defined, Minimum wage setting

On March 5, 1996, petitioner PWC filed with the RTWPB-NCR, an application for
exemption from the aforesaid wage orders on the ground that it was a distressed
establishment with an impaired capital of at least twenty-five percent (25%).
On September 2, 1996, said application was approved by the RTWPB-NCR. The
dispositive portion of its Decision thus provides:

Quoted hereunder, for your information, is a resolution of this Court dated JAN 26
2000.

"WHEREFORE, premises considered, the application

filed by PHILIPPINE WALLBOARD CORPORATION is hereby
APPROVED. PHILLIPPINE WALLBOARD CORPORATION is
hereby granted exemption from the implementation of Wage
Order No. NCR-04 and NCR-04-A, for all employees in the
National Capital Region, for a period of twelve (12) months
effective 02 February 1996 until 01 February 1997. After the
period of exemption shall have expired, Philippine Wallboard
Corporation shall pay the corresponding minimum wage for
all covered workers without need of further notice."1 Annex
"C" of the Petition, Rollo, p. 25. Emphasis supplied by the
RTWPB-NCR.

G.R. No. 132162 (Philippine Wallboard Corporation vs. National Wages and
Productivity Commission and Manila Lumber Employees and General Workers'
Union.)

On March 3, 1997, petitioner PWC filed a Motion for Reconsideration where it sought
an extension of the period for exemption granted by the Board on the ground that it
continued to suffer business reverses.

Before us is a petition for certiorari under Rule 65 of the Revised Rules of Court
assailing two (2) decisions of Public respondent National Wages and Productivity
Commission (NWPC) dated October 6, 1997 and December 16, 1997, denying the
application of petitioner Philippine Wallboard Corporation (hereafter, "PWC") for
extension of its one-year exemption from coverage of Wage Order Nos. NCR-04 and
NCR-04-A.

On March 11, 1997, the RTWPB-NCR denied the motion, citing Section 7 of Wage
Order No. NCR 04 which expressly limits the period of exemption to a maximum of
one (1) year from the effectivity of this wage order.

PHIL. WALLBOARD CORP. vs. NWPC, et al.

G.R. No. 132162. January 26, 2000
SECOND DIVISION
Gentlemen:

The facts are:

On June 30, 1997, petitioner appealed to the NWPC which, however, denied the
same in the assailed Decision of October 6, 1997. It ruled, thus:
"Perforce, there is simply no legal basis upon which
the extension of exemption being sought in the instant

28

appeal will lie. Appellant, therefore, is entitled only to a

maximum duration of exemption of one year under subject
Wage Order.
It must be stressed, as we have done so in similar
appeals of this nature, that the non-renewability of the one
year exemption was purposely meant to protect workers from
any deleterious effect of a prolonged exemption.
"Finally, it may not be amiss to note that in Cheng
Ban Yek & Co., Inc. v. National Wages and Productivity
Commission, et al., G.R. No. 112216, December 6, 1996, which
involves the issue of whether or not this Commission
committed grave abuse of discretion in denying the
petitioners' request for extension of the one year exemption
granted to it by the Board under Wage Order No. NCR-02 &
NCR-02-A, the Supreme Court dismissed the petition for
certiorari after finding that no such grave abuse of discretion
was committed by respondent Commission in denying the
extension of exemption sought under the Wage
Order."2 Annex "A" of the Petition, Rollo, pp.20-21.

The rationale for allowing a one-year exemption from coverage of the wage order is
precisely to afford the parties affected thereby, more than sufficient time to cope with
adverse financial conditions and make the necessary adjustments in order to comply
with the mandated wage increases. To allow the petitioner to escape this obligation is
tantamount to a judicial imprimatur of an attempt to evade the mandate of the wage
order in question. This, we cannot tolerate.
WHEREFORE, the petition for certiorari is hereby DISMISSED. Petitioner is ordered
to pay the corresponding minimum wage to all its covered workers effective 02
February 1997. Costs against petitioner.

On October 23, 1997, petitioner filed a Motion for Reconsideration but the same was
denied in the assailed Decision of December 16, 1997.3 Annex "B" Petition, Rollo pp.
22-23.
Hence, this petition.
Petitioner insists that the NWPC committed grave abuse of discretion in denying
petitioner's application for extension from Wage Order No. NCR-04 and NCR-04-A
despite its worsening financial condition.
We disagree.
Section 7 of Wage Order No. NCR-04 categorically provides that exemption
thereunder is to be granted for a maximum of only one year. The said section which
states, viz:
"Section 7. The Board has the discretion to grant full
or partial exemption to such employer with respect to the
amount or period of exemption but in no case shall it exceed
one (1) year from the effectivity of this Wage Order.
is clear and fixes the limit within which such exemption shall be valid. There are no
exceptions.

29

G.R. NO. 144322

February 6, 2007

METROPOLITAN BANK and TRUST COMPANY, INC., Petitioner,

vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION and REGIONAL
TRIPARTITE WAGES AND PRODUCTIVITY BOARD - REGION II, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
[1]
Revised Rules of Court seeking the reversal of the Decision of the Court of Appeals
(CA) dated July 19, 2000 in CA-G.R. SP No. 42240 which denied the petition
for certiorari and prohibition of Metropolitan Bank and Trust Company, Inc.
(petitioner).
The procedural antecedents and factual background of the case are as follows:
On October 17, 1995, the Regional Tripartite Wages and Productivity Board,
Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic Act No. 6727 (R.A.
[2]
No. 6727), otherwise known as the Wage Rationalization Act, issued Wage Order
No. R02-03 (Wage Order), as follows:
Section 1. Upon effectivity of this Wage Order, all
employees/workers in the private sector throughout Region II,
regardless of the status of employment are granted an across-the[3]
board increase of P15.00 daily.
The Wage Order was published in a newspaper of general circulation
[4]
[5]
on December 2, 1995 and took effect on January 1, 1996. Its Implementing
[6]
[7]
Rules were approved on February 14, 1996. Per Section 13 of the Wage Order,
any party aggrieved by the Wage Order may file an appeal with the National Wages
and Productivity Commission (NWPC) through the RTWPB within 10 calendar days
from the publication of the Wage Order.
In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers Council for
Personnel Management (BCPM), on behalf of its member-banks, requested for a
ruling on the eligibility of establishments with head offices outside Region II to seek
exemption from the coverage of the Wage Order since its member-banks are already
paying more than the prevailing minimum wage rate in the National Capital Region
[8]
(NCR), which is their principal place of business.

In a letter-reply dated July 16, 1996, the NWPC stated that the member-banks
of BCPM are covered by the Wage Order and do not fall under the exemptible
[9]
categories listed under the Wage Order.
In a letter-inquiry to the NWPC dated July 23, 1996, petitioner sought for
[10]
interpretation of the applicability of said Wage Order. The NWPC referred
petitioners inquiry to the RTWPB.
In a letter-reply dated August 12, 1996, the RTWPB clarified that the Wage
Order covers all private establishments situated in Region II, regardless of the
voluntary adoption by said establishments of the wage orders established in Metro
[11]
Manila and irrespective of the amounts already paid by the petitioner.
On October 15, 1996, the petitioner filed a Petition for Certiorari and Prohibition
with the CA seeking nullification of the Wage Order on grounds that the RTWPB
acted without authority when it issued the questioned Wage Order; that even
assuming that the RTWPB was vested with the authority to prescribe an increase, it
exceeded its authority when it did so without any ceiling or qualification; that the
implementation of the Wage Order will cause the petitioner, and other similarly
[12]
situated employers, to incur huge financial losses and suffer labor unrest.
On March 24, 1997, the Office of the Solicitor General (OSG) filed a
Manifestation and Motion in lieu of Comment affirming the petitioners claim that the
RTWPB acted beyond its authority in issuing the Wage Order prescribing an acrossthe-board increase to all workers and employees in Region II, effectively granting
[13]
additional or other benefits not contemplated by R.A. No. 6727.
In view of the OSGs manifestation, the CA directed respondents NWPC and
[14]
RTWPB to file their comment.
On September 22, 1997, respondents filed their Comment praying that the
petition should be dismissed outright for petitioners procedural lapses;
that certiorari and prohibition are unavailing since petitioner failed to avail of the
remedy of appeal prescribed by the Wage Order; that the Wage Order has long been
in effect; and that the issuance of the Wage Order was performed in the exercise of a
[15]
purely administrative function.
On July 19, 2000, the CA rendered its Decision denying the petition. The
appellate court held that a writ of prohibition can no longer be issued since
implementation of the Wage Order had long become fait accompli, the Wage Order
having taken effect on January 1, 1996 and its implementing rules approved on
February 14, 1996; that a writ of certiorari is improper since the Wage Order was

