You are on page 1of 98

BPI VS BPI EMPLOYEES UNION

Facts:
The BSP approved the Articles of Merger executed on January 20, 2000 by and between BPI, and FEBTC.
This Article and Plan of Merger was approved by the SEC on April 7, 2000.Pursuant to the Article and
Plan of Merger, all the assets and liabilities of FEBTC were transferred to and absorbed by BPI as the
surviving corporation. FEBTC employees, including those in its different branches across the country,
were hired by petitioner as its own employees, with their status and tenure recognized and salaries and
benefits maintained. Respondent BPI Employees Union-Davao Chapter-Federation of Unions in BPI
Unibank is the exclusive bargaining agent of BPIs rank and file employees in Davao City. The former
FEBTCrank-and-file employees in Davao City did not belong to any labor union at the time of the merger.
Prior to the effectivity of the merger, respondent union invited said FEBTC employees to a meeting
regarding the Union Shop Clause of the existing CBA between petitioner BPI and respondent union. The
parties both advert to certain provisions of the existing CBA. After the meeting called by the union,
some of the former FEBTC employees joined the union, while others refused. Later, however, some of
those who initially joined retracted their membership. Respondent union then sent notices to the
former FEBTC employees who refused to join, as well as those who retracted their membership and
called them to a hearing regarding the matter. When these former FEBTC employees refused to attend
the hearing, the president of the Union requested BPI to implement the Union Shop Clause of the CBA
and to terminate their employment. After two months of management inaction on the request,
respondent informed petitioner of its decision to refer the issue of the implementation of the Union
Shop Clause of the CBA to the Grievance Committee. However, the issue remained unresolved at this
level and so it was subsequently submitted for voluntary arbitration by the parties. Voluntary Arbitrator
ruled in favor of petitioner BPI. Respondent Union filed a motion for reconsideration, but the voluntary
arbitrator denied the same. It appealed to the CA and the CA reversed and set aside the decision of the
voluntary arbitrator. Hence, this petition.
Issue:
May a corporation invoke its merger with another corporation as a valid ground to exempt its absorbed
employees from the coverage of a union shop clause contained in its existing CBA with its own certified
labor union Employment Contracts Significantly, too, the Articles of Merger and Plan of Merger dated
April 7, 2000 did not contain any specific stipulation with respect to the employment contracts of
existing personnel of the non-surviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court
cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC assets and
liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC
employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything
about it. Even if it is so, it does not follow that the absorbed employees should not be subject to the
terms and conditions of employment obtaining in the surviving corporation. The rule is that unless
expressly assumed, labor contracts such as employment contracts and collective bargaining agreements
are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus
binding only between the parties. A labor contract merely creates an action in personam and does not

create any real right which should be respected by third parties. This conclusion draws its force from the
right of an employer to select his employees and to decide when to engage them as protected under our
Constitution, and the same can only be restricted by law through the exercise of the police power.
ISSUE: Whether or not the Union Shop agreement violated the constitutional right of security of tenure
of the FEB employees absorbed by BPI.
HELD: No. As a general rule, the State protects the workers right to security of tenure. An employees
services can only be terminated upon just and authorized causes. In this case, the presence of a Union
Shop Clause in the CBA between BPI and BPI Union must be respected. Failure of an employee to join
the union pursuant to the clause is an authorized cause for BPI not to continue employing the employee
concerned and BPI must respect that provision of the CBA. In the hierarchy of labor rights, unionism is
favored over security of tenure. A contrary interpretation of the Union Shop Clause would dilute its
efficacy and put the certified union that is supposedly being protected thereby at the mercy of
management. Nevertheless, the FEB employees are still entitled to the twin notice rule this is to afford
them ample opportunity to whether or not join the union.
LABOR
EMPLOYER-EMPLOYEE RELATION

Ramy Gallego vs. Bayer Philippines, Inc., et. al.

G.R. No. 179807, July 31, 2009

Facts:

Ramy Gallego was contracted in 1992 by Bayer Philippines as crop protection technician to promote and
market Bayer products by making farm visits to convince the farmers to buy their products. Petitioner
employment came to a halt in 1996 prompting Gallego to seek another employment, but he was
reemployed in 1997 as part of the product image which actually performing the same task as crop

protection technician. In 2001, he was directed to submit a resignation letter and ordered to return all
pieces of service equipment, which he refused. He continued performing his duties and received
compensation until January 2002, however, in April 2002, he received a memorandum that he will be
transferred to Luzon; and that he heard that respondents spread rumors that reached the dealers in
Antique that he is no longer connected with Bayer and any transaction with him will not be honored as
of April 30, 2002.

Believing he was terminated, he instituted a complaint for illegal dismissal before the NLRC.
Respondents Bayer and Guillermo denied the existence of employment relationship, while, respondents
Product Image and Bergonia admitted that the petitioner was hired as contractual employee and that he
has stopped reporting for work. The Labor Arbiter declared that respondents were guilty of illegal
dismissal. On appeal by the respondents, the NLRC reversed the Arbiters decision and contended that
petitioner was not dismissed but has abandoned his employment by failure to report on his duties.
Hence, this petition for Review.

Issues:

(1)

Was there employment relation between petitioner and respondent Bayer?

(2)

Was petitioner illegally dismissed from his employment?

Ruling (First Issue):

The existence of an employer-employee relationship is determined on the basis of four standards,


namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of
payment of wages; (c) the presence or absence of power of dismissal; and (d) the presence or absence
of control of the putative employees conduct. Most determinative among these factors is the so-called
"control test." If at all, the only control measure retained by Bayer over petitioner was to act as his de
facto supervisor in certifying to the veracity of the accomplishment reports he submitted to Product
Image. This is by no means the kind of control that establishes an employer-employee relationship as it
pertains only to the results and not the manner and method of doing the work. It would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews any intervention
whatsoever in his performance of the engagement. Surely, it would be foolhardy for any company to
completely give the reins and totally ignore the operations it has contracted out. In fine, Product Image
is ineluctably the employer of petitioner.

(Second Issue):

The Court appreciates no evidence that petitioner was dismissed. What it finds is that petitioner
unilaterally stopped reporting for work before filing a complaint for illegal dismissal, based on his belief
that Guillermo and Bergonia had spread rumors that his transactions on behalf of Bayer would no longer
be honored as of April 30, 2002. This belief remains just that it is unsubstantiated. While in cases of
illegal dismissal, the employer bears the burden of proving that the dismissal is for a valid or authorized
cause, the employee must first establish by substantial evidence the fact of dismissal

Miguela Santuyo, et al. vs. Remerco Garments Manufacturing, Inc. and/or Victoria Reyes

GR No. 174420; March 22, 2010

Facts:

Petitioners, who are employees of the Remerco Garments Manufacturing, Inc. (RGMI), were among
those recalled to work by the company, after their union, the Kaisahan ng Manggagawa sa Remerco
Garments Manufacturing Inc. (KMM Kilusan), staged a 2-year illegal strike from 1992 to 1994. Among
the conditions of their recall was that they would no longer be paid a daily rate but on a piece-rate basis.
However, even before RGMI could normalize its operations, the union filed a notice of strike in the
National Conciliation and Mediation Board (NCMB) on August 8, 1995. According to the union, RGMI
conducted a time and motion study and changed the salary scheme from a daily rate to piece-rate basis
without consulting it. It claimed that RGMI therefore not only violated the existing collective bargaining
agreement (CBA) but also diminished the salaries agreed upon. It therefore committed an unfair labor
practice. The conciliation proceedings between the union and RGMI before the NCMB resulted in a lockout. The union went on strike in November 1995. Therafter, the Secretary of Labor assumed jurisdiction
over the case, pursuant to Article 263(g) of the Labor Code. It ordered all striking workers to return to
work.

The Secretary of Labor found that the employees would receive higher wages if they were paid on a
piece-rate rather than on a daily rate basis. Hence, the new salary scheme would be more advantageous
to the employees. For this reason, despite the provisions of the CBA, the change in salary scheme was
validated.

In an order dated September 18, 1996, the Secretary of Labor ordered all employees to return to work
and RGMI to pay its employees their unpaid salaries (from September 25, 1995 to October 14, 1995) on
the piece-rate basis. Neither the union nor RGMI appealed the aforementioned order. Meanwhile,
however, on October 18, 1995, while the conciliation proceedings between the union and respondent
were pending, petitioners filed a complaint for illegal dismissal against RGMI and respondent Victoria
Reyes, accusing the latter of harassment. Petitioners subsequently amended their complaint,
demanding payment of their accrued salaries from September 25 to October 14, 1995.

Respondents moved to dismiss the complaint in view of the pending conciliation proceedings, involving
the same issue, in the NCMB. It also claimed that alleged violations of the CBA should be resolved
according to the grievance procedure laid out therein. It argued that the labor arbiter had no jurisdiction
over the complaint. The labor arbiter assumed jurisdiction over the case and rendered a decision
granting the claims of the union. The NLRC denied the appeal of the respondents. The Court of Appeals,
however, reversed the NLRC and ruled that the labor arbiter had no jurisdiction over the complaint. This
prompted the petitioners to elevate the matter to the Supreme Court.

Issues:

1. Did the labor arbiter have jurisdiction over the complaint filed by the petitioners?

2. Was the labor arbiter barred by prior judgment from assuming jurisdiction over the complaint?

Ruling (First Issue):

No, the labor arbiter did not have jurisdiction over the complaint. Petitioners clearly and consistently
questioned the legality of RGMIs adoption of the new salary scheme (i.e., piece-rate basis), asserting
that such action, among others, violated the existing CBA. The controversy was not a simple case of
illegal dismissal but a labor dispute involving the manner of ascertaining employees salaries, a matter
which was governed by the existing CBA. Article 217 of the Labor Code provides that *c+ases arising
from the interpretation or implementation of collective bargaining agreements and those arising from

the interpretation or enforcement of company personnel policies shall be disposed of by the Labor
Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided
in said agreements.

This provision requires labor arbiters to refer cases involving the implementation of CBAs to the
grievance machinery provided therein and to voluntary arbitration.

Moreover, Article 260 of the Labor Code clarifies that such disputes must be referred first to the
grievance machinery and, if unresolved within seven days, they shall automatically be referred to
voluntary arbitration. Thus, under Article 261 of the Labor Code, voluntary arbitrators have original and
exclusive jurisdiction over matters which have not been resolved by the grievance machinery. Pursuant
to Articles 217 in relation to Articles 260 and 261 of the Labor Code, the labor arbiter should have
referred the matter to the grievance machinery provided in the CBA. Because the labor arbiter clearly
did not have jurisdiction over the subject matter, his decision was void.

(Second Issue):

Yes, the labor arbiter was barred by prior judgment from assuming jurisdiction over the complaint. The
Secretary of Labor resolved the labor dispute between the union and RGMI in his September 18, 1996
order. Since neither the union nor RGMI appealed the said order, it became final and executory. Article
263(g) of the Labor Code gives the Secretary of Labor discretion to assume jurisdiction over a labor
dispute likely to cause a strike or a lockout in an industry indispensable to the national interest and to
decide the controversy or to refer the same to the NLRC for compulsory arbitration. In doing so, the
Secretary of Labor shall resolve all questions and controversies in order to settle the dispute. The
Secretary of Labor assumed jurisdiction over the controversy because RGMI had a substantial number of
employees and was a major exporter of garments to the United States and Canada

Settled is the rule that unions are the agent of its members for the purpose of securing just and fair
wages and good working conditions. Since petitioners were part of the bargaining unit represented by
the union and members thereof, the September 18, 1996 order of the Secretary of Labor applies to
them.

Furthermore, since the union was the bargaining agent of petitioners, the complaint was barred under
the principle of conclusiveness of judgments. The parties to a case are bound by the findings in a
previous judgment with respect to matters actually raised and adjudged therein. Hence, the labor
arbiter should have dismissed the complaint on the ground of res judicata.

APPEALS

Del Rosario vs. Philippine Journalists, Inc.

G.R. No. 181516, August 19, 2009

Facts:

The instant petition stemmed from a complaint filed by petitioner, Cesario L. del Rosario, against herein
respondent, Philippine Journalists, Inc. (PJI), for illegal dismissal with money claims.