30

issued in the exercise of a purely administrative function, not judicial or quasi-judicial;

that the letter-query did not present justiciable controversies ripe for consideration by
the respondents in the exercise of their wage-fixing function, since no appeal from the
Wage Order was filed; that petitioner never brought before the said bodies any formal
and definite challenge to the Wage Order and it cannot pass off the letter-queries as
actual applications for relief; that even if petitioners procedural lapse is disregarded,
a regional wage order prescribing a wage increase across-the-board applies to banks
adopting a unified wage system and a disparity in wages between employees holding
[16]
similar positions in different regions is not wage distortion.
Hence, the present petition anchored on the following grounds:
4.1 THE COURT OF APPEALS ERRED IN REFUSING TO
DECLARE WAGE ORDER NO. R02-03 NULL AND VOID AND OF
NO LEGAL EFFECT.

As to the second issue, petitioner submits that ultra vires acts of administrative
agencies are correctible by way of a writ of certiorari and prohibition; that even
assuming that it did not observe the proper remedial procedure in challenging the
Wage Order, the remedy of certiorari and prohibition remains available to it by way of
an exception, on grounds of justice and equity; that its failure to observe procedural
rules could not have validated the manner by which the disputed Wage Order was
issued.

4.1.1 THE BOARD, IN ISSUING WAGE

ORDER NO. R02-03, EXCEEDED THE
AUTHORITY
DELEGATED
TO
IT
BY
CONGRESS.
4.1.2 WAGE ORDER NO. R02-03 IS AN
UNREASONABLE INTRUSION INTO THE
PROPERTY RIGHTS OF PETITIONER.
4.1.3 WAGE ORDER NO. R02-03
UNDERMINES THE VERY ESSENCE OF
COLLECTIVE BARGAINING.
4.1.4 WAGE ORDER NO. R02-03 FAILS
TO TAKE INTO ACCOUNT THE VERY
RATIONALE
FOR
A
UNIFIED
WAGE
STRUCTURE.
4.2 PETITIONERS RECOURSE TO A
[17]
CERTIORARI AND PROHIBITION WAS PROPER.
[18]

WRIT

Anent the first issue, petitioner maintains that the RTWPB, in issuing said
Wage Order, exceeded the authority delegated to it under R.A. No. 6727, which is
limited to determining and fixing the minimum wage rate within their respective
territorial jurisdiction and with respect only to employees who do not earn the
prescribed minimum wage rate; that the RTWPB is not authorized to grant a general
across-the-board wage increase for non-minimum wage earners; that Employers
Confederation of the Philippines v. National Wages and Productivity
[22]
Commission (hereafter referred to as ECOP) is not authority to rule that
respondents have been empowered to fix wages other than the minimum wage since
said case dealt with an across-the-board increase with a salary ceiling, where the
wage adjustment is applied to employees receiving a certain denominated salary
ceiling; that the Wage Order is an unreasonable intrusion into its property rights; that
the Wage Order undermines the essence of collective bargaining; that the Wage
Order fails to take into account the rationale for a unified wage structure.

OF

[19]

Respondents counter that the present petition is fatally defective from inception
since no appeal from the Wage Order was filed by petitioner; that the letter-query to
the NWPC did not constitute the appeal contemplated by law; that the validity of the
Wage Order was never raised before the respondents; that the implementation of the
Wage Order had long become fait accompli for prohibition to prosper. Respondents
insist that, even if petitioners procedural lapses are disregarded, the Wage Order
was issued pursuant to the mandate of R.A. No. 6727 and in accordance with the
[23]
Courts pronouncements in the ECOP case; that the Wage Order is not an intrusion
on property rights since it was issued after the required public hearings; that the
Wage Order does not undermine but in fact recognizes the right to collective
bargaining; that the Wage Order did not result in wage distortion.

Following the submission of the Comment and Reply thereto, the Court
gave due course to the petition and required both parties to submit their respective
[20]
memoranda.
In compliance therewith, petitioner and respondents submitted their
[21]
respective memoranda.

The Court shall first dispose of the procedural matter relating to the propriety
of petitioners recourse to the CA before proceeding with the substantive issue
involving the validity of the Wage Order.

Petitioner poses two issues for resolution, to wit: (1) whether Wage Order
No. R02-03 is void and of no legal effect; and (2) whether petitioners recourse to a
petition for certiorari and prohibition with the CA was proper.

Certiorari as a special civil action is available only if the following essential

requisites concur: (1) it must be directed against a tribunal, board, or officer
exercising judicial or quasi-judicial functions; (2) the tribunal, board, or officer must

31

have acted without or in excess of jurisdiction or with grave abuse of discretion

amounting lack or excess of jurisdiction; and (3) there is no appeal nor any plain,
[24]
speedy, and adequate remedy in the ordinary course of law.
On the other hand, prohibition as a special civil action is available only if the
following essential requisites concur: (1) it must be directed against a tribunal,
corporation, board, officer, or person exercising functions, judicial, quasi-judicial, or
ministerial; (2) the tribunal, corporation, board or person has acted without or in
excess of its jurisdiction, or with grave abuse of discretion amounting lack or excess
of jurisdiction; and (3) there is no appeal or any other plain, speedy, and adequate
[25]
remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he has the
power to determine what the law is and what the legal rights of the parties are, and
then undertakes to determine these questions and adjudicate upon the rights of the
[26]
parties. Quasi-judicial function is a term which applies to the action, discretion, etc.,
of public administrative officers or bodies, who are required to investigate facts or
ascertain the existence of facts, hold hearings, and draw conclusions from them as a
basis for their official action and to exercise discretion of a judicial
[27]
nature. Ministerial function is one which an officer or tribunal performs in the
context of a given set of facts, in a prescribed manner and without regard to the
[28]
exercise of his own judgment upon the propriety or impropriety of the act done.
In the issuance of the assailed Wage Order, respondent RTWPB did not act
in any judicial, quasi-judicial capacity, or ministerial capacity. It was in the nature of
subordinate legislation, promulgated by it in the exercise of delegated power under
R.A. No. 6727. It was issued in the exercise of quasi-legislative power. Quasilegislative or rule-making power is exercised by administrative agencies through the
promulgation of rules and regulations within the confines of the granting statute and
the doctrine of non-delegation of certain powers flowing from the separation of the
[29]
great branches of the government.
Moreover, the rule on the special civil actions of certiorari and prohibition
equally mandate that these extra-ordinary remedies are available only when there is
no appeal or any other plain, speedy, and adequate remedy in the ordinary course of
law. A remedy is considered plain, speedy and adequate if it will promptly relieve the
petitioner from the injurious effects of the judgment or rule, order or resolution of the
[30]
lower court or agency.
Section 13 of the assailed Wage Order explicitly provides that any party
aggrieved by the Wage Order may file an appeal with the NWPC through the RTWPB

[31]

within 10 days from the publication of the wage order. The Wage Order was
[32]
published in a newspaper of general circulation on December 2, 1995.
In this case, petitioner did not avail of the remedy provided by law. No
appeal to the NWPC was filed by the petitioner within 10 calendar days from
publication of the Wage Order on December 2, 1995. Petitioner was silent until seven
months later, when it filed a letter-inquiry on July 24, 1996 with the NWPC seeking a
clarification on the application of the Wage Order. Evidently, the letter-inquiry is not
an appeal.
It must also be noted that the NWPC only referred petitioners letter-inquiry
to the RTWPB. Petitioner did not appeal the letter-reply dated August 12, 1996 of the
RTWPB to the NWPC. No direct action was taken by the NWPC on the issuance or
implementation of the Wage Order. Petitioner failed to invoke the power of the NWPC
to review regional wage levels set by the RTWPB to determine if these are in
accordance with prescribed guidelines. Thus, not only was it improper to implead the
NWPC as party-respondent in the petition before the CA and this Court, but also
petitioner failed to avail of the primary jurisdiction of the NWPC under Article 121 of
the Labor Code, to wit:
ART. 121. Powers and Functions of the Commission.
The Commission shall have the following powers and functions:
xxxx
(d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if these
are in accordance with prescribed guidelines and national
development plans;
xxxx
(f) To review plans and programs of the Regional Tripartite
Wages and Productivity Boards to determine whether these are
consistent with national development plans;
(g) To exercise technical and administrative supervision over
the Regional Tripartite Wages and Productivity Boards;
xxxx
(Emphasis supplied)
Under the doctrine of primary jurisdiction, courts cannot and will not resolve
a controversy involving a question which is within the jurisdiction of an administrative
tribunal, especially where the question demands the exercise of sound administrative

32

discretion requiring the special knowledge, experience and services of the

[33]
administrative tribunal to determine technical and intricate matters of fact.
Nevertheless, the Court will proceed to resolve the substantial issues
in the present petition pursuant to the well-accepted principle that acceptance
of a petition for certiorari or prohibition as well as the grant of due course
[34]
thereto is addressed to the sound discretion of the court. It is a wellentrenched principle that rules of procedure are not inflexible tools designed to
hinder or delay, but to facilitate and promote the administration of justice. Their
strict and rigid application, which would result in technicalities that tend to
[35]
frustrate, rather than promote substantial justice, must always be eschewed.
As to respondents submission that the implementation of the Wage Order
can no longer be restrained since it has become fait accompli, the Wage Order
having taken effect on January 1, 1996 and its implementing rules approved on
February 14, 1996, suffice it to state that courts will decide a question otherwise moot
[36]
if it is capable of repetition yet evading review. Besides, a case becomes moot and
academic only when there is no more actual controversy between the parties or no
useful purpose can be served in passing upon the merits. Such circumstances do not
obtain in the present case. The implementation of the Wage Order does not in any
way render the case moot and academic, since the issue of the validity of the wage
order subsists even after its implementation and which has to be determined and
passed upon to resolve petitioners rights and consequent obligations therein.
It is worthy to quote the Courts pronouncements in Tan v. Commission on
[37]
Elections, thus:
For this Honorable Court to yield to the respondents urging that, as
there has been fait accompli, then this Honorable Court should
passively accept and accede to the prevailing situation is an
unacceptable suggestion. Dismissal of the instant petition, as
respondents so propose is a proposition fraught with
mischief. Respondents submission will create a dangerous
precedent. Should this Honorable Court decline now to perform its
duty of interpreting and indicating what the law is and should be,
this might tempt again those who strut about in the corridors of
power to recklessly and with ulterior motives commit illegal acts,
either brazenly or stealthily, confident that this Honorable Court will
abstain from entertaining future challenges to their acts if they
[38]
manage to bring about a fait accompli.
Having disposed of this procedural issue, the Court now comes to the
substance of the petition.

R.A. No. 6727 declared it a policy of the State to rationalize the fixing
of minimum wages and to promote productivity-improvement and gain-sharing
measures to ensure a decent standard of living for the workers and their families; to
guarantee the rights of labor to its just share in the fruits of production; to enhance
employment generation in the countryside through industrial dispersal; and to allow
[39]
business and industry reasonable returns on investment, expansion and growth.
[40]

In line with its declared policy, R.A. No. 6727 created the
NWPC, vested with the power to prescribe rules and guidelines for the
determination of appropriate minimum wage and productivity measures at the
[42]
regional, provincial or industry levels; and authorized the RTWPB to determine
and fix the minimum wage rates applicable in their respective regions,
provinces, or industries therein and issue the corresponding wage orders,
[43]
subject to the guidelines issued by the NWPC. Pursuant to its wage fixing authority,
the RTWPB may issue wage orders which set the daily minimum wage
[44]
[45]
rates, based on the standards or criteria set by Article 124 of the Labor Code.
[41]

[46]

In ECOP, the Court declared that there are two ways of fixing the
minimum wage: the floor-wage method and the salary-ceiling method. The floorwage method involves the fixing of a determinate amount to be added to the
prevailing statutory minimum wage rates. On the other hand, in the salary-ceiling
method, the wage adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already being paid more than the
existing minimum wage (up to a certain amount stated in the Wage Order) are also to
[47]
be given a wage increase.
To illustrate: under the floor wage method, it would have been sufficient if
the Wage Order simply set P15.00 as the amount to be added to the prevailing
statutory minimum wage rates, while in the salary-ceiling method, it would have
been sufficient if the Wage Order states a specific salary, such as P250.00, and only
those earning below it shall be entitled to the salary increase.
In the present case, the RTWPB did not determine or fix the minimum wage
rate by the floor-wage method or the salary-ceiling method in issuing the Wage
Order. The RTWPB did not set a wage level nor a range to which a wage adjustment
or increase shall be added. Instead, it granted an across-the-board wage increase
of P15.00 to all employees and workers of Region 2. In doing so, the RTWPB
exceeded its authority by extending the coverage of the Wage Order to wage earners
receiving more than the prevailing minimum wage rate, without a denominated salary
ceiling. As correctly pointed out by the OSG, the Wage Order granted additional
benefits not contemplated by R.A. No. 6727.

33

In no uncertain terms must it be stressed that the function of promulgating

rules and regulations may be legitimately exercised only for the purpose of carrying
out the provisions of a law. The power of administrative agencies is confined to
implementing the law or putting it into effect. Corollary to this guideline is that
administrative regulation cannot extend the law and amend a legislative
[48]
enactment. It is axiomatic that the clear letter of the law is controlling and cannot be
[49]
amended by a mere administrative rule issued for its implementation. Indeed,
administrative or executive acts, orders, and regulations shall be valid only when they
[50]
are not contrary to the laws or the Constitution.
Where the legislature has delegated to an executive or administrative
officers and boards authority to promulgate rules to carry out an express legislative
purpose, the rules of administrative officers and boards, which have the effect of
extending, or which conflict with the authority-granting statute, do not represent a
valid exercise of the rule-making power but constitute an attempt by an administrative
[51]
body to legislate.
It has been said that when the application of an administrative issuance
modifies existing laws or exceeds the intended scope, as in this case, the issuance
[52]
becomes void, not only for being ultra vires, but also for being unreasonable.
Thus, the Court finds that Section 1, Wage Order No. R02-03 is void insofar
as it grants a wage increase to employees earning more than the minimum wage
[53]
rate; and pursuant to the separability clause of the Wage Order, Section 1 is
declared valid with respect to employees earning the prevailing minimum wage rate.
Prior to the passage of the Wage Order, the daily minimum wage rates in
Region II was set at P104.00 for the Province of Isabela, P103.00 for the Province of
Cagayan, P101.00 for the Province of Nueva Vizcaya, and P100.00 for the Provinces
[54]
of Quirino and Batanes. Only employees earning the above-stated minimum wage
rates are entitled to the P15.00 mandated increase under the Wage Order.
Although the concomitant effect of the nullity of the Wage Order to those
employees who have received the mandated increase was not put in issue, this Court
shall make a definite pronouncement thereon to finally put this case to rest. As ruled
[55]
by the Court in Latchme Motoomull v. Dela Paz, the Court will always strive to
settle the entire controversy in a single proceeding leaving no root or branch to bear
[56]
the seeds of future litigation.
Applying by analogy, the Courts recent pronouncement in Philippine Ports
[57]
Authority v. Commission on Audit, thus:

In regard to the refund of the disallowed benefits, this

Court holds that petitioners need not refund the benefits received
by them based on our rulings in Blaquera v. Alcala, De Jesus v.
Commission on Audit and Kapisanan ng mga Manggagawa sa
Government Service Insurance System (KMG) v. Commission on
Audit.
In Blaquera, the petitioners, who were officials and
employees of several government departments and agencies, were
paid incentive benefits pursuant to EO No. 292 and the Omnibus
Rules Implementing Book V of EO No. 292. On January 3, 1993,
then President Fidel V. Ramos issued Administrative Order (AO)
No. 29 authorizing the grant of productivity incentive benefits for the
year 1992 in the maximum amount of P1,000. Section 4 of AO No.
29 directed all departments, offices and agencies which authorized
payment of CY 1992 Productivity Incentive Bonus in excess
of P1,000 to
immediately
cause
the
refund
of
the
excess. Respondent heads of the departments or agencies of the
government concerned caused the deduction from petitioners
salaries or allowances of the amounts needed to cover the
overpayments. Petitioners therein filed a petition for certiorari and
prohibition
before
this
Court
to
prevent
respondents therein from making further deductions from their
salaries or allowances. The Court ruled against the refund, thus:
Considering, however, that all the
parties here acted in good faith, we cannot
countenance the refund of subject incentive
benefits for the year 1992, which amounts the
petitioners have already received. Indeed,
no indicia of bad faith can be detected under
the attendant facts and circumstances. The
officials and chiefs of offices concerned
disbursed such incentive benefits in the
honest belief that the amounts given were
due to the recipients and the latter accepted
the same with gratitude, confident that they
richly deserve such benefits.

The said ruling in Blaquera was applied in De Jesus.

In De Jesus, COA disallowed the payment of allowances
and bonuses consisting of representation and transportation
allowance, rice allowance, productivity incentive bonus, anniversary
bonus, year-end bonus and cash gifts to members of
theinterim Board of Directors of the Catbalogan Water District. This
Court affirmed the disallowance because petitioners therein were
not entitled to other compensation except for payment of per

34

diem under PD No. 198. However, the Court ruled against the
refund of the allowances and bonuses received by petitioners, thus:
This ruling in Blaquera applies to the
instant case. Petitioners here received the
additional allowances and bonuses in good
faith under the honest belief that LWUA Board
Resolution
No.
313
authorized
such
payment. At the time petitioners received the
additional allowances and bonuses, the Court
had
not
yet
decided Baybay
Water
District. Petitioners had no knowledge that
such payment was without legal basis. Thus,
being in good faith, petitioners need not
refund the allowances and bonuses they
received but disallowed by the COA.
Further, in KMG, this
Court
applied
the
ruling
in Blaquera and De Jesus in holding that the Social Insurance
Group (SIG) personnel of the Government Service Insurance
System need not refund the hazard pay received by them although
said benefit was correctly disallowed by COA. The Court ruled:
The Court however finds that the
DOH and GSIS officials concerned who
granted hazard pay under R.A. No. 7305 to the
SIG personnel acted in good faith, in the
honest belief that there was legal basis for
such grant. The SIG personnel in turn
accepted the hazard pay benefits likewise
believing that they were entitled to such
benefit. At that time, neither the concerned
DOH and GSIS officials nor the SIG personnel
knew that the grant of hazard pay to the latter
is not sanctioned by law. Thus, following the
rulings of the Court in De Jesus v.
Commission on Audit, and Blaquera v. Alcala,
the SIG personnel who previously received
hazard pay under R.A. No. 7305 need not
refund such benefits.

legal basis. Being in good faith, petitioners need not refund the
[58]
benefits they received.
(Emphasis supplied)

employees, other than minimum wage earners, who received the wage increase
mandated by the Wage Order need not refund the wage increase received by them
since they received the wage increase in good faith, in the honest belief that they are
entitled to such wage increase and without any knowledge that there was no legal
basis for the same.
Considering the foregoing, the Court need not delve on the other arguments
raised by the parties.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the
Court of Appeals dated July 19, 2000 in CA-G.R. SP No. 42240
is MODIFIED. Section 1 of Wage Order No. R02-03 issued on October 17, 1995 by
the Regional Tripartite Wages and Productivity Board for Region II, Tuguegarao,
Cagayan is declared VALID insofar as the mandated increase applies to employees
earning the prevailing minimum wage rate at the time of the passage of the Wage
Order and VOID with respect to its application to employees receiving more than the
prevailing minimum wage rate at the time of the passage of the Wage Order.
No costs.
SO ORDERED.

In the same vein, the rulings in Blaquera, De

Jesus and KMG apply to this case. Petitioners received the hazard
duty pay and birthday cash gift in good faith since the benefits were
authorized by PPA Special Order No. 407-97 issued pursuant to
PPA Memorandum Circular No. 34-95 implementing DBM National
Compensation Circular No. 76, series of 1995, and PPA
Memorandum Circular No. 22-97, respectively. Petitioners at that
time had no knowledge that the payment of said benefits lacked

35

3.

Minimum wage of workers paid by results

A.

B.

7.

Facilities vs supplements

8.

Wage distortion/ rectification

9.

Divisor to determine daily rate

Workers paid by results

Aprrentices

C.

Learners

D.

Persons with disability

C. Rest Periods

4.

Commissions

5.

Deductions from wages

6.

1.

Weekly rest day

2.

Emergency Rest day

Non-diminution of benefits

36

D. Holiday pay/ premium

Art. 94. Right to holiday pay.
a. Every worker shall be paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less than ten (10) workers;
b. The employer may require an employee to work on any holiday but such employee
shall be paid a compensation equivalent to twice his regular rate; and
c. As used in this Article, "holiday" includes: New Years Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of July,
the thirtieth of November, the twenty-fifth and thirtieth of December and the day
designated by law for holding a general election.
Art. 95. Right to service incentive leave.
a. Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
E. Leaves
b. This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor and
Employment after considering the viability or financial condition of such
establishment.

1)

Service incentive leave

c. The grant of benefit in excess of that provided herein shall not be made a subject of
arbitration or any court or administrative action.

2)

Maternity leave

Art. 96. Service charges. All service charges collected by hotels, restaurants and
similar establishments shall be distributed at the rate of eighty-five percent (85%) for
all covered employees and fifteen percent (15%) for management. The share of the
employees shall be equally distributed among them. In case the service charge is
abolished, the share of the covered employees shall be considered integrated in their
wages.

3)

Paternity leave

4)

Paternity leave (ra 8972)

5)

Leave for victims of violence against women and children (RA 9262)

6)

Special leave benefit for women

1.

2.

Coverage, exclusions

Teachers, piece workers, takay, seasonal workers, seafarers

37

F. Service Charge
3.

Retirement benefits of workers paid by results

4.

Retirement benefits of part-time workers

5.

Taxability

G. Thirteenth month pay

H. Separation pay

I. Retirement pay

1.

Eligibility

2.

Amount

38

G.R. No. 181995

July 16, 2012

BIBIANO
C.
vs.
PHILIPPINE AIRLINES, INC., Respondent.

ELEGIR, Petitioner,

DECISION
REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
1
to annul and set aside the Decision dated August 6, 2007 of the Court of Appeals
2
(CA) in CA-G.R. SP No. 79111, which reversed and set aside the Decision dated
3
March 18, 2002 and Order dated June 30, 2003 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 00-08-06135-97 and NLRC NCR CA
No. 015030-98.
Factual Antecedents
As culled from the records, the instant case stemmed from the following factual
antecedents:
Petitioner Bibiano C. Elegir (petitioner) was hired by Philippine Airlines, Inc. (PAL) as
a commercial pilot, specifically designated as HS748 Limited First Officer, on March
4
16, 1971.
In 1995, PAL embarked on a refleeting program and acquired new and highly
sophisticated aircrafts. Subsequently, it sent an invitation to bid to all its flight deck
crew, announcing the opening of eight (8) B747-400 Captain positions that were
created by the refleeting program. The petitioner, who was then holding the position
5
of A-300 Captain, submitted his bid and was fortunately awarded the same. The
petitioner, together with seven (7) other pilots, was sent for training at Boeing in
Seattle, Washington, United States of America on May 8, 1995, to acquire the
necessary skills and knowledge in handling the new aircraft. He completed his
6
training on September 19, 1995.
On November 5, 1996, after rendering twenty-five (25) years, eight (8) months and
twenty (20) days of continuous service, the petitioner applied for optional retirement
authorized under the Collective Bargaining Agreement (CBA) between PAL and the
Airline Pilots Association of the
Philippines (ALPAP), in which he was a member of good standing. In response, PAL
asked him to reconsider his decision, asseverating that the company has yet to
recover the full value of the costs of his training. It warned him that if he leaves PAL
before he has rendered service for at least three (3) years, it shall be constrained to
7
deduct the costs of his training from his retirement pay.