On November 5, 2002, the Labor Arbiter rendered a decision in favor of petitioner. Respondent elevated
its case to the National Labor Relations Commission (NLRC). On January 6, 2003, it filed its memorandum
of appeal together with the appeal bond issued by Philippine Pryce Assurance Corporation (PPAC).

On December 15, 2003, the NLRC issued a resolutiondismissing the appeal for failure to perfect the
same due to the posting of the appeal bond from a bonding company not duly accredited by the Court.
But in a bid of liberality, the NLRC directed respondent to post a new bond, but respondent failed to
comply. Thus, on March 31, 2005, the NLRC issued a resolution dismissing the appeal.

Aggrieved, respondent filed a petition for certiorari under Rule 65 of the Rules of Court before the Court
of Appeals (CA). The CA reversed the NLRC, saying that the NLRC committed grave abuse of discretion in
dismissing PJIs appeal based on an erroneous finding that the surety bond respondent posted was void.
The CA ratiocinated that at the time the subject bond was issued, PPAC was still authorized to issue the
same. Thus, there was no legal basis to dismiss PJIs appeal because it had actually posted a valid bond.
The CA directed the NLRC to give due course to the appeal, as well as directed the respondent to file a
new bond.

Issue:

Should the appeal be granted due course?

Ruling:

Yes. The Supreme Court sided with the Court of Appeals. Article 223 of the Labor Code mandates that in
cases of judgment involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in an amount equivalent to the monetary award in the judgment appealed from.

The filing of a supersedeas bond for the perfection of an appeal is mandatory and jurisdictional. The
requirement that employers post a cash or surety bond to perfect their appeal is apparently intended to
assure workers that if they prevail in the case, they will receive the money judgment in their favor upon
the dismissal of the formers appeal. It was intended to discourage employers from using an appeal to
delay, or even evade, their obligations to satisfy their employees' just and lawful claims.

At the time of the filing of the surety bond by PJI on January 2, 2003, PPAC was still an accredited
bonding company. Thus, it was but proper to honor the appeal bond issued by a bonding company duly
accredited by this Court at the time of its issuance. The subsequent revocation of the authority of a
bonding company should not prejudice parties who relied on its authority. The revocation of authority
of a bonding company is prospective in application.

Still, the Court takes due notice of the opportunity given to PJI to post a new bond issued by an
accredited bonding company in the NLRC resolution dated February 23, 2004. Yet, PJI insisted on the
validity of the bond it had filed despite the fact the PPAC was no longer accredited to act as a surety.
This notwithstanding, guided by the principle that technical rules of procedure should not hamper the
quest for justice and truth, this Court deems it prudent that the case be reviewed and decided on the
merits, in view of the question on the employer-employee relationship of the parties and its resultant
legal consequences. But, so as not to prejudice the rights of petitioner in this case, the Court reiterates
the CA directive for PJI to post a new bond issued by an accredited bonding company.

REGULAR EMPLOYEES

Philippine Long Distance Telephone Company vs. Rizalina Raut, et. al.

G.R. No. 174209, August 25, 2009

Facts:

This is an illegal case by Raut, Emnace and Capistrano against PLDT. They alleged that they were illegally
dismissed on November 30 and December 16, 1996. The Labor Arbiter ruled in their favor reinstating
the respondents to their former position or if not feasible anymore to another equal position without
loss of seniority rights and benefits and its backwages.

Soon after, the respondents were reinstated, but allegedly continued to be treated as temporary
employees of the company. Petitioner appealed the decision alleging that the respondents were never
employees of the company but that of an independent contractor, Peerless Integrated Services.
However, NLRC affirmed the arbiters decision. The Court of Appeals also granted the NLRCs ruling. The
judgment became final and exeutory.

Issue:

Are respondents considered regular employees?

Ruling:

The Labor Arbiter, the NLRC, and the Court of Appeals found that the respondents are regular
employees of the petitioner as provided under Article 279, in relation to Article 280 of the Labor Code.
Thus, the lower tribunals all affirmed the order of reinstatement of respondents and their corresponding
entitlement to the payment of salaries and other benefits received by petitioners regular employees.

Finally, on the increase in the computation of the monetary award to respondents, the decision of the
Labor Arbiter specified that for purposes of putting up a bond should petitioner appeal, the backwages
were computed only for a certain period. Otherwise, the actual backwages to be paid to respondents
are computed from the date of dismissal until the finality of the decision. In addition, because petitioner
continues to refuse and accord regular status to respondents and to pay them their corresponding
wages even after the lapse of two (2) years from the finality of the Labor Arbiters decision, the Labor
Arbiter correctly included that in its order of execution. Thus, the Labor Arbiters order of execution
simply covered the correct computation of wages and other payments enjoyed by petitioners regular
employees.
Locsin vs. PLDT

GR No. 185251, October 2, 2009

Facts:

On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the
Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement
(Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various

offices. Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement
effective October 1, 2001. Despite the termination of the Agreement, however, petitioners continued
to secure the premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter
with copies of petitioner Locsins pay slips for the period of January to September 2002.

Then, on September 30, 2002, petitioners services were terminated. Thus, petitioners filed a complaint
before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday
pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living
Allowance, and moral and exemplary damages against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the
Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was
arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such
employees, petitioners were entitled to substantive and procedural due process before termination of
employment.

Issue:

Is there employer-employee relationship?

Ruling:

Yes. From the foregoing circumstances, reason dictates that we conclude that petitioners remained at
their post under the instructions of respondent. We can further conclude that respondent dictated upon
petitioners that the latter perform their regular duties to secure the premises during operating hours.
This, to our mind and under the circumstances, is sufficient to establish the existence of an employeremployee relationship.

To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the premises of respondent while receiving their
salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by
respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest
and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are
indicia of control that respondent exercised over petitioners.

Evidently, respondent having the power of control over petitioners must be considered as petitioners
employerfrom the termination of the Agreement onwardsas this was the only time that any
evidence of control was exhibited by respondent over petitioners and in light of our ruling in Abella.
Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and benefits of employees of
respondent, including due process requirements in the termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements.
Having failed to do so, respondent is guilty of illegal dismissal.

Masonic Contractor Inc. vs Madjos, Tiamzon and Rapadas

G.R. No. 185094, November 25, 2009

Facts:

Respondents Magdalena Madjos, Zenaida Tiamzon and Carmelita Rapadas were employed sometime in
1991 as all-around laborers (driver/sweeper/ taga-libing/grass-cutter) by Masonic Contractor, Inc.
(MCI). Each of them received an initial daily wage of P165.00 and were required to report for work from
7:00 a.m. to 4:00 p.m. Three years thereafter, MCI increased their wages by P15.00 per day but not
without earning the ire of Melvin Balais, president of MCI.

Sometime in 2004, Balais told Madjos, Tiamzon and Rapadas, along with nine (9) other employees, to
take a two-day leave. When they reported for work two days thereafter, they were barred from entering
the work premises and were informed that they had already been replaced by other workers. This
prompted Madjos and her co-workers to file a complaint against herein petitioners for illegal dismissal
and for non-payment of overtime pay, holiday pay, 13th month pay, and damages.

Petitioners, for their part, denied being the direct employer of respondents. Essentially, they argued
that MCI had maintenance contracts with different memorial park companies and that, over the years,

they had engaged the services of a certain Luz Malibiran to provide them with the necessary manpower
depending on MCIs volume of work.

Issue:

Are respondents regular employees of petitioner?

Ruling:

Yes. Petitioners defense that they merely contracted the services of respondents through Malibiran
fails to persuade us. The facts of this case show that respondents have been under the employ of MCI as
early as 1991. They were hired not to perform a specific job or undertaking. Instead, they were
employed as all-around laborers doing varied and intermittent jobs, such as those of drivers, sweepers,
gardeners, and even undertakers or tagalibing, until they were arbitrarily terminated by MCI in 2004.
Their wages were paid directly by MCI, as evidenced by the latters payroll summary, belying its selfserving and unsupported contention that it paid directly to Malibiran for respondents services.
Respondents had identification cards or gate passes issued not by Malibiran, but by MCI, and were
required to wear uniforms bearing MCIs emblem or logo when they reported for work.

It is common practice for companies to provide identification cards to individuals not only as a security
measure, but more importantly to identify the bearers thereof as bona fide employees of the firm or
institution that issued them. The provision of company-issued identification cards and uniforms to
respondents, aside from their inclusion in MCIs summary payroll, indubitably constitutes substantial
evidence sufficient to support only one conclusion: that respondents were indeed employees of MCI.
Gomez vs PNOC

G.R. No. 174044, November 27, 2009

Facts:

Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of Petron Corporation,
then a government-owned corporation. With Petrons privatization, she availed of the companys early
retirement program and left that organization on April 30, 1994. On the following day, May 1, 1994,
however, Filoil Refinery Corporation (Filoil), also a government-owned corporation, appointed her its
corporate secretary and legal counsel, with the same managerial rank, compensation, and benefits that
she used to enjoy at Petron. However, the privatization did not materialize so Gomez continued to serve
as corporate secretary of respondent PDMC. On September 23, 1996 its president re-hired her as
administrator and legal counsel of the company.

On March 29, 1999 the new board of directors of respondent PDMC removed petitioner Gomez as
corporate secretary. Further, at the boards meeting on October 21, 1999 the board questioned her
continued employment as administrator. In answer, she presented the former presidents May 24, 1998
letter that extended her term. Dissatisfied with this, the board sought the advice of its legal
department, which expressed the view that Gomezs term extension was an ultra vires act of the former
president. It reasoned that, since her position was functionally that of a vice-president or general
manager, her term could be extended under the companys by-laws only with the approval of the board.
The legal department held that her de facto tenure could be legally put to an end.

Petitioner Gomez for her part conceded that as corporate secretary, she served only as a corporate
officer. But, when they named her administrator, she became a regular managerial employee.

Consequently, the respondent PDMCs board did not have to approve either her appointment as such or
the extension of her term in 1998.

Issue:

Is Gomez an ordinary employee whose complaint is within the jurisdiction of the NLRC?

Ruling:

Yes. The relationship of a person to a corporation, whether as officer or agent or employee, is not
determined by the nature of the services he performs but by the incidents of his relationship with the
corporation as they actually exist. That the employee served concurrently as corporate secretary for a
time is immaterial. A corporation is not prohibited from hiring a corporate officer to perform services
under circumstances which will make him an employee. Indeed, it is possible for one to have a dual role
of officer and employee. NLRC has jurisdiction over a complaint filed by one who served both as
corporate officer and employee, when the money claims were made as an employee and not as a
corporate officer.

PROJECT EMPLOYEES

William Uy Construction vs. Trinidad

G.R. No. 183250, March 10, 2010

Facts:

Trinidad claimed that he had been working with the latter company for 16 years since 1988 as driver of
its service vehicle, dump truck, and transit mixer. He had signed several employment contracts with the
company that identified him as a project employee although he had always been assigned to work on
one project after another with some intervals. On December 2004, he was terminated from work due to
the shutdown of operations due to lack of projects but he later found out that there was a project in
Batangas but he was no longer hired back.

Petitioner company countered that it was in the construction business. By the nature of such business,
it had to hire and engage the services of project construction workers, including respondent Trinidad,
whose employments had to be co-terminous with the completion of specific company projects. For this
reason, every time the company employed Trinidad, he had to execute an employment contract with it,
called Appointment as Project Worker.

The Labor Arbiter dismissed Trinidads complaint for unjust dismissal and ordered petitioner company to
pay Trinidad P1,500.00 in unpaid service incentive leave, taking into consideration the three-year
prescriptive period for money claims. The Labor Arbiter held that, since Trinidad was a project
employee and since his company submitted the appropriate establishment termination report to DOLE,
his loss of work cannot be regarded as unjust dismissal. National Labor Relations Commission (NLRC)
affirmed the Labor Arbiters ruling, prompting respondent Trinidad to elevate his case to the Court of
Appeals (CA). The CA reversed the NLRCs findings

Issue:

Is respondent Trinidad a regular employee?