On November 6, 1996, the petitioner went on terminal leave for thirty (30) days and
thereafter made effective his retirement from service. Upon securing his clearance,
however, he was informed that the costs of his training will be deducted from his
retirement pay, which will be computed at the rate of P 5,000.00 per year of service.
The petitioner, through his counsel, sent PAL a correspondence, asserting that his
retirement benefits should be based on the computation stated in Article 287 of the
Labor Code, as amended by Republic Act (R.A.) No. 7641, and that the costs of his
training should not be deducted therefrom. In its Reply dated August 4, 1997, PAL
refused to yield to the petitioners demand and maintained that his retirement pay
should be based on PAL-ALPAP Retirement Plan of 1967 (PAL-ALPAP Retirement
Plan) and that he should reimburse the company with the proportionate costs of his
training. Thus, on August 27, 1997, the petitioner filed a complaint for non-payment of
retirement pay, moral damages, exemplary damages and attorneys fees against
8
PAL.
9

On February 6, 1998, the Labor Arbiter (LA) rendered a Decision, the pertinent
portions of which read:
From the foregoing, it is manifestly clear that an employees retirement benefits under
any collective bargaining agreement shall not be less than those provided under the
New Retirement Pay Law and if such benefits are less, the employee shall pay the
difference between the amount due the employee and that provided under the CBA or
individual agreement or retirement plan (Par. 3.2, Sec. 3, rules Implementing the New
Retirement Pay Law).
Thus, applying the pertinent CBA provision in correlation with the New Retirement
Pay Law, complainant should receive the following amount, to wit:
22.5 x 26 yrs. x P138,447.00= P2,700,301.50
If we were to follow the PALs computation of petitioners retirement pay, the latters
retirement benefits in the amount of P125,000.00 based on Section 2, Article VII of
the Retirement Plan of the CBA at P5,000.00 per every year of service would be
much less than his monthly salary of P138,477.00 at the time of his retirement. This
was never envisioned by the law. Instead, it is the clear intention of our law makers to
provide a bigger and better retirement pay or benefits under existing laws and/or
existing CBA or other agreements.
xxxx
WHEREFORE, in view of the foregoing, we find PAL liable to the petitioner for the
payment of his retirement benefits as follows:
Retirement

Benefits

P 2,700,301.50

39

On appeal, the NLRC took a different stance and modified the decision of the LA in its
Decision dated March 18, 2002, which pertinently states:

(22.5 x 26 years x P138,477.00)

Accrued Trip Leave

760,299.37

Accrued Vacation Leave

386,546.44

1996 Unutilized days off

105,089.46

Nov. 96 Prod. Allow. (net)

1,726.92

Unpaid Salary 12/1/-5/96

22,416.65

1996 w/tax refund

2,464.42

13th month backpay for the year

1988-1991

171,262.50

Considering that [petitioner] was only fifty-two (52) years when he opted to retire on
November 6, 1996, he was, strictly, not yet qualified to receive the benefits provided
under said Article 287 of the Labor Code, as amended by R.A. 7641. However,
petitioner is eligible for retirement under the CBA between respondent PAL and
ALPAP, as he had already served for more than 25 years with said respondent. This
is covered by the provision in the first paragraph of Article 287 of the Labor Code
which states that an employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment
contract, inasmuch as the CBA in question does not provide for any retirement age,
but limited itself to the number of years of service or flying hours of the employee
concerned. Consequently, anytime that an employee of respondent PAL reaches
twenty (20) years of service or 20,000 (flying) hours as a pilot of PAL, then his age at
that precise time would be considered as the retirement age, as far as he is
concerned.
The retirement benefits of petitioner should, therefore, be computed in accordance
with both Article 287 of the Labor Code and the Retirement Plan in the CBA of PAL
and ALPAP.
On the second issue, we rule that petitioner is under obligation to reimburse a portion
of the expenses incurred for his training as B747-400 Captain.

TOTAL

P 4,150,106.20

plus legal interest of 12% per annum from November 06, 1996.
Finally, ten percent (10%) of all sums owing to petitioner is hereby adjudged as
attorneys fees.
SO ORDERED.

10

The LA ratiocinated that PAL had no right to withhold the payment of the petitioners
retirement benefits simply because he retired from service before the lapse of three
(3) years. To begin with, there was no document evidencing the fact that the
petitioner was required to stay with PAL for three (3) years from the completion of his
training or that he was bound to reimburse the company of the costs of his training
should he retire from service before the completion of the period. The LA likewise
dismissed the theory espoused by PAL that the petitioners submission of his bid for
the new position which necessarily requires training created an innominate contract of
du ut facias between him and the company since their relationship is governed by the
11
CBA between the management and the ALPAP.

It would be grossly unfair and unjust to PAL if the petitioner would be allowed to reap
the fruits of this training, which upgraded his knowledge and skills that would enable
him to demand higher pay, if he would not be made to return said benefits in the form
of service for a reasonable period of time, say three (3) years as PALs company
policy demands. x x x
xxxx
Thus, with the adjudged reimbursement for training expenses of P921,281.71 (sic),
the awards due to petitioner shall be, as follows:
Retirement Pay (P138,477.00 divided by 2 times 26)

P1,800,201.00

Service Incentive Leave (P138,477.00 divided by 30 x 5)

23,074.50

Accrued Trip Leave

386,546.44

40

13th Month Pay

138,477.00

1996 Unutilized days off

105,089.48

Nov. 1996 Productive Allowance (net)

1,726.92

petitioners retirement benefits based on Article 287 of the Labor Code, instead of the
CBA, was inconsistent with the disposition of this Court in Philippine Airlines, Inc. v.
14
Airline Pilots Association of the Philippines. It emphasized that in said case, this
Court sustained PALs position and directed the payment of retirement benefits of the
complainant pilot in accordance with the PAL-ALPAP Retirement Plan. However, in
15
an Order dated June 30, 2003, the NLRC denied PALs motion for reconsideration.
Unyielding, PAL filed a petition for certiorari with the CA. In said petition, PAL
emphasized that the petitioners case should be decided in light of the ruling in
Philippine Airlines, Inc., where this Court held that the computation of the retirement
pay of a PAL pilot who retired before reaching the retirement age of sixty (60) should
be based on the PAL-ALPAP Retirement Plan or at the rate of P5,000.00 for every
16
year of service.

Unpaid salary 12/1-5/96

22,416.63

1996 w/ tax refund

2,464.42

TOTAL

[P] 2,479.996.39
In its Decision dated August 6, 2007, the CA ruled that the petitioners retirement pay
should be computed in accordance with PAL-ALPAP Retirement Plan and the PAL
Pilots Retirement Benefit Plan as was held in Philippine Airlines, Inc. It held, thus:

LESS:
Reimbursement of training expenses

981,281.71

1996 13thmonth pay overpayment

19,837.16

1996 Christmas bonus overpayment

11,539.75

PESALA

567.93

The present case squarely falls within the state of facts upon which the ruling in
Philippine Airlines, Inc., vs. Airline Pilots Association of the Philippines was
enunciated. Petitioner herein applies for retirement at an age below 60. A distinction
was made between a pilot who retires at the age of sixty and another who retires
earlier. The Supreme Court was explicit when it declared:
"A pilot who retires after twenty years of service or after flying 20,000 hours would still
be in the prime of his life and at the peak of his career, compared to one who retires
at the age of 60 years old."