Ruling:

No. The test for distinguishing a project employee from a regular employee is whether or not he has
been assigned to carry out a specific project or undertaking, with the duration and scope of his
engagement specified at the time his service is contracted. Here, it is not disputed that petitioner
company contracted respondent Trinidads service by specific projects with the duration of his work
clearly set out in his employment contracts. He remained a project employee regardless of the number
of years and the various projects he worked for the company.

Generally, length of service provides a fair yardstick for determining when an employee initially hired on
a temporary basis becomes a permanent one, entitled to the security and benefits of regularization. But
this standard will not be fair, if applied to the construction industry, simply because construction firms
cannot guarantee work and funding for its payrolls beyond the life of each project. The repeated and
successive rehiring of project employees do not qualify them as regular employees, as length of service
is not the controlling determinant of the employment tenure of a project employee, but whether the
employment has been fixed for a specific project or undertaking, its completion has been determined at
the time of the engagement of the employee.

Trinidads series of employments with petitioner company were co-terminous with its projects. When
its Boni Serrano-Katipunan Interchange Project was finished in December 2004, Trinidads employment

ended with it. He was not dismissed. His employment contract simply ended with the project for which
he had signed up. His employment history belies the claim that he continuously worked for the
company. Intervals or gaps separated one contract from another.

The CA noted that DOLE Order 19 required employers to submit a report of termination of employees
every completion of construction project. And, since petitioner company submitted at the hearing
before the Labor Arbiter only the termination report covering respondent Trinidads last project, it failed
to satisfy such requirement.

LABOR ONLY CONTRACTING

Coca-Cola Bottlers Phils., Inc., vs. Agito, Oca III, Alariao, Jr., Ong, Arvin, Francisco, and Golez

G.R. No. 179546, February 13, 2009

Facts:

Respondents filed before the NLRC two complaints against Petitioner, Interserve, Peerless Integrated
Services, Inc., Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages,
regularization, nonpayment of 13th month pay, and damages. Respondents alleged in their Position
Paper that they were salesmen assigned at the Lagro Sales Office of petitioner. They had been in the
employ of petitioner for years, but were not regularized. Their employment was terminated on 8 April
2002 without just cause and due process. However, they failed to state the reason/s for filing a

complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent
Partners, Inc.

Petitioner Coca-cola filed its Position Paper (with Motion to Dismiss), where it averred that respondents
were employees of Interserve who were tasked to perform contracted services in accordance with the
provisions of the Contract of Services executed between petitioner and Interserve on 23 March 2002.
Said Contract between petitioner and Interserve, covering the period of 1 April 2002 to 30 September
2002, constituted legitimate job contracting, given that the latter was a bona fide independent
contractor with substantial capital or investment in the form of tools, equipment, and machinery
necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following
pieces of evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of
Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial
Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as an
independent job contractor, issued by the Department of Labor and Employment (DOLE).

As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter
which hired them, paid their wages, and supervised their work, as proven by: (1) respondents Personal
Data Files in the records of Interserve; (2) respondents Contract of Temporary Employment with
Interserve; and (3) the payroll records of Interserve. Petitioner, thus, sought the dismissal of
respondents complaint against it on the ground that the Labor Arbiter did not acquire jurisdiction over
the same in the absence of an employer-employee relationship between petitioner and the
respondents.

The Labor Arbiter found that respondents were employees of Interserve and not of petitioner. The
Labor Arbiter placed considerable weight on the fact that Interserve was registered with the DOLE as an
independent job contractor, with total assets amounting to P1,439,785.00 as of 31 December 2001. It
was Interserve that kept and maintained respondents employee records, including their Personal Data
Sheets; Contracts of Employment; and remittances to the Social Securities System (SSS), Medicare and
Pag-ibig Fund, thus, further supporting the Labor Arbiters finding that respondents were employees of
Interserve. She ruled that the circulars, rules and regulations which petitioner issued from time to time
to respondents were not indicative of control as to make the latter its employees.

Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal with the NLRC.
In their Memorandum of Appeal, respondents maintained that contrary to the finding of the Labor
Arbiter, their work was indispensable to the principal business of petitioner. Respondents supported
their claim with copies of the Delivery Agreement between petitioner and TRMD Incorporated, stating
that petitioner was engaged in the manufacture, distribution and sale of soft drinks and other related
products with various plants and sales offices and warehouses located all over the Philippines.
Moreover, petitioner supplied the tools and equipment used by respondents in their jobs such as
forklifts, pallet, etc. Respondents were also required to work in the warehouses, sales offices, and plants
of petitioner. Respondents pointed out that, in contrast, Interserve did not own trucks, pallets cartillas,
or any other equipment necessary in the sale of Coca-Cola products.

The NLRC affirmed the Labor Arbiters Decision and pronounced that no employer-employee
relationship existed between petitioner and respondents. Aggrieved once more, respondents sought
recourse with the Court of Appeals by filing a Petition for Certiorari under Rule 65. The Court of Appeals
reversed the NLRC decision. The appellate court ruled that Interserve was a labor-only contractor, with
insufficient capital and investments for the services which it was contracted to perform. With only
P510,000.00 invested in its service vehicles and P200,000.00 in its machineries and equipment,
Interserve would be hard-pressed to meet the demands of daily soft drink deliveries of petitioner in the
Lagro area. The Court Appeals concluded that the respondents used the equipment, tools, and facilities
of petitioner in the day-to-day sales operations.

Additionally, the Court of Appeals determined that petitioner had effective control over the means and
method of respondents work as evidenced by the Daily Sales Monitoring Report, the Conventional
Route System Proposed Set-up, and the memoranda issued by the supervisor of petitioner addressed to
workers, who, like respondents, were supposedly supplied by contractors. The appellate court deemed
that the respondents, who were tasked to deliver, distribute, and sell Coca-Cola products, carried out
functions directly related and necessary to the main business of petitioner. The appellate court finally
noted that certain provisions of the Contract of Service between petitioner and Interserve suggested
that the latters undertaking did not involve a specific job, but rather the supply of manpower.

Issue:

Is Interserve a legitimate job contractor?

Ruling:

No.The law clearly establishes an employer-employee relationship between the principal employer and
the contractors employee upon a finding that the contractor is engaged in labor-only contracting.
Article 106 of the Labor Code categorically states: There is labor-only contracting where the person
supplying workers to an employee does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of such employer.
Thus, performing activities directly related to the principal business of the employer is only one of the
two indicators that labor-only contracting exists; the other is lack of substantial capital or investment.
The Court finds that both indicators exist in the case at bar.

Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose
job was designated as leadman. In the Delivery Agreement between petitioner and TRMD Incorporated,
it is stated that petitioner is engaged in the manufacture, distribution and sale of softdrinks and other
related products. The work of respondents, constituting distribution and sale of Coca-Cola products, is
clearly indispensable to the principal business of petitioner. The repeated re-hiring of some of the
respondents supports this finding. Petitioner also does not contradict respondents allegations that the
former has Sales Departments and Sales Offices in its various offices, plants, and warehouses; and that
petitioner hires Regional Sales Supervisors and District Sales Supervisors who supervise and control the
salesmen and sales route helpers.

As to the supposed substantial capital and investment required of an independent job contractor,
petitioner calls the attention of the Court to the authorized capital stock of Interserve amounting to
P2,000,000.00. It cites as authority Filipinas Synthetic Fiber Corp. v. National Labor Relations
Commission and Frondozo v. National Labor Relations Commission, where the contractors authorized
capital stock of P1,600,000.00 and P2,000,000.00, respectively, were considered substantial for the
purpose of concluding that they were legitimate job contractors. Petitioner also refers to Neri v.
National Labor Relations Commission where it was held that a contractor ceases to be a labor-only
contractor by having substantial capital alone, without investment in tools and equipment.

Note: Labor-only contracting would give rise to: (1) the creation of an employer-employee relationship
between the principal and the employees of the contractor or sub-contractor; and (2) the solidary
liability of the principal and the contractor to the employees in the event of any violation of the Labor
Code.

Coca-cola Bottlers Philippines vs. Ricky Dela Cruz, et. al.

G.R. No. 184977, December 7, 2009

Facts:

Respondents filed two separate complaints for regularization with money claims against Coca-Cola
Bottlers Philippines, Inc. Before the Labor Arbiter, the respondents alleged that they are route helpers
assigned to work in the petitioners trucks. They go from the Coca-Cola sales offices or plants to
customer outlets; they were hired either directly by the petitioner or by its contractors, but they do not
enjoy the full remuneration, benefits and privileges granted to the petitioners regular sales force. They
argued that the services they render are necessary and desirable in the regular business of the
petitioner. In defense, the petitioner contended that it entered into contracts of services with Peerless
and Excellent Partners Cooperative, Inc. (Excellent) to provide allied services; under these contracts,
Peerless and Excellent retained the right to select, hire, dismiss, supervise, control and discipline and pay
the salaries of all personnel they assign to the petitioner; in return for these services, Peerless and
Excellent were paid a stipulated fee. The petitioner posited that there is no employer-employee
relationship between the company and the respondents and the complaints should be dismissed for lack
of jurisdiction on the part of the NLRC. In reply, the respondents countered that they worked under the
control and supervision of the companys supervisors who prepared their work schedules and
assignments. Peerless and Excellent, too, did not have sufficient capital or investment to provide
services to the petitioner. The respondents thus argued that the petitioners contracts of services with
Peerless and Excellent are in the nature of "labor-only" contracts prohibited by law.

Issue:

Was there labor-only contracting?

Ruling:

Yes. The contract between the principal and the contractor is not the final word on how the contracted
workers relate to the principal and the purported contractor; the relationships must be tested on the
basis of how they actually operate. The legitimate job contractor must have the capitalization and
equipment to undertake the sale and distribution of the manufacturers products, and must do it on its
own using its own means and selling methods.

Even before going into the realities of workplace operations, the Court of Appeals found that the service
contracts themselves provide ample leads into the relationship between the company, on the one hand,
and Peerless and Excellent, on the other. The Court of Appeals noted that both the Peerless and the
Excellent contracts show that their obligation was solely to provide the company with the services of
contractual employees, and nothing more. These contracted services were for the handling and
delivery of the companys products and allied services. Following D.O. 18-02 and the contracts that
spoke purely of the supply of labor, the Court of Appeals concluded that Peerless and Excellent were
labor-only contractors unless they could prove that they had the required capitalization and the right of
control over their contracted workers.

The contractors were not independently selling and distributing company products, using their own
equipment, means and methods of selling and distribution; they only supplied the manpower that
helped the company in the handing of products for sale and distribution. In the context of D.O. 18-02,
the contracting for sale and distribution as an independent and self-contained operation is a legitimate
contract, but the pure supply of manpower with the task of assisting in sales and distribution controlled
by a principal falls within prohibited labor-only contracting. Consequently, the contracted personnel,
engaged in component functions in the main business of the company under the latters supervision and
control, cannot but be regular company employees.
Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al.

G.R. No. 160506, March 9, 2010

Facts:

Petitioners worked as merchandisers of P&G. They all individually signed employment contracts with
either Promm-Gem or SAPS for periods of more or less five months at a time.They were assigned at
different outlets, supermarkets and stores where they handled all the products of P&G. They received
their wages from Promm-Gem or SAPS. Subsequently, petitioners filed a complaintagainst P&G for
regularization, service incentive leave pay and other benefits with damages. The complaint was later
amendedto include the matter of their subsequent dismissal.

The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employeremployee relationship between petitioners and P&G. He found that the selection and engagement of
the petitioners, the payment of their wages, the power of dismissal and control with respect to the
means and methods by which their work was accomplished, were all done and exercised by PrommGem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors.
On appeal to the NLRC, the NlRC affirmed the decision of the labor arbiter. Petitioners then filed a
petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the
CA.

Issues:

1.) Is P&G the employer of petitioners?

2.) Were petitioners illegally dismissed?