TOTAL

RETIREMENT PAY STILL PAYABLE

Furthermore, petitioner would not be getting less if his retirement pay is computed on
the PAL-ALPAP retirement plan rather than the formula provided by the Labor Code.
1,013,226.55 Petitioner did not refute that he already got retirement benefits from another
retirement plan the PAL

[P] 1,466,769.81
Pilots Retirement Plan. It appearing that the retirement benefits amounting to
P1,800,201.00 being the main bone of contention herein, this Court proceeds to
compute the balance of Capt. Elegirs retirement benefits as follows:
IN VIEW OF THE FOREGOING, the decision of the Labor Arbiter should be
MODIFIED by increasing the awards to the petitioner to ONE MILLION FOUR
Retirement Pay (P5,000 x 25 years)
P125,000.00
HUNDRED SIXTY SIX THOUSAND SEVEN HUNDRED SIXTY-NINE and 84/100
(P1,466,769.84) PESOS as computed above.
SO ORDERED.

12

Both PAL and petitioner filed their respective motions for partial reconsideration from
13
the decision of the NLRC. In its Motion for Partial Reconsideration, PAL
asseverated that the decision of the NLRC, directing the computation of the

Trip Leave Pay

757,564.04

Vacation Leave Pay

385,155.76

41

1996 Unutilized Day-Off

104,711.38

Productivity Allowance for 1996

1,726.92

The petitioner filed a motion for reconsideration but the same was denied in a
18
Resolution dated February 21, 2008. Aggrieved, the petitioner appealed to this
Court.
Essentially, we are called upon to rule on the following issues:

Unpaid Salary for December 1-5, 1996

22,335.00

1996 Withholding Tax Refund

2,464.42

1. Whether the petitioners retirement benefits should be computed based on

Article 287 of the Labor Code or on PALs retirement plans;
2. Whether the petitioner should reimburse PAL with the proportionate costs
of his training; and

P1,398,957.52
Less Accountabilities:

The Ruling of this Court

Training Cost

P981,281.71

1996 13th Month Pay Overpayment

19,837.16

1996 Christmas Bonus

11,539.75

PESALA

567.93

BALANCE

The petitioners retirement pay should be computed based on PALs retirement plans.

1,013,226.55

P 385,730.97

pursuant to the ruling in G.R. No. 143686.

xxxx
WHEREFORE, the petition is GRANTED. The Decision of public respondent dated
March 18, 2002 and its Order of June 30, 2003 are REVERSED and SET ASIDE. The
retirement benefits of petitioner Capt. Bibiano Elegir shall be based on the 1967 PALALPAP Retirement Plan andthe PAL Pilots Retirement Benefit Plan and the balance
still due him, pegged at P385,730.97.
SO ORDERED.

17

3. Whether interest should be imposed on the monetary award in favor of the

petitioner.

(Citation omitted and emphasis supplied)

The petitioner maintains that it is Article 287 of the Labor Code which should be
applied in the computation of his retirement pay since the same provides for higher
benefits. He contends that the CA erroneously resorted to the ruling in Philippine
Airlines, Inc. since the circumstances in the said case, which led this Court to rule in
favor of the applicability of PALs retirement plans in computing retirement benefits,
are unavailing in the present case. Specifically, he pointed out that the pilot in
Philippine Airlines, Inc. retired at the age of forty-five (45), while he opted to retire at
fifty-two (52). He further emphasized that the ruling was anchored on a finding that
the retirement benefits that the pilot would get under Article 287 of the Labor Code
19
are less than those he would get under PALs retirement plans.
Apparently, the petitioner failed to appreciate the heart behind the ruling in Philippine
Airlines, Inc. To recapitulate, the case stemmed from PALs unilateral act of retiring
airline pilot Captain Albino Collantes (Collantes) under the authority of Section 2,
Article VII of the PAL-ALPAP Retirement Plan. Thereafter, ALPAP filed a Notice of
Strike with the Department of Labor and Employment (DOLE), asseverating that the
retirement of Collantes constituted illegal dismissal and union busting. The Secretary
of Labor assumed jurisdiction and eventually upheld PALs action of retiring Collantes
as a valid exercise of its option under Section 2, Article VII of the PAL-ALPAP
Retirement Plan. It further directed for the computation of Collantes retirement
20
benefits on the basis of Article 287 of the Labor Code. Acting on Collantes petition
for certiorari, the CA held that the pilots retirement benefits should be based on
Article 287 of the Labor Code and not on the PAL-ALPAP Retirement Plan. On
appeal to this Court, we reversed the CA and ruled that Collantes retirement benefits
should be computed based on the PAL-ALPAP Retirement Plan and the PAL Pilots
Retirement Benefit Plan and not on Article 287 of the Labor Code since the benefits

42

under the two (2) plans are substantially higher than the latter. The dispositive portion
of the decision reads:
WHEREFORE, in view of all the foregoing, the petition is GRANTED. The March 2,
2000 Decision and the June 19, 2000 Resolution of the Court of Appeals in CA-G.R.
SP No. 54403 are REVERSED and SET ASIDE. The Order of the Secretary of Labor
in NCMB-NCR-N.S. 12-514-97 dated June 13, 1998, is MODIFIED as follows: The
retirement benefits to be awarded to Captain Albino Collantes shall be based on the
1967 PAL-ALPAP Retirement Plan and the PAL Pilots Retirement Benefit Plan. The
directive contained in subparagraph (2) of the dispositive portion thereof, which
required petitioner to consult the pilot involved before exercising its option to retire
him, is DELETED. The said Order is AFFIRMED in all other respects.
SO ORDERED.

21

(Emphasis supplied)

It bears reiterating that there are only two retirement schemes at point in this case: (1)
Article 287 of the Labor Code, and; (2) the PAL-ALPAP Retirement Plan and the PAL
Pilots Retirement Benefit Plan. The two retirement schemes are alternative in nature
such that the retired pilot can only be entitled to that which provides for superior
benefits.
Article 287 of the Labor Code states:
Art. 287. Retirement. - Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective bargaining
agreement and other agreements: provided, however, that an employees retirement
benefits under any collective bargaining and other agreements shall not be less than
those provided herein.
In the absence of a retirement plan or agreement plan providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared
as the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shallmean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and
the cash equivalent of not more than five (5) days of service incentive leaves. x x x
(Emphasis supplied)

It can be clearly inferred from the language of the foregoing provision that it is
applicable only to a situation where (1) there is no CBA or other applicable
employment contract providing for retirement benefits for an employee, or (2) there is
a CBA or other applicable employment contract providing for retirement benefits for
an employee, but it is below the requirement set by law. The rationale for the first
situation is to prevent the absurd situation where an employee, deserving to receive
retirement benefits, is denied them through the nefarious scheme of employers to
deprive employees of the benefits due them under existing labor laws. On the other
hand, the second situation aims to prevent private contracts from derogating from the
22
public law.
The primary application of existing CBA in computing retirement benefits is implied in
the title of R.A. No. 7641 which amended Article 287 of the Labor Code. The
complete title of R.A. No. 7641 reads: "An Act Amending Article 287 of Presidential
Decree No. 442, As Amended, otherwise known as the Labor Code of the Philippines,
By Providing for Retirement Pay to Qualified Private Sector in the Absence of Any
23
Retirement Plan in the Establishment."
Emphasis must be placed on the fact that the purpose of the amendment is not
merely to establish precedence in application or accord blanket priority to existing
CBAs in computing retirement benefits. The determining factor in choosing which
retirement scheme to apply is still superiority in terms of benefits provided. Thus,
even if there is an existing CBA but the same does not provide for retirement benefits
equal or superior to that which is provided under Article 287 of the Labor Code, the
latter will apply. In this manner, the employee can be assured of a reasonable amount
of retirement pay for his sustenance.
Consistent with the purpose of the law, the CA correctly ruled for the computation of
the petitioners retirement benefits based on the two (2) PAL retirement plans
because it is under the same that he will reap the most benefits. Under the PALALPAP Retirement Plan, the petitioner, who qualified for late retirement after
rendering more than twenty (20) years of service as a pilot, is entitled to a lump sum
payment of P125,000.00 for his twenty-five (25) years of service to PAL. Section 2,
Article VII of the PAL-ALPAP Retirement Plan provides:
Section 2. Late Retirement. Any member who remains in the service of the company
after his normal retirement date may retire either at his option or at the option of the
Company, and when so retired he shall be entitled either: (a) to a lump sum payment
of P5,000.00 for each completed year of service rendered as a pilot, or (b) to such
termination pay benefits to which he may be entitled under existing laws, whichever is
24
the greater amount.
Apart from the abovementioned benefit, the petitioner is also entitled to the equity of
the retirement fund under PAL Pilots Retirement Benefit Plan, which pertains to the
retirement fund raised from contributions exclusively from PAL of amounts equivalent
to 20% of each pilots gross monthly pay. Each pilot stands to receive the full amount
of the contribution upon his retirement which is equivalent to 240% of his gross