Ruling:

Qualify. In order to determine whether P&G is the employer of petitioners, it is necessary to first
determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

The Court held that Promm-Gem cannot be regarded as labor-only contractor but a legitimate
independent contractor because the financial statement of Promm-Gem shows that it has authorized
capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of
1990. It also has long term assets worth P432, 895.28 and current assets of P719, 042.32. Promm-Gem
has also proven that it maintained its own warehouse and office space with a floor area of 870 square
meters. It also had under its name three registered vehicles which were used for its
promotional/merchandising business. Promm-Gem also has other clients aside from P&G.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,
250.00. There is no other evidence presented to show how much its working capital and assets are.
Furthermore, there is no showing of substantial investment in tools, equipment or other assets.
Considering that SAPS has no substantial capital or investment and the workers it recruited are
performing activities which are directly related to the principal business of P&G, the court held that
SAPS is engaged in "labor-only contracting". The contractor is considered merely an agent of the

principal employer and the latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.

With regard to the termination letters given by Promm-Gem to its employees uniformly specified the
cause of dismissal as grave misconduct and breach of trust. The court held that there were no valid
causes for the dismissal of petitioners-employees of Promm-Gem.

Misconduct to be valid just cause for dismissal, such misconduct (a) must be serious; (b) must relate to
the performance of the employees duties; and (c) must show that the employee has become unfit to
continue working for the employer. In the case, petitioners-employees of Promm-Gem may have
committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they
were motivated by any wrongful intent in doing so. As such, they are guilty of only simple misconduct
for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A misconduct
which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an
employee.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach
of the trust reposed in the employee by his employer. Ordinary breach will not suffice. Loss of trust and
confidence, as a cause for termination of employment, is premised on the fact that the employee
concerned holds a position of responsibility or of trust and confidence. And, in order to constitute a just
cause for dismissal, the act complained of must be work-related and must show that the employee is
unfit to continue to work for the employer. In the case at bar, In the instant case, the petitionersemployees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust
and confidence. Neither is there any evidence to show that they are unfit to continue to work as
merchandisers for Promm-Gem. Hence, no valid cause for dismissal by Promm-Gem against petitioneremployees.

With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal.
The records show that upon receipt by SAPS of P&Gs letter terminating their "Merchandising Services
Contact", they in turn verbally informed the concerned petitioners not to report for work anymore. It
must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with the
employer. In termination cases, the burden of proof rests upon the employer to show that the dismissal
is for just and valid cause. In the instant case, P&G failed to discharge the burden of proving the legality
and validity of the dismissals of those petitioners who are considered its employees. Hence, the
dismissals necessarily were not justified and are therefore illegal.

OUTSOURCING

Temic Automotic Philippines vs.

Temic Automotive Philipppines Employees Union-FFW

G.R. No. 186965, December 23, 2009

Facts:

By practice, the petitioner contracts out some of the work in the warehouse department, to three
independent service providers or forwarders. These forwarders also have their own employees who
hold the positions of clerk, material handler, system encoder and general clerk. The regular employees
of the petitioner and those of the forwarders share the same work area and use the same equipment,
tools and computers all belonging to the petitioner.

This outsourcing arrangement gave rise to a union grievance on the issue of the scope and coverage of
the collective bargaining unit, specifically to the question of "whether or not the functions of the
forwarders employees are functions being performed by the regular rank-and-file employees covered
by the bargaining unit." The union thus demanded that the forwarders' employees be absorbed into the
petitioner's regular employee force and be given positions within the bargaining unit. The petitioner, on
the other hand, on the premise that the contracting arrangement with the forwarders is a valid exercise
of its management prerogative, posited that the union's position is a violation of its management
prerogative to determine who to hire and what to contract out, and that the regular rank-and-file
employees and their forwarders employees serving as its clerks, material handlers, system encoders
and general clerks do not have the same functions as regular company employees.

Issue:

Was the company validly outsourcing the services involving forwarding, packing, loading and clerical
activities related thereto?

Ruling:

Yes. The employer was within its right in entering the forwarding agreements with the forwarders as an
exercise of its management prerogative. The employers declared objective for the arrangement is to
achieve greater economy and efficiency in its operations a universally accepted business objective and
standard that the union has never questioned. In Meralco v. Quisumbing,[G.R. No. 127598, January 27,
1999] the Court joined this universal recognition of outsourcing as a legitimate activity when it held that
a company can determine in its best judgment whether it should contract out a part of its work for as
long as the employer is motivated by good faith; the contracting is not for purposes of circumventing
the law; and does not involve or be the result of malicious or arbitrary action.
ALIEN EMPLOYMENT PERMIT

WPP Marketing Communications, Inc., et al. vs. Jocelyn M. Galera

GR No. 169207; March 25, 2010

Jocelyn M. Galera vs. WPP Marketing Communications, Inc., et al.

GR No. 169239; March 25, 2010

Facts:

Petitioner Jocelyn M. Galera is an American citizen, who was hired by respondent John Steedman,
Chairman of WPP Worldwide and Chief Executive Officer of Mindshare, Co., a corporation based in Hong
Kong, China, to work in the Philippines for private respondent WPP Marketing Communications, Inc.
(WPP), a corporation registered and operating under the laws of Philippines. Under the employment
contract, Galera would commence employment on September 1, 1999, with the position of Managing
Director of Mindshare Philippines. Thus, without obtaining an alien employment permit, Galera
commenced her employment with WPP Philippines on the said date. It was only after four months from
the time she commenced employment that private respondent WPP filed before the Bureau of
Immigration an application for petitioner Galera to receive a working visa. In the application, she was
designated as Vice-President of WPP. Petitioner alleged that she was constrained to sign the application
in order that she could remain in the Philippines and retain her employment.

On December 14, 2000, private respondent Galera was verbally informed by Steedman that her
employment had been terminated. She received her termination letter the following day. Her

termination prompted Galera to commence a complaint for illegal dismissal before the labor arbiter.
The labor arbiter found WPP, Steedman, Webster, and Lansang liable for illegal dismissal and damages.
Furthermore the labor arbiter stated that Galera was not only illegally dismissed but was also not
accorded due process, saying that Galera was not given an opportunity by WPP to defend herself and
explain her side. Thus, WPP did not observe both substantive and procedural due process in terminating
Galeras employment. The labor arbiter ordered WPP to reinstate Galera and to pay her backwages,
transportation and housing benefits, and moral and exemplary damages, among others.

On appeal, the NLRC reversed the labor arbiters ruling. The NLRC ruled that Galera was WPPs VicePresident, and therefore, a corporate officer at the time she was removed by the Board of Directors on
14 December 2000. The NLRC ruled that the labor arbiter had no jurisdiction over the case because
being a corporate officer, a case arising from her termination is considered as an intra-corporate
dispute, which was cognizable by the Securities and Exchange Commission under P.D. 902-A (but now by
the Regional Trial Courts designated as Commercial Courts by the Supreme Court pursuant to Section
5.2 of RA No.8799).

The Court of Appeals reversed the NLRC. It ruled that Galeras appointment by the Board of Directors of
the WPP as Vice President for Media had no legal effect as WPPs by-laws provided for only one VicePresident, which at that time was occupied. Furthermore, WPPs by-laws did not include a managing
director as among its corporate officers. The Court of Appeals ordered WPP to pay Galera backwages
and separation pay, as well as housing benefits, moral and exemplary damages, and attorneys fees,
among others.

The case was subsequently elevated to the Supreme Court.

Issues:

1. Is Galera an employee or a corporate officer of WPP?

2. Did the labor arbiter have jurisdiction over the case?

3. Was Galera illegally dismissed?

4. Is Galera entitled to collect the award of backwages and damages even if she did not have an alien
employment permit when she commenced her employment in the Philippines?

Ruling (First Issue):

Galera is an employee of WPP. She is not a corporate officer of WPP. An examination of WPPs by-laws
resulted in a finding that Galeras appointment as a corporate officer (Vice-President with the
operational title of Managing Director of Mindshare) during a special meeting of WPPs Board of
Directors is an appointment to a non-existent corporate office. WPPs by-laws provided for only one
Vice-President. At the time of Galeras appointment on December 31, 1999, WPP already had one VicePresident in the person of Webster. Galera cannot be said to be a director of WPP also because all five
directorship positions provided in the by-laws are already occupied.

The appellate court further justified that Galera was an employee and not a corporate officer by
subjecting WPP and Galeras relationship to the four-fold test: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employee with respect to the means and methods by which the work is to be accomplished.
The appellate court found that Sections 1 and 4 of the employment contract mandate where and how
often she is to perform her work; Sections 3, 5, 6 and 7 show that wages she receives are completely
controlled by WPP; and Sections 10 and 11 clearly state that she is subject to the regular disciplinary
procedures of WPP.

(Second Issue):

The Labor Arbiter had jurisdiction over the illegal dismissal complaint filed by Galera. Galera being an
employee, the Labor Arbiter and the NLRC had jurisdiction over her illegal dismissal complaint. Article
217 of the Labor Code vests the Labor Arbiter with the jurisdiction to hear and decide, among others
termination disputes, involving workers, whether agricultural or non-agricultural.
(Third Issue):

Yes, WPPs dismissal of Galera lacked both substantive and procedural due process.

WPP failed to prove any just or authorized cause for Galeras dismissal. WPP was unable to substantiate
the allegations of Steedmans December 15, 2000 letter to Galera, (questioning her leadership and
competence). Galera, on the other hand, presented documentary evidence in the form of
congratulatory letters, including one from Steedman, which contents are diametrically opposed to the
December 15, 2000 letter. Also, the law requires that the employer must furnish the worker sought to
be dismissed with two written notices before termination of employment can be legally effected: (1)
notice which apprises the employee of the particular acts or omissions for which his dismissal is sought;
and (2) the subsequent notice which informs the employee of the employers decision to dismiss him.
Failure to comply with the requirements taints the dismissal with illegality. WPPs acts clearly show that
Galeras dismissal did not comply with the two-notice rule.

(Fourth Issue):

No, Galera could not claim the employees benefits she is entitled under Philippine Labor Laws. The law
and the rules are consistent in stating that the employment permit must be acquired prior to
employment. Article 40 of the Labor Code states: "Any alien seeking admission to the Philippines for
employment purposes and any domestic or foreign employer who desires to engage an alien for
employment in the Philippines shall obtain an employment permit from the Department of Labor.
Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides, among others, that if an
alien enters the country under a non-working visa and wishes to be employed thereafter, he may only
be allowed to be employed upon presentation of a duly approved employment permit.

Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to sanction the
violation of the Philippine labor laws requiring aliens to secure work permits before their employment.
We hold that the status quo must prevail in the present case and we leave the parties where they are.
This ruling, however, does not bar Galera from seeking relief from other jurisdictions.

ILLEGAL RECRUITMENT

People vs. Balagan and Avila

G.R. No. 183099, February 3, 2010

Facts:

Complainant went into the office of a certain recruiter whom he heard can facilitate employment
overseas. Upon arriving at the latters office, the recruiter asked him if he was interested in getting
employment abroad. After answering in the affirmative, the recruiter told him to submit certain
requirements (e.g. passport and other requirements). After doing so, the recruiter told Complainant to
prepare P150,000 for deployment. A few days later, Complainant went to the recruiters office and
handed P37,000. A day after that, he gave another P20,000. These amounts, however, were not
personally handed to said recruiter, but instead was given to the accused (Balagan and Avila) who
allegedly served as the recruiters clerk and secretary respectively.

No deployment occurred. Complainant demanded for the return of the money, but the recruiter
refused. Upon Complainants inquiry with the POEA, he discovered that the recruiter and the accused
(Balagan and Avila) were not licensed to perform recruitment activities. Aggrieved he filed a case of
Syndicated Illegal Recruitment and Estafa against the accused (Balagan and Avila only). The RTC
convicted the accused as charged, but on appeal, the CA, while affirming the conviction of Estafa,
modified the conviction of Syndicated Illegal Recruitment to Simple Illegal Recruitment. Hence, the
present petition.

Issue:

Was the modification correct?

Ruling:

Yes, because the prosecution failed to establish that the illegal recruitment was committed by a
syndicate.[1]

People vs. Maritess Martinez y Dulay

G.R. No. 158627, March 5, 2010

Facts:

Appellant Maritess Martinez and her daughter, Jenilyn Martinez, were charged with seven counts of
Estafa before the RTC of Manila. In addition, appellant together with her children Jenilyn Martinez and
Julius Martinez, were also charged with the crime of Illegal Recruitment in large scale. However,
warrants of arrest were served only against appellantand Julius Martinez, whereas accused Jenilyn
Martinez remains at large. The RTC rendedered a decision acquitting Julius Martinez while declaring
Maritess Martinez guilty of four (4) counts of estafa and illegal recruitment. On appeal the CA affirmed
the appellants conviction of (4) counts of estafa, while in the case of illegal recruitment modified it as
illegal recruitment in large scale.

Issue:

Is appellant guilty of illegal recruitment in large scale?

Ruling:

Yes. As defined in Art. 38 of the Labor Code, Illegal Recruitment a) any recruitment activities, including
the prohibited practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or

non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code. x x x (b)
Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof. illegal
recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction,
enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed
in large scale if committed against three (3) or more persons individually or as a group.

In the instant case, the prosecution satisfactorily established that appellant was not a licensee or holder
of authority to deploy workers abroad. By this fact alone, she is deemed to have engaged in illegal
recruitment and the same was committed in large scale because it was carried out against the four
complainants.

The three elements of the crime of illegal recruitment, to wit: a) the offender has no valid license or
authority required by law to enable him to lawfully engage in recruitment and placement of workers; b)
the offender undertakes any of the activities within the meaning of "recruitment and placement" under
Article 13(b) of the Labor Code, or any of the prohibited practices enumerated under Article 34 of the
said Code (now Section 6 of RA 8042); and c) the offender committed the same against three or more
persons, individually or as a group, are present in the instant case.
LNS international Manpower Services vs. Armando Padua, Jr.

G.R. No. 179792, March 5, 2010

Facts:

Respondent Armando C. Padua, Jr. filed a Sworn Statement before the Adjudication Office of the POEA
against LNS and Sharikat Al Saedi International Manpower (Sharikat) for violation of Section 2(b), (d),
and (e) of Rule I, Part VI of the 2002 POEA Rules and Regulations Governing the Recruitment and
Employment of Land-based Overseas Workers. Respondent Padua alleged that he applied as auto
electrician with petitioner LNS and assured of a job in Saudi Arabia. Respondent paid to LNS the
processing fees, medical expenses, and trade test. Respondent Padua further alleged that it was another
agency, Sharikat, which processed his papers and eventually deployed him to Saudi Arabia. However, he
returned to the Philippines because he was not allegedly paid his salaries and also because of violations
in the terms and conditions of his employment contract.

In its answer, LNS admitted that Padua applied for employment abroad but he withdrew all the
documents he submitted to LNS. As proof, LNS attached the withdrawal letter duly signed by Padua.
Thus, LNS claimed that it could not be held liable for non-issuance of receipt or misrepresentation. The
POEA issued its order finding LNS liable for non-issuance of receipt and misrepresentation. As to
Sharikat, the POEA found no sufficient evidence to hold it liable for the violations charged. On appeal to
the Secretary of DOLE, it dismissed the appeal of petitioner and affirmed the ruling of the POEA.
Aggrieved, petitioner filed with the CA a petition for certiorari but it was dismissed.

Issue:

Is petitioner liable for non-issuance of receipt and misrepresentation?

Ruling:

No. As a general rule, factual findings of administrative and quasi-judicial agencies specializing in their
respective fields, especially when affirmed by the CA, must be accorded high respect, if not finality.
However, the Court find out that the factual findings do not conform to the evidence on record or are
not supported by substantial evidence, as in the instant case.

The self-serving and unsubstantiated allegations of respondent cannot defeat the concrete evidence
submitted by petitioner. In fine, for failure to adduce any shred of evidence of payment made to
petitioner, or that petitioner referred or endorsed respondent for employment abroad to another
agency, the charges of non-issuance of receipt and misrepresentation against petitioner could not
possibly prosper. By the voluntary withdrawal of respondents application from petitioner, the latter
could not have been involved in the recruitment and placement of respondent and consequently could
not be held liable for any violation.
People vs. Melissa Chua

G.R. No. 184058, March 10, 2010

Facts:

Melissa Chua (appellant) was indicted for Illegal Recruitment (Large Scale). Appellant pleaded not guilty
on arraignment. Her co-accused Josie remained at large. The cases were consolidated, hence, trial
proceeded only with respect to appellant. Of the five complainants, only three testified, namely, Marilyn
D. Macaranas (Marilyn), Erik de Guia Tan (Tan) and Harry James King (King). Appellant denied the
charges. Claiming having worked as a temporary cashier from January to October, 2002 at the office of
Golden Gate, owned by one Marilyn Calueng, she maintained that Golden Gate was a licensed
recruitment agency and that Josie, who is her godmother, was an agent.

Appellant was convicted thereof by the Regional Trial Court (RTC) of Manila. She was also indicted for
five counts of Estafa but was convicted only for three. The Court of Appeals affirmed appellants
conviction.

Issue:

Is appellant guilty of illegal recruitment in large scale?

Ruling:

Yes. For illegal recruitment in large scale to prosper, the prosecution has to prove three essential
elements, to wit: (1) the accused undertook a recruitment activity under Article 13(b) or any prohibited
practice under Article 34 of the Labor Code; (2) the accused did not have the license or the authority to
lawfully engage in the recruitment and placement of workers; and (3) the accused committed such
illegal activity against three or more persons individually or as a group.

In the present case, Golden Gate, of which appellant admitted being a cashier from January to October
2002, was initially authorized to recruit workers for deployment abroad. Per the certification from the
POEA, Golden Gates license only expired on February 23, 2002 and it was delisted from the roster of
licensed agencies on April 2, 2002.

Appellant was positively pointed to as one of the persons who enticed the complainants to part with
their money upon the fraudulent representation that they would be able to secure for them
employment abroad. In the absence of any evidence that the complainants were motivated by improper
motives, the trial courts assessment of their credibility shall not be interfered with by the Court

Even if appellant were a mere temporary cashier of Golden Gate, that did not make her any less an
employee to be held liable for illegal recruitment as principal by direct participation, together with the
employer, as it was shown that she actively and consciously participated in the recruitment process.

Assuming arguendo that appellant was unaware of the illegal nature of the recruitment business of
Golden Gate, that does not free her of liability either. Illegal Recruitment in Large Scale penalized under
Republic Act No. 8042, or "The Migrant Workers and Overseas Filipinos Act of 1995," is a special law, a
violation of which is malum prohibitum, not malum in se. Intent is thus immaterial. And that explains
why appellant was, aside from Estafa, convicted of such offense.

JUST AND AUTHORIZED CAUSES

FRAUD AND LOSS OF CONFIDENCE

Eric dela Cruz and Raul Lacuata vs. Coca-Cola Bottlers Philippines, Inc.

G. R. No. 180465, July 31, 2009

Facts:

On August 12, 2000, Raymundo Sales, a salesman of Coca-Cola Bottlers met an accident while diving
respondents motor vehicle which he was then not authorized to us. While Sales was hospitalized, he
was observed to have been under the influence of liquor during the incident. This was also indicated in
the police blotter dated the same day. However, respondent discovered that Sales co-employees
(Espina, dela Cruz and Lacuata) secured an August 15 police blotter and August 14 medical certificate
omitting the statement that Sales was under the influence of liquor.

After initial investigation, respondent issued memoranda requiring the petitioner to explain why no
disciplinary action should be taken against them for violation of the Employees Code vis a vis Article 282
of the Labor Code in connection to their production of the police blotter and medical certificate which
did not state the full details of the accident. Petitioners denied the participation of the alteration of the
document. However, after further investigation, it showed that petitioners conspired to have an altered
report prepared to make it appear that Sales was not under an influence of liquor.

The Labor Arbiter dismissed Espinas complaint for lack of merit, while de la Cruz was found to have
been illegally dismissed and reinstatement was ordered. Meanwhile, Lacuata was found to have been at
fault and that respondent was justified in losing trust and confidence in him. On appeal by the
respondent, the NLRC affirmed the decision of the Labor Arbiter. Respondent then filed a certiorari
before the Court of Appeals wherein it ruled that the petitioners were validly dismissed. Hence, this
Review by the petitioners.

Issue:

Did the Court of Appeals err in deciding that the petitioners were validly dismissed?

Ruling:

The Court of Appeals correctly overturned the decision of the Labor Arbiter and the NLRC since the
petitioners were supervisory employees and thus covered with the trust and confidence rule. For loss of
trust and confidence to be a ground for termination of employment, it must be willful and must be
connected with the employees work. The records of the case are rife with proof that the supervisors
committed acts which are inimical to the interest and stability, not only to the management, but of the
company itself. They did so through deceitful means and methods. Indeed, by obtaining an altered
police report and medical certificate, petitioners attempted to cover up the fact that Sales was under
the influence of liquor when the accident took place. In doing so, they committed acts inimical to
respondents interests. They thus committed a work-related willful breach of trust and confidence
reposed in them.

Eats-Cetera Food Services vs. Letran

GR No. 179507, October 2, 2009

Facts:

Espadero had been employed by Eats-cetera Food Services Outlet since June 30, 2001 as cashier. On
November 20, 2002, when she reported for duty, Espadero discovered that her time card was already
punched in. After asking around, she found out that a certain Joselito Cahayagan was the one who
punched in her time card. Espadero, however, failed to report the incident to her supervisor, Clarissa
Reduca (Reduca). This prompted Reduca to report the incident to the personnel manager, Greta dela
Hostria. Espadero contended that she was dismissed outright without being given ample opportunity to
explain her side. She claimed that on November 21, 2002, petitioners called her and asked her to make a
letter of admission as a condition for her reemployment.

After writing the letter, Espadero was told to wait for an assignment. The following day, on November
22, 2002, the company issued a Memorandum terminating her for violation of Rule 24 of the company
rules and regulations. Because of this, Espadero decided to file a complaint for illegal dismissal before
the NLRC.

Petitioners, however, maintained that the company rules and regulations, as well as the corresponding
penalties in case of violation thereof, were made known to Espadero before and upon her actual
employment as cashier. They also argued that contrary to her claim, petitioners gave Espadero ample
opportunity to explain her side.

Petitioners also claimed that they conducted an impartial investigation of the incident and found
substantial evidence that Espadero was in cahoots with a co-worker in punching in her time card. For
this reason, petitioners decided to terminate her.

Issue:

Is Espaderos infraction serious enough to warrant the penalty of dismissal?

Ruling:

Yes. Espaderos position as a cashier is one that requires a high degree of trust and confidence, and that
her infraction reasonably taints such trust and confidence reposed upon her by her employer.
The
rule, therefore, is that if there is sufficient evidence to show that the employee occupying a position of
trust and confidence is guilty of a breach of trust, or that his employer has ample reason to distrust him,
the labor tribunal cannot justly deny the employer the authority to dismiss such employee.

In the instant case, petitioners cannot be faulted for losing their trust in Espadero. As an employee
occupying a job which requires utmost fidelity to her employers, she failed to report to her immediate
supervisor the tampering of her time card. Whether her failure was deliberate or due to sheer
negligence, and whether Espadero was or was not in cahoots with a co-worker, the fact remains that the
tampering was not promptly reported and could, very likely, not have been known by petitioners, or, at
least, could have been discovered at a much later period, if it had not been reported by Espaderos
supervisor to the personnel manager. Petitioners, therefore, cannot be blamed for losing their trust in
Espadero.

Moreover, the peculiar nature of Espaderos position aggravates her misconduct. The misconduct, to be
serious, must be of such a grave character and not merely trivial or unimportant. To constitute just
cause for termination, it must be in connection with the employees work. With the degree of trust
expected of Espadero, such infraction can hardly be classified as one that is trivial or unimportant. Her
failure to promptly report the incident reflects a cavalier regard for the responsibility required of her in
the discharge of the duties of her position.

Bibiana Farms and Mills v. Arturo Lado

G.R. No. 157861, February 2, 2010

Facts:

Respondent was a warehouseman for the Petitioner, acting as empty sacks controller among other
functions. On one occasion, a customer transacted with the Petitioners cashier for the purchase of
3,000 pieces of empty sacks. The cashier gave a note to the customer and instructed the latter to show
said note to the warehouseman. The note contained instructions as to how many sacks were to be
loaded. After showing the note to the Respondent (the warehouseman), the latter loaded the said sacks
for the customer, but despite the cashiers instruction, the Respondent loaded a total of 3,400 sacks
instead of just 3,000; and if not for the cashiers timely inspection, the 400 sack excess would have been
brought by the customer without payment.