43

monthly income for every year of service he rendered to PAL. This is in addition to the
amount of not less than P100,000.00 that he shall receive under the PAL-ALPAP
25
Retirement Plan.
In sum, therefore, the petitioner will receive the following retirement benefits:
(1) P125,000.00 (25 years x P5,000.00) for his 25 years of service to PAL
under the PAL-ALPAP Retirement Plan, and;
(2) 240% of his gross monthly salary for every year of his employment or,
more specifically, the summation of PALs monthly contribution of an amount
equivalent to 20% of his actual monthly salary, under the PAL Pilots
Retirement Benefit Plan.
As stated in the records, the petitioner already received the amount due to him under
26
the PAL Pilots Retirement Benefit Plan. As much as we would like to demonstrate
with specificity the amount of the petitioners entitlement under said plan, we are
precluded from doing so because there is no record of the petitioners salary,
including increments thereto, attached to the records of this case. To reiterate, the
benefit under the PAL Pilots Retirement Benefit Plan pertains to the totality of PALs
monthly contribution for every pilot, which amounts to 20% of the actual monthly
salary. Necessarily, the computation of this benefit requires a record of the
petitioners salary, which was unfortunately not submitted by either of the parties. At
any rate, the petitioner did not dispute the fact that he already received his entitlement
under the PAL Pilots Retirement Benefit Plan nor did he question the propriety of the
amount tendered. Thus, we can reasonably assume that he received the rightful
amount of his entitlement under the plan.

As regards the issue of whether the petitioner should be obliged to reimburse PAL
28
with the costs of his training, the ruling in Almario v. Philippine Airlines, Inc. is
controlling. Essentially, in the mentioned case, this Court recognized the right of PAL
to recoup the costs of a pilots training in the form of service for a period of at least
three (3) years. This right emanated from the CBA between PAL and ALPAP, which
must be complied with good faith by the parties. Thus:
"The CBA is the law between the contracting parties the collective bargaining
representative and the employer-company. Compliance with a CBA is mandated by
the expressed policy to give protection to labor. In the same vein, CBA provisions
should 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." This is
founded on the dictum that a CBA is not an ordinary contract but one impressed with
public interest. It goes without saying, however, that only provisions embodied in the
CBA should be so interpreted and complied with. Where a proposal raised by a
contracting party does not find print in the CBA, it is not a part thereof and the
proponent has no claim whatsoever to its implementation."
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines, Inc.," the
Secretary of the Department of Labor and Employment (DOLE), passing on the
failure of PAL and ALPAP to agree on the terms and conditions for the renewal of
their CBA which expired on December 31, 1987 and construing Section 1 of Article
XXIII of the 1985-1987 CBA, held:
xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:

On the other hand, under Article 287 of the Labor Code, the petitioner would only be
receiving a retirement pay equivalent to at least one-half (1/2) of his monthly salary
for every year of service, a fraction of at least six (6) months being considered as one
whole year. To stress, one-half (1/2) month salary means 22.5 days: 15 days plus 2.5
days representing one-twelfth (1/12) of the 13th month pay and the remaining 5 days
27
for service incentive leave.
Comparing the benefits under the two (2) retirement schemes, it can readily be
perceived that the 22.5 days worth of salary for every year of service provided under
Article 287 of the Labor Code cannot match the 240% of salary or almost two and a
half worth of monthly salary per year of service provided under the PAL Pilots
Retirement Benefit Plan, which will be further added to the P125,000.00 to which the
petitioner is entitled under the PAL-ALPAP Retirement Plan. Clearly then, it is to the
petitioners advantage that PALs retirement plans were applied in the computation of
his retirement benefits.
The petitioner should reimburse PAL with the costs of his training.

Pilots fifty-five (55) years of age or over who have not previously qualified in any
Company turbo-jet aircraft shall not be permitted to bid into the Companys turbo-jet
operations. Pilots fifty-five (55) years of age or over who have previously qualified in
the companys turbo-jet operations may be by-passed at Company option, however,
any such pilot shall be paid the by-pass pay effective upon the date a junior pilot
starts to occupy the bidded position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots who reach the
age of fifty-five (55) years and over without having previously qualified in any
Company turbo-jet aircraft shall not be permitted to occupy any position in the
Companys turbo-jet fleet. Pilots fifty-four (54) years of age and over are ineligible for
promotion to any position in Group I. Pilots reaching the age of fifty-five (55) shall be
frozen in the position they currently occupy at that time and shall be ineligible for any
further movement to any other positions.

44

PALs contention is basically premised on prohibitive training costs. The return on this
investment in the form of the pilot promoted is allegedly five (5) years. Considering
the pilots age, the chances of full recovery are asserted to be quite slim.
ALPAP opposed the proposal and argued that the training cost is offset by the pilots
maturity, expertise and experience.
By way of compromise, we rule that a pilot should remain in the position where he is
upon reaching age fifty-seven (57), irrespective of whether or not he has previously
qualified in the Companys turbo-jet operations. The rationale behind this is that a
pilot who will be compulsorily retired at age sixty (60) should no longer be burdened
with training for a new position. But if a pilot is only at age fifty-five (55), and
promotional positions are available, he should still be considered and promoted if
qualified, provided he has previously qualified in any company turbo-jet aircraft. In the
latter case, the prohibitive training costs are more than offset by the maturity,
expertise, and experience of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their positions.1wphi1 Pilots
fifty-five (55) [sic] years of age provided they have previously qualified in any
company turbo-jet aircraft shall be permitted to occupy any position in the companys
29
turbo-jet fleet. (Citations omitted and emphasis supplied)
Further, we considered PALs act of sending its crew for training as an investment
which expects an equitable return in the form of service within a reasonable period of
time such that a pilot who decides to leave the company before it is able to regain the
full value of the investment must proportionately reimburse the latter for the costs of
his training. We ratiocinated:
It bears noting that when Almario took the training course, he was about 39 years old,
21 years away from the retirement age of 60. Hence, with the maturity, expertise, and
experience he gained from the training course, he was expected to serve PAL for at
least three years to offset "the prohibitive costs" thereof.
The pertinent provision of the CBA and its rationale aside, contrary to Almarios claim,
Article 22 of the Civil Code which reads:
"Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him," applies.
This provision on unjust enrichment recognizes the principle that one may not enrich
himself at the expense of another. An authority on Civil Law writes on the subject, viz:

"Enrichment of the defendant consists in every patrimonial, physical, or moral

advantage, so long as it is appreciable in money. It may consist of some positive
pecuniary value incorporated into the patrimony of the defendant, such as: (1) the
enjoyment of a thing belonging to the plaintiff; (2) the benefits from service rendered
by the plaintiff to the defendant; (3) the acquisition of a right, whether real or personal;
(4) the increase of value of property of the defendant; (5) the improvement of a right
of the defendant, such as the acquisition of a right of preference; (6) the recognition of
the existence of a right in the defendant; and (7) the improvement of the conditions of
life of the defendant.
x x x x"
Admittedly, PAL invested for the training of Almario to enable him to acquire a higher
level of skill, proficiency, or technical competence so that he could efficiently
discharge the position of A-300 First Officer. Given that, PAL expected to recover the
training costs by availing of Almarios services for at least three years. The
expectation of PAL was not fully realized, however, due to Almarios resignation after
only eight months of service following the completion of his training course. He
cannot, therefore, refuse to reimburse the costs of training without violating the
30
principle of unjust enrichment. (Citation omitted and emphasis supplied)
After perusing the records of this case, we fail to find any significant fact or
circumstance that could warrant a departure from the established jurisprudence. The
petitioner admitted that as in Almario, the prevailing CBA between PAL and ALPAP at
the time of his retirement incorporated the same stipulation in Section 1, Article XXIII
31
of the 1985-1987 CBA which provides:
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots fifty-five
(55) [sic] years of age provided they have previously qualified in any company turbo32
jet aircraft shall be permitted to occupy any position in the companys turbo-jet fleet.
As discussed in Almario, the above provision initially set the age of fifty-five (55) years
as the reckoning point when a pilot becomes disqualified to bid for a higher position.
The age of disqualification was set at 55 years old to enable PAL to fully recover the
costs of the pilots training within a period of five (5) years before the pilot reaches the
compulsory retirement age of sixty (60). The DOLE Secretary however lowered the
age to fifty-seven (57), thereby cutting the supposed period of recovery of investment
to three (3) years. The DOLE Secretary justified the amendment in that the
"prohibitive training costs are more than offset by the maturity, expertise and the
33
experience of the pilot."
By carrying over the same stipulation in the present CBA, both PAL and ALPAP
recognized that the companys effort in sending pilots for training abroad is an
investment which necessarily expects a reasonable return in the form of service for a
period of at least three (3) years. This stipulation had been repeatedly adopted by the
parties in the succeeding renewals of their CBA, thus validating the impression that it
is a reasonable and acceptable term to both PAL and ALPAP. Consequently, the

45

petitioner cannot conveniently disregard this stipulation by simply raising the absence
of a contract expressly requiring the pilot to remain within PALs employ within a
period of 3 years after he has been sent on training. The supposed absence of
contract being raised by the petitioner cannot stand as the CBA clearly covered the
petitioners obligation to render service to PAL within 3 years to enable it to recoup
the costs of its investment.

employment as in fact he was able to transfer to another airline company immediately

38
after he left PAL. To allow the petitioner to simply leave the company without
reimbursing it for the proportionate amount of the expenses it incurred for his training
will only magnify the financial disadvantage sustained by PAL. Reason and fairness
dictate that he must return to the company a proportionate amount of the costs of his
training.

Further, to allow the petitioner to leave the company before it has fulfilled the
reasonable expectation of service on his part will amount to unjust enrichment.
Pertinently, Article 22 of the New Civil Code states:

Award of interest not warranted under the circumstances.

Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
There is unjust enrichment when a person unjustly retains a benefit at the loss of
another, or when a person retains the money or property of another against the
fundamental principles of justice, equity and good conscience. Two conditions must
concur: (1) a person is unjustly benefited; and (2) such benefit is derived at the
expense of or with damages to another. The main objective of the principle of unjust
enrichment is to prevent one from enriching oneself at the expense of another. It is
commonly accepted that this doctrine simply means that a person shall not be
34
allowed to profit or enrich himself inequitably at anothers expense. The enrichment
may consist of a patrimonial, physical, or moral advantage, so long as it is
35
appreciable in money. It must have a correlative prejudice, disadvantage or injury to
the plaintiff which may consist, not only of the loss of the property or the deprivation of
its enjoyment, but also of the non-payment of compensation for a prestation or
service rendered to the defendant without intent to donate on the part of the plaintiff,
36
or the failure to acquire something what the latter would have obtained.
As can be gathered from the facts, PAL invested a considerable amount of money in
sending the petitioner abroad to undergo training to prepare him for his new
appointment as B747-400 Captain. In the process, the petitioner acquired new
knowledge and skills which effectively enriched his technical know-how. As all other
investors, PAL expects a return on investment in the form of service by the petitioner
for a period of 3 years, which is the estimated length of time within which the costs of
the latters training can be fully recovered. The petitioner is, thus, expected to work for
PAL and utilize whatever knowledge he had learned from the training for the benefit
of the company. However, after only one (1) year of service, the petitioner opted to
retire from service, leaving PAL stripped of a necessary manpower.
Undeniably, the petitioner was enriched at the expense of PAL. After undergoing the
training fully shouldered by PAL, he acquired a higher level of technical competence
which, in the professional realm, translates to a higher compensation. To prove this
point, his monthly salary of P125,692.00 was increased to P131,703.00 while he was
still undergoing training. After his training, his salary was further increased to
37
P137,977.00. Further, his training broadened his opportunities for a better

The petitioner claims that the CA should have imposed interest on the monetary
award in his favor. To support his claim, he cited the case of Eastern Shipping Lines,
39
Inc. v. Court of Appeals, where this Court summarized the rules in the imposition of
the proper interest rates:
I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII on "Damages" of the
Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

46

3. When the judgment of the court awarding a sum of money

becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of
40
credit. (Citations omitted and emphasis supplied)
The petitioner, however, took the foregoing guidelines out of context and entertained
a misplaced supposition that all judgments which include a monetary award must be
imposed with interest. The jurisprudential guideline clearly referred to breach of an
obligation consisting of a forbearance of money, goods or credit before the imposition
of a legal interest of 12% can be warranted. Such essential element is nowhere to be
found in the facts of this case. Even granting that an interest of 6% may be imposed
in cases of breached obligations not constituting loan or forbearance of money, loan
or credit, such depends upon the discretion of the court. If at all, the monetary award
in favor of the petitioner will earn legal interest from the time the judgment becomes
final and executory until the same is fully satisfied, regardless of the nature of the
breached obligation. The imposition is justified considering that the interim period
from the finality of judgment, awarding a monetary claim and until payment thereof, is
41
deemed to be equivalent to a forbearance of credit.
WHEREFORE, in view of the foregoing disquisitions, the petition is DENIED. The
Decision dated August 6, 2007 of the Court of Appeals in CA-G.R. SP No. 79111 is
AFFIRMED. The Labor Arbiter is hereby DIRECTED to compute Bibiano C. Elegir's
retirement pay based on the 1967 PAL-ALPAP Retirement Plan and the PAL Pilots'
Retirement Benefit Plan, crediting Philippine Airlines, Inc. for the amount it had
already paid the petitioner under the mentioned plans.
SO ORDERED.

J. Women workers

1.

Provisions against discrimination

2.

Stipulation against marriage

3.

Prohibited acts

4.

Anti-sexual harassment act (ra 7877)

AN ACT DECLARING SEXUAL HARASSMENT UNLAWFUL IN THE

EMPLOYMENT, EDUCATION OR TRAINING ENVIRONMENT, AND FOR
OTHER PURPOSES.
Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:
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 or 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

47

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 of 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 ordiminish employment opportunities or otherwise
adversely affect said employee;
(2) The above acts would impair the employee's rights or
under existing labor laws; or

privileges

(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 consideration; or
(4) When the sexual advances result in an intimidating, hostile or offensive
environment for the student, trainee 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 and
joint1y 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 subsection (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 from 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, 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 5. Liability of the Employer, Head of Office, Educational or
Training Institution. - The employer or head of office, educational or training
institution shall be solidarily 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.

48

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.

5.

Any action arising from the violation of the provisions of this Act shall
prescribe in three (3) years.
Ra 9710 sec 13, 18
AN ACT PROVIDING FOR THE MAGNA CARTA OF WOMEN

Section 13. Equal Access and Elimination of Discrimination in Education,

Scholarships, and Training. - (a) The State shall ensure that gender stereotypes
and images in educational materials and curricula are adequately and appropriately
revised. Gender-sensitive language shall be used at all times. Capacity-building on
gender and development (GAD), peace and human rights, education for teachers,
and all those involved in the education sector shall be pursued toward this end.
Partnerships between and among players of the education sector, including the
private sector, churches, and faith groups shall be encouraged.
(b) Enrollment of women in nontraditional skills training in vocational and tertiary
levels shall be encouraged.
(c) Expulsion and non-readmission of women faculty due to pregnant;- outside of
marriage shall be outlawed. No school shall turn out or refuse admission to a female
student solely on the account of her having contracted pregnancy outside of marriage
during her term in school.
Section 18. Special Leave Benefits for Women. - A woman employee having
rendered continuous aggregate employment service of at least six (6) months for the
last twelve (12) months shall be entitled to a special leave benefit of two (2) months
with full pay based on her gross monthly compensation following surgery caused by
gynecological disorders.

49