The next day, the Petitioners General Operations Manager issued two (2) memoranda directing
Respondent to submit his written explanation on the release of sacks contrary to the cashiers
instructions. After submitting his explanation, another memorandum was issued Manager informing him
that he is being placed under preventive suspension pending investigation. Another notice was sent to
his house informing him of the date of the investigation but Respondents house maid refused to accept
it. On September 11, 1998, an investigation was conducted, but before a decision can be made on the
investigation, Respondent filed, a complaint for illegal preventive suspension against the Petitioner. A
few days after, Respondent received a Notice of Termination dismissing him from the service the
grounds being "serious misconduct, dishonesty, willful breach of trust, fraud, loss of confidence and

other grounds". Aggrieved, Respondent filed another case for illegal termination. Both cases were
consolidated.

Issue:

Was the termination valid?

Ruling:

Yes. Under the Labor Code, the requirements for the lawful dismissal of an employee are two-fold:
substantive and procedural. Not only must the dismissal be for a just or authorized cause, the basic
requirements of procedural due process notice and hearing must likewise be observed. Without the
concurrence of the two, the termination is illegal.

On the just cause issue, Respondent was no ordinary rank-and-file employee. As warehouseman, his
duties involved the handling of incoming and outgoing materials. He had, as the Arbiter noted, access to
company property;tasked to closely monitor and handle company property, especially the outflow of
sacks to avoid or minimize losses. In other words, Respondent held a position of trust and confidence.
When he disregarded the cashiers note, Respondent violated company procedures, laying the company
open to the possibility of loss. This is a serious misconduct for which he should be held accountable.

On the issue of procedural due process, the essence of due process is the opportunity to be heard; it is
the denial of this opportunity that constitutes violation of due process of law. The respondent was given
the opportunity to be heard when a proper notice of investigation was sent to him, although the notice
did not reach him for reasons outside the petitioners control. He was not also totally unheard on the
matter as he was able to explain his side through the two (2) explanation letters he submitted.

Philippine Journalists, Inc. vs. NLRC

G.R. No. 187120, February 16, 2010

Facts:

PJI is a corporation engaged in the publication of People's Journal, People's Journal Tonight, People's
Journal International, People's Taliba, Women's Journal, and Insider. In December 1978, it employed
respondent Eduardo S. Rivera (Rivera) as proof reader. Rivera rose from the ranks over the years,
becoming purchasing manager in 1998. His primary duty involved the canvassing and purchase of paper
and other materials for PJI's day-to-day operations. Sometime in November 2002, Women's Journal
implemented a calendar insertion project requiring paper-coated materials. Rivera canvassed and
purchased the material sheet. Consistencies in the canvass and prices were found. On January 8, 2003,
PJI's Chief Legal Counsel issued a memorandumrequiring Rivera to explain in writing why he "should not
be terminated from employment for defrauding or attempting to defraud the Company " in the
canvassing and purchase of Womens Journals paper requirements. Rivera submitted his written
explanation, denying that he defrauded or attempted to defraud PJI. Ruiz-Bruno issued a memorandum
on the same day to Assistant Purchasing Manager Jean Alvarado (Alvarado), requiring her to explain the
difference in the quotation prices. On the same day, Alvarado submitted her explanation, stating that
she signed the canvass sheet as instructed by Rivera and she claimed that the figures were written by
Rivera himself.

In a memorandum dated February 7, 2003, Rivera was terminated "on the ground of loss of confidence".
Rivera filed a complaint for illegal dismissal. Labor Arbiter found that Rivera's dismissal was proper. The
NLRC reversed the labor arbiter's decision which was affirmed by the CA.

Issue:

Is the dismissal on the ground of loss of confidence valid?

Ruling:

Yes. As the company's purchasing manager, Rivera held a position of trust and confidence; his role in the
procurement of the company's operational requirements is critical. PJI is a publication company and is
engaged in a highly competitive enterprise. The facts shows that Rivera arranged a purchase transaction
markedly disadvantageous to the company mainly due to: (1) his failure to conduct an honest-togoodness canvass of prices for the required paper material and (2) his dishonesty, or at least his
misrepresentations, in making it appear that he canvassed two suppliers when he really dealt only with
one of them.

Substantial evidence exists justifying Riveras dismissal for a just cause loss of trust and confidence. For
loss of trust and confidence to be a ground for dismissal, the law requires only that there be at least
some basis to justify the dismissal.

To place this conclusion in Riveras own terms, contrary to what he claimed, his dismissal was not on the
basis of "mere speculation and conjecture," but on the basis of relevant evidence that a reasonable
mind might accept to support a conclusion. In legal terms, this is the quantum of proof required in
administrative proceedings.

White Diamond Trading Corporation and/or Jerry Uy and Jessie Uy vs. NLRC, Norlito Escoto, Mary Grace
Pastoril and Maria Myrna Omela

GR No. 186019; March 29, 2010

Facts:

The respondents were employees of White Diamond Trading Corporation, a company engaged in buying
and selling second-hand cars. At the time of their dismissal, Norlito Escoto was the companys
salesman, Mary Grace Pastoril was the secretary, and Maria Myrna Omela was the assistant secretary.

On February of 2004, Norlito Escoto sold a Toyota Town Ace to Teodoro Aquino for P200,000. Acting on
instructions from Escoto, Aquino handed P200,000 to Omela, which amount Aquino counted in the
presence of Pastoril. Pastoril then took out the deed of sale and handed it to Aquino. The deed showed
that the consideration for the sale was P190,000. Omela issued to Aquino a receipt indicating the
purchase price of P200,000. However, the duplicate copy of the receipt, which the company retained,
only reflected a purchase price of P190,000. The address and telephone number of Aquino was also
altered in the duplicate receipt retained by the company. On the same day, another employee, Neil
Rodriguez, made inquiries from the companys manager regarding the sale of the vehicle from. The
manager told him that the purchase price was P190,000. This prompted him to wonder why Escoto gave
him P1,000. Upon learning of the said fact, the manager instructed Rodriguez to investigate the sale.
Soon, the company learned from Aquino that he bought the vehicle for P200,000 and that days after the
sale the three respondents went to his (Aquino) house to return to him P10,000, which the respondents
said was his discount. Prior to returning the P10,000, the respondents told Aquino that if somebody
would like to see the original receipt, he (Aquino) should just say that the receipt was lost. As a result of
the investigation, Escoto, Pastoril, and Omela were terminated by the company. Thereafter, they filed a
case of illegal dismissal against the petitioners.

The labor arbiter dismissed the complaint, ruling that the dismissal was valid because the respondents
conspired in defrauding the company. The NLRC affirmed the ruling of the labor arbiter, but with
modifications. The NLRC said that Pastoril showed no contributory act in the fraud committed as her
role was simply that of handing to Aquino the deed of sale. Thus, it ruled that Pastorils dismissal was
without just cause. The NLRC also ruled that while Escoto and Omelas dismissal were valid, the
company, however, failed to observe the twin-notice rule required in termination of employment. It said
that while the company conducted an investigation, the questions posed to the respondents were not
reduced to writing. Thus, the NLRC awarded Escoto and Omela nominal damages. The Court of Appeals
affirmed the NLRC.

Issues:

(1) Was the dismissal of Pastoril valid?

(2) Are the dismissed employees entitled to nominal damages because on non-observance of the twinnotice rule?

Ruling (First Issue):

Yes, the dismissal of Pastoril was valid. Pastoril was not an innocent participant in the fraudulent sale of
the company's Toyota Town Ace. She acted in concert with Escoto and Omela in the transaction that
defrauded their employer in the amount of P10,000.00. Pastoril prepared and issued the deed of sale
indicating that the vehicle was sold for P190,000.00, although she knew that the buyer was being
charged P200,000.00 for the vehicle. Escoto, Omela and Pastoril helped themselves to the price
difference and tried to silence Rodriguez (who got wind of the anomaly) by giving him P1,000.00 and
passing the P10,000.00 price difference off as the approved discount Aquino asked for. Under these
facts, there was a conspiracy where every participant had made significant contributory acts. Pastoril's
involvement in the questionable transaction was much more than handing over to Aquino his copy of
the deed of sale. The payment of the purchase price, the issuance of the receipt and the handing of the
deed of sale to Aquino were not separate isolated acts. They occurred in one continuous logical
sequence with the players in close proximity with one another. Under these circumstances, to say that
Pastoril merely handed over the deed of sale to Aquino without even looking at the document or
knowing what it contained, and without knowing what was actually happening, can hardly be believed.

(Second Issue):

Yes, Pastoril, Escoto and Omela are entitled to nominal damages because of the companys nonobservance of the twin notice rule required in termination of employment. The company itself admits
that it failed to observe procedural due process in Pastoril's dismissal and, for this reason, it states that
the payment of indemnity in the form of nominal damages is warranted. We note further that the NLRC
had the same conclusion with respect to Escoto and Omela; hence, the award to them of P10,000.00
each by way of nominal damages. We find a similar award of nominal damages to Pastoril to be
warranted.
SERIOUS/GRAVE/GROSS MISCONDUCT

Ester Maralit vs. Philippine National Bank

G. R. No. 163788, August 24, 2009

Facts:

Petitioner worked for respondent Bank from August 27, 1968 to December 31, 1998. She began as a
casual clerk and climbed her way to become branch manager. In February 1998, PNB offered its
personnel an early retirement plan through Special Separation Incentive Plan (SSIP). Under the Circular,
personnel with pending administrative cases or who are under preliminary investigation may the avail of
it, however, payment of their benefits shall be made only after the resolution of their cases and only if
they are not disqualified from receiving such benefits.

On September 8, 1998, PNB Internal Audit Group found that Maralit violated bank policies, which
resulted in the return of unfunded checks. She was the asked to submit her written explanation under
oath. On September 15, 1998, Maralit filed her application for early retirement. However, on September
29, PNB charged her with serious misconduct, gross violation of bank rules and regulations, and conduct
prejudicial to the best interest of the bank. Next month thereof, she was placed under preventive
suspension.

On November 1998, PNB conditionally approved Maralits application for early retirement effective on
December 31, 1998. Only on January 11, 1999 that she submitted her answer and stated that she did
the same in good faith and favorable to the bank.

On April 14, 2000, Maralit received a letter from PNBs Administrative Adjudication Panel finding her
guilty with the abovementioned violations. Then she filed a complaint with the arbitration branch of the

NLRC for non-payment of retirement benefits and separation pay against PNB. Both the Arbiter and the
NLRC found that she was entitled retirement benefits. However, the Court of Appeals set aside the
decision and held that the NLRC committed grave abuse of discretion when it affirmed the decision of
the Arbiter for Maralit was under preliminary investigation when she filed her application for early
retirement and that she was afforded due process.

Issue:

Was Maralit illegally dismissed by her employer Bank?

Ruling:

No. Respondent Bank termination is valid. PNBs Administrative Adjudication Panel found her guilty of
serious misconduct, gross violation of bank rules and regulations, and conduct prejudicial to the best
interest of the bank for she violated bank policies which resulted in the return of unfunded checks
amounting to P54,950,000. Accordingly, PNBs dismissal of Maralut from the service with forfeiture of
her retirement benefits is rightful. Having dismissed with just cause, she is not entitled with her
retirement benefits.

There is substantial evidence showing that there was valid cause for the bank to dismiss petitioners
employment for loss of trust and confidence. Petitioner was a bank accountant, which is a position of
trust and confidence.

Superlines Transportation Company, Inc. vs. Pinera

G.R. No. 188742, Oct. 13, 2009

Facts:

Respondent Pinera was complained by Zeny Iligan through a letter addressed to petitioner for
misappropriation of money sent by Iligan thru petitioner. Petitioner immediately investigated the
complaint. It informed respondent of the allegations against him and ordered him to answer the same.
Respondent admitted using the money for his personal needs. Thus, petitioner terminated respondents
employment on June 18, 2004 and notified him of its decision. Subsequently, respondent filed a
complaint for illegal dismissal with the labor arbiter asserting that petitioner did not have any just or
valid cause for terminating his employment. In a decision dated March 23, 2007, the labor arbiter
dismissed the complaint for lack of cause of action. She found that respondents dismissal was legal as
he was guilty of serious misconduct. On appeal, the National Labor Relations Commission (NLRC)
affirmed the decision of the labor arbiter in toto. On petition for certiorari in the Court of Appeals (CA),
the appellate court held that misappropriation did not constitute serious misconduct, hence,
respondent was illegally dismissed. Petitioner moved for reconsideration but it was denied, hence, this
petition.

Issue:

Is respondent guilty of misconduct?

Ruling:

Yes. An employee who fails to account for and deliver the funds entrusted to him is liable for
misappropriating the same and is consequently guilty of serious misconduct. Petitioner therefore validly
dismissed respondent.
Jose, Jr. vs Michaelmar Phils., Inc.

G.R. No. 169606, November 27, 2009

Facts:

Michaelmar Philippines, Inc. (MPI) is the Philippine agent of Michaelmar Shipping Services, Inc. (MSSI).
In an undertaking dated 2 July 2002 and an employment contract dated 4 July 2002, MSSI through MPI
engaged the services of Bernardo B. Jose, Jr. as oiler of M/T Limar. The employment contract stated in
part that any seaman will be instantly dismissed if they are found to have positive trace of alcohol or any
of the banned substances in any random testing sample. Jose, Jr. began performing his duties on board
the M/T Limar on 21 August 2002. On 8 October 2002, a random drug test was conducted on all officers
and crew members of M/T Limar at the port of Curacao. Jose, Jr. was found positive for marijuana.
Jose, Jr. was informed about the result of his drug test and was asked if he was taking any medication.
Jose, Jr. said that he was taking Centrum vitamins. He was allowed to continue performing his duties on
board the M/T Limar from 8 October to 29 November 2002. Despite getting a 96% total rating and was
described as very hardworking, trustworthy, and reliable, Jose, Jr. was repatriated to the Philippines
when M/T Limar reached the next port of destination after the random drug test. Jose, Jr. filed with the
NLRC a complaint against MPI and MSSI for illegal dismissal with claim for his salaries for the unexpired
portion of the employment contract.

Issue:

Was the dismissal based on a just cause?

Ruling:

Yes.
Article 282(a) of the Labor Code states that the employer may terminate an employment for
serious misconduct. Drug use in the premises of the employer constitutes serious misconduct. In
Bughaw, Jr. v. Treasure Island Industrial Corporation, the Court held that:

The charge of drug use inside the companys premises and during working hours against petitioner
constitutes serious misconduct, which is one of the just causes for termination. Misconduct is improper
or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden
act, a dereliction of duty, willful in character, and implies wrongful intent and not merely an error in
judgment. The misconduct to be serious within the meaning of the Act must be of such a grave and
aggravated character and not merely trivial or unimportant. Such misconduct, however serious, must
nevertheless, in connection with the work of the employee, constitute just cause for his separation. This
Court took judicial notice of scientific findings that drug abuse can damage the mental faculties of the
user. It is beyond question therefore that any employee under the influence of drugs cannot possibly
continue doing his duties without posing a serious threat to the lives and property of his co-workers and
even his employer. (Emphasis supplied)

However, Jose, Jr. was not given any written notice about his dismissal. But the propriety of Jose,
Jr.s dismissal is not affected by the lack of written notices. When the dismissal is for just cause, the lack
of due process does not render the dismissal ineffectual but merely gives rise to the payment of P30,000
in nominal damages.

Wilfredo Baron vs. NLRC

G.R. No. 182299, February 22, 2010

Facts:

The president and general manager of the MSI ordered an inventory to be conducted and even ordered
Baron to be temporarily relieved for the audit and the employees were instructed (1) to give all the
support needed by the audit team; (2) to surrender all keys and documents; (3) not to bring out
anything belonging to management; and (4) to undergo a search before leaving the office.Petitioners,
however, refused to cooperate in the audit process, and thereafter, refrained from reporting for work.
Nonetheless, the audit was completed, and an Internal Audit Reportwas submitted. According to the
audit team, there were several irregularities in the operations of MSI. The accounting system designed
by Baron was generally weak and compliance to procedures was not strictly implemented. The team
was also convinced that Baron abused his authority and took advantage of the laxity of the system he
designed.

Hence, MSI decided to terminate their services. The petitioners filed a complaint in the NLRC that they
were dismissed whimsically and capriciously in a very oppressive manner, without valid cause and
without due process of law.

Issues:

(1) Were petitioners validly dismissed on the grounds of grave misconduct and loss of confidence?

(2) Were petitioners accorded their right to due process when they were terminated from their
employment?

Ruling (First Issue):

Yes. The Constitution, statutes and jurisprudence uniformly mandate that no worker shall be dismissed
except for a just or valid cause provided by law, and only after due process is properly observed. The
just causes for termination of employment are enumerated in Article 282 of the Labor Code, as
amended. For there to be a valid dismissal based on loss of trust and confidence, the breach of trust
must be willful, meaning it must be done intentionally, knowingly, and purposely, without justifiable
excuse. The basic premise for dismissal on the ground of loss of confidence is that the employees
concerned hold a position of trust and confidence. It is the breach of this trust that results in the
employers loss of confidence in the employee. In the instant case, we note that petitioners were
holding the following positions: Wilfredo Baron - operations manager, Jomar dela Rosa and Jefferson
dela Rosa - sales representatives, Cynthia Junatas and Marife Ballesca - accounting clerks, and Lourdes
Rabago - warehouse checker. Clearly, petitioners were holding positions imbued with trust and
confidence, which are deemed to have been reposed on them by virtue of the nature of their work.

(Second Issue):

Yes. Records show that respondents complied with the two-notice rule. On various dates, two [2]
separate notices were given the employees. In the first notice, the acts imputed against them were
enumerated with a call for an investigation, while the second notice contained MSIs decision
terminating them after they failed to respond to the first notice. Thus, the employees inaction is

attributable to them. Due process is not violated where a person is given the opportunity to be heard
but chooses not to give his side of the case.

Evidence shows that petitioners were properly notified of the charges against them. They received
letters instructing them to explain within seventy-two (72) hours from receipt why they should not be
dismissed for their offenses. They were likewise warned that failure to reply would mean that they were
waiving their right to present evidence in their favor.
Caltex vs. Agad

G.R. 162017, APRIL 23, 2010

Facts:

Petitioner Caltex Philippines, Inc. (Caltex) employed respondent Hermie G. Agad (Agad) as Depot
Superintendent-A on a probationary basis for six months. On 28 February 1984, Agad became a regular
employee. After Agad had served for two years since 1990 as Superintendent of the Tacloban Bulk
Depot (Depot) in Leyte, Caltex transferred Agad to Bauan Bulk Depot in Batangas effective 16 May 1992.
To transfer his belongings from Leyte to Batangas, Agad secured the carpentry services of Alfredo Delda
(Delda), the owner of A.A. Delda Engineering Services (Delda Services) for the construction of two
crates. Agad paid Delda P15,500, evidenced by Official Receipt and submitted the receipt and Caltex
reimbursed him the said amount.

Caltex conducted its regular audit of employees account and expenses. The company auditor of Caltex
verified the crating expense incurred by Agad with Delda. Delda alleged that he was forced by Agad to
issue the official receipt in order to get a favorable recommendation from the incoming superintendent
of the Depot.

In another audit report, the company auditor declared that 190 pieces of 11 kg. liquefied petroleum gas
(LPG) cylinders from the Depot were allegedly withdrawn when Agad was still depot superintendent In a
Confidential Memorandum, Agad was informed of his dismissal on the grounds of serious misconduct

and loss of trust and confidence. The LA held that there were no just causes for Agads termination of
employment. The NLRC reversed the decision of the LA and held that there existed just causes which
justified Agads dismissal. Agad filed a Motion for Reconsideration which was denied. He then filed a
petition for certiorari under Rule 65 with the CA for the nullification of the decision of the NLRC. The CA
modified the judgment of the NLRC and ruled in favor of Agad. Caltex filed a Motion for Reconsideration
which was denied. Hence, the instant petition.

Issue:

Did Caltex legally terminate Agads employment on just causes?

Ruling:

The findings of the CA and National Labor Relations Commission (NLRC) establish the following: (1)
Agads request for withdrawal of the 190 cylinders of LPG as stated in a Memorandum dated 12
February 1992 cannot be given credence since the Memorandum pertains to the replacement of the
scrap materials due to Boy Bato consisting of 3,000 kilograms of black iron plates and not to the subject
LPG cylinders; (2) Agad did not observe Caltexs rules and regulations when he transferred the said
cylinders to Millanes compound without the RMRD form as required under Caltexs Field Accounting
Manual; (3) Agad gave specific instructions to Millanes to sell the cylinders without bidding to third
parties in violation of company rules; (4) Agad failed to submit the periodic inventory report of the LPG
cylinders to the accounting department; (5) Agad did not remit the proceeds of the sale of the LPG
cylinders; and (6) even if considered as scrap materials, the LPG cylinders still had monetary value which
Agad cannot appropriate for himself without Caltexs consent.

Considering these findings, it is clear that Agad committed a serious infraction amounting to theft of
company property. This act is akin to serious misconduct or willful disobedience by the employee of the
lawful orders of his employer in connection with his work, a just cause for termination of employment
recognized under Article 282(a) of the Labor Code. Misconduct has been defined as a transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character,
and implies wrongful intent and not mere error in judgment. To be serious, the misconduct must be of
such grave and aggravated character.

RETRENCHMENT

Tala vs. NLRC

G. R. 1755040, April 6, 2010

Facts:

The respondent, The Software Factory, Inc. (TSFI), is a domestic corporation engaged in providing
information technology and computer consultancy to the public. In April 2001, it employed Talam as a
full-time programmer. In the latter part of 2001 and in 2002, TSFI suffered financial reverses. Its
external financial auditor advised that it cut on its payroll expenses which accounted for 41% of its total
operating costs. TSFI heeded the advice and decided to retrench some of its employees, using as basis
its employees' service income and contribution margins to the company. TSFI found that Talam was one
of two employees with the least or with no income contribution for the year 2002. Consequently,
respondents verbally informed Talam that his services with the company would be terminated thirty
(30) days after September 27, 2002.

On November 29, 2002, Talam questioned the legality of his separation from the service through a
complaint for illegal dismissal and illegal deduction, with claims for service incentive leave pay, damages
and attorney's fees against TSFI. Talam alleged before the Labor Arbiter that his dismissal from
employment was illegal because the company did not comply with the requisites under Article 283 of
the Labor Code for a valid retrenchment action. On October 28, 2003, Executive Labor Arbiter rendered
a decision declaring Talam's dismissal illegal. The Arbiter held that while it is TSFI's right to reduce its
workforce to prevent losses, it failed to present evidence that the company adopted a retrenchment
program and there was also no evidence showing clearly that Talam should be retrenched.

TSFI appealed to the NLRC. In a Decision, the NLRC set aside the labor arbiter's ruling and dismissed
Talam's complaint without prejudice, for improper venue. TSFI moved for reconsideration of the NLRC
resolution which was partially granted. This time, the NLRC deleted the award of backwages and 13th
month pay, but ordered the company to pay Talam P30,000.00 as nominal damages for violating his
right to procedural due process, citing Jaka Food Processing Corp. v. Darwin Pacot, et al., where the
Court held that although the complainant's dismissal was based on an authorized cause, nominal
damages were awarded because of the respondent's failure to comply with the notice requirement. The
NLRC ruled that the non-observance of the notice requirement will not invalidate Talam's separation on
the ground of retrenchment; thus, the award of full backwages was not proper. Talam moved for
reconsideration, but the NLRC denied the motion. Talam thereafter sought relief from the CA through a
petition for certiorari under Rule 65 of the Rules of Court, charging the NLRC with grave abuse of
discretion for its resolutions of September 27, 2005 and January 31, 2006. In particular, Talam
questioned the deletion of the award to him of backwages and 13th month pay.

The CA denied the petition for lack of merit. It found Talam's separation from the service by reason of
retrenchment to be valid. However, while it acknowledged that TSFI was suffering from financial losses
as confirmed by the report of independent external auditor, it ruled that the company failed to give
Talam the notice required by law. The CA opined that although the law mandated that the written
notice of termination of employment for authorized causes should be served at least one month before
the effective date of the termination, the employment contract should prevail because it does not
violate the minimum requirement under Article 283 of the Labor Code. Even if Article 283 were to be
followed, the CA added, TSFI still failed to comply with the notice requirement considering that the
notices to Talam and to DOLE were for less than thirty (30) days.

Although Talam's dismissal was due to a cause authorized by law, the CA deemed TSFI liable for nominal
damages for violation of Talam's right to procedural due process. The appellate court affirmed with
modification the assailed NLRC decision. It increased to P50,000.00 the nominal damages of P30,000.00
awarded by the NLRC. Talam moved for reconsideration of the decision, but the CA denied the motion.
Hence, the present recourse to the Court.

Issue:

Is the dismissal valid?

Ruling:

Yes. Talam was not an unlettered employee; he was an information technology consultant and must
have been fully aware of the consequences of what he was entering into. The quitclaim was a voluntary
act as there is no showing that he was coerced into executing the instrument; he received a valuable
consideration for his less than two years of service with the company. Thus, from all indications, the
release and quitclaim was a valid and binding undertaking that should have been recognized by the
labor authorities and the CA. While the law frowns upon releases and quitclaims executed by employees
who are inveigled or pressured into signing them by unscrupulous employers seeking to evade their
legal responsibilities, a legitimate waiver representing a voluntary settlement of a laborers claims
should be respected by the courts as the law between the parties. In the Courts view, Talams release
and quitclaim fall into the category of legitimate waivers as defined by the Court.

With Talams voluntary execution of the release and quitclaim, the Court found the filing of the illegal
dismissal case tainted with bad faith. Neither can TSFI be made to answer for failure to afford Talam
procedural due process. The release and quitclaim, in the Courts mind, erased whatever infirmities
there might have been in the notice of termination as Talam had already voluntarily accepted his
dismissal through the release and quitclaim. As such, the written notice became academic; the notice,
after all, is merely a protective measure put in place by law and serves no useful purpose after
protection has been assured. The Court thus finds no basis for the conclusion that TSFI violated
procedural due process and should pay nominal damages.

The CA committed no reversible error in affirming the NLRC ruling that Talam was validly dismissed on
the ground of retrenchment.

First. The decision to retrench had a basis; it was not simulated nor resorted to for the purpose of
getting rid of employees. The decision was upon the recommendation of the companys external
auditor Leah A. Villanueva, as contained in her letter to the TSFI Board of Directors in October 2002. As
the CA noted, the standard proof of a companys financial standing is its financial statements duly
audited by credible external auditors. We see nothing in the records which impugns Villanueva's
assessment of the financial condition of TSFI at the time material to the case.

Second. The cost-cutting measure recommended involved reduction of TSFIs payroll expense account
which, as the auditor found, makes up 41% of the companys total operating expenses. Talam
insinuates that the share in the companys operating costs of personnel expenses is misleading,
contending that the bulk of the expense goes into management fees. While this may be so, it cannot be
denied that the management group is still part of the personnel component of the company, and absent
any showing of bad faith, the choice of who should be retrenched must be conceded to the company for
as long as there exists a basis for it.

In the present case, we note that the auditor suggested that TSFI review the contribution margin per
consultant and compensation packages of personnel in the executive and support group. Again, absent
any showing of bad faith, we cannot fault the company for choosing the option of looking at the margins
of contribution of the consultants to the income of the company as primary retrenchment standard. It is
just unfortunate that based on this yardstick, Talam came out as one of two consultants with very high
negative contribution margins and was therefore chosen for retrenchment.

Third. Talam was dismissed due to a cause authorized by law retrenchment to prevent losses. At the
time of Talams dismissal, TSFIs financial condition, as found by the external auditor, showed that it was
not just expecting losses, it already suffered a net income loss of P2,474,418.00 and retained earnings
deficit of P7,424,250.00 for the period ending December 31, 2002.

Fourth. TSFI resorted to other measures to abate its losses. It claimed that during the crises period, it
used as an office a small-room (a mere cubicle) with only a two-person support staff; it reduced the
salaries of its employees by as much as 30%. This submission by the company is substantiated by the
schedule of Operating Expenses for the year ended December 31, 2002 and September 30, 2002. A
quick glance at the schedule readily shows a reduction of TSFIs operating expenses across the board.
The schedule indicates a substantial decrease in the operating expenses. On the whole, we find that TSFI
satisfied the requisites for a valid retrenchment.
REDUNDANCY

Lowe, Inc. vs. CA and Mutuc

G.R. Nos. 164813 & 174590, August 14, 2009

Facts:

Lowe, an advertising agency, is a corporation duly organized and existing under the laws of the
Philippines. On 23 June 2000, at the height of the influx of advertising projects, Lowe hired Mutuc as a
Creative Director to help out the four other Creative Directors of Lowe. Mutuc was given a salary of
P100,000 a month. On 26 February 2001, Mutuc became a regular employee of Lowe.

However, in 2001, most of Lowes clients reduced their advertising budget. In response to the situation,
Lowe implemented cost-cutting measures including a redundancy program. On 31 October 2001, Lowe
terminated Mutucs services because her position was declared redundant.

Subsequently, Mutuc filed a complaint for illegal dismissal, nonpayment of 13th month pay with prayer
for the award of moral and exemplary damages plus attorneys fees against Lowe.

The Labor Arbiter ruled that Lowe satisfied the requisites for a valid implementation of a redundancy
program. The Labor Arbiter found self-serving Mutucs allegation that she was terminated from service
due to professional jealousy.

Issue:

Was there a valid dismissal on the ground of redundancy?

Held:

Yes. Redundancy, which is one of the authorized causes for the dismissal of an employee, is governed by
Article 283 of the Labor Code. Redundancy exists when the service of an employee is in excess of what is
reasonably demanded by the actual requirements of the business.A redundant position is one rendered
superfluous by any number of factors, such as overhiring of workers, decreased volume of business,
dropping of a particular product line previously manufactured by the company or phasing out of a
service activity formerly undertaken by the enterprise.

For a valid implementation of a redundancy program, the employer must comply with the following
requisites: (1) written notice served on both the employee and the DOLE at least one month prior to the
intended date of termination; (2) payment of separation pay equivalent to at least one month pay or at
least one month pay for every year of service, whichever is higher; (3) good faith in abolishing the
redundant position; and (4) fair and reasonable criteria in ascertaining what positions are to be declared
redundant.

The controversy lies on whether Lowe used any fair and reasonable criteria in declaring Mutucs position
redundant and whether there was bad faith in the abolition of her position. Lowe insists that it used fair
and reasonable criteria in declaring Mutucs position redundant. Lowe argues that Mutuc was the most
junior of all the executives of Lowe and that, based on its performance evaluation, Mutuc was also the
least efficient among the Creative Directors.

The Court recognizes that a host of relevant factors comes into play in determining who among the
employees should be retained or separated. Among the accepted criteria in implementing a redundancy
program are: (1) preferred status; (2) efficiency; and (3) seniority.

The determination of the continuing necessity of a particular officer or position in a business


corporation is a management prerogative, and the courts will not interfere unless arbitrary or malicious
action on the part of management is shown. Aside from Mutucs self-serving statements, we find no
evidence to support her conclusion that she was dismissed because of the "rift" with Castro. Considering
further that Mutuc held a position which was definitely managerial in character, Lowe had a broad
latitude of discretion in abolishing her position. An employer has a much wider discretion in terminating
the employment of managerial personnel as compared to rank and file employees.

De Lecciones vs. NLRC, NNA Philippines Co., Inc. et. al.

G.R. No. 184735, September 17, 2009

Facts:

The respondent, a research and translation service company with less than ten employees and a whollyowned subsidiary of NNA Japan employed the petitioner on August 1, 1997, and she held various
positions in the company, the latest of which as Administrator. Additionally, she served as Corporate
Secretary until July 3, 2002. She alleged that she usually worked from 9:00 a.m. to 10:00 p.m. - 12:00
midnight and sometimes even until 2:00 a.m. or 9:00 a.m. She claimed that the respondent promised to
compensate her for extra hours, as well as for doing tasks other than that what she was contracted for.

On May 17, 2002, the Board of Directors of NNA Japan decided to streamline the operations of its
subsidiaries including the respondent, and thus issued a memorandum directing the respondent to
transfer the corporate secretarys functions to the external counsel. The memorandum also gave
management the discretion to determine which positions should be declared redundant.

On July 4, 2002, the respondents Board of Directors held an organizational meeting where the
petitioner was not re-elected as corporate secretary. The board also directed the respondents President
at the time, Ms. Kimi Kimura, to reorganize the corporation and abolish any redundant position.

On October 17, 2002, the petitioner received a notice of termination of employment on the ground that
her position as Administrator had been declared redundant. On the same day, the respondent filed a
report of the petitioners separation from service with the Office of the DOLE in the National Capital
Region.

On November 15, 2002, the respondent issued the petitioner a memorandum advising her of the
release of checks in her favor representing her salary and accrued benefits including her separation pay.
On the same day, she accepted the checks for her last salary; 13th month pay; unused leave credits for
seven days; year-end tax refund; and reimbursement of advances made to the company. She refused to
accept the check representing her separation pay in the amount of P244, 182.07 (based on her salary
and allowances).

On January 16, 2004, Labor Arbiter Aliman D. Mangandog dismissed the complaint for lack of merit, but
ordered the respondent to pay the petitioner separation pay computed at one (1) months salary for
every year of service. The petitioner appealed the decision to the NLRC.

Issue:

Was the termination valid?

Ruling:

Yes. The separation of the petitioner by reason of redundancy was supported by the evidence on record.
She was separated from the service after the respondents reorganization where her position as
Administrator was declared redundant. She was served notice within the statutory period of thirty (30)
days and so was the DOLE-NCR. The petitioner was assured of all the benefits under the law.

The petitioner imputes bad faith and malice on the respondent in declaring her position as
Administrator redundant, but failed to present convincing proof that the respondent abused its
prerogative in terminating her employment or that it was motivated by ill-will in doing so. It was a
business decision arrived at in the face of financial losses being suffered by the company at the time.

The general rule is that the characterization by an employer of an employees services as no longer
necessary or sustainable is an exercise of business judgment on the part of the employer. The wisdom or
soundness of such a characterization or decision is not, as a general rule, subject to discretionary review

on the part of the Labor Arbiter, the NLRC and the CA. Such characterization may, however, be rejected
if the same is found to be in violation of the law or is arbitrary or malicious.

We find no violations of law in the respondents actions against the petitioner, nor was the respondent
arbitrary or influenced by malice in terminating the petitioners employment for redundancy. This
ground for termination is a legitimate exercise of management prerogative unless attended to by
arbitrariness or by the failure to follow statutory requirements. No arbitrariness or any violations took
place in the present case.

MANAGEMENT PREROGATIVE

Aguanza vs. Asian Terminal, Inc.

G.R. No. 163505, August 14, 2009

Facts:

Petitioner Gualberto Aguanza was employed with respondent company Asian Terminal, Inc. from April
15, 1989 to October 1997. He was initially employed as Derickman or Crane Operator and was assigned
as such aboard Bismark IV, a floating crane barge owned by Asian Terminals, Inc. based at the port of
Manila. Aside from his basic pay, he received meal allowance, fixed overtime pay and out-of port
allowance [when the barge is assigned outside Metro Manila].

Sometime in September 1997, the Bismark IV, together with its crew, was temporarily assigned at the
Mariveles Grains Terminal in Mariveles, Bataan. Then, on October 20, 1997, respondent James Keith
issued a memo to the crew of Bismark IV stating that the barge had been permanently transferred to
the Mariveles Grains terminal beginning October 1, 1997 and because of that, its crew would no longer
be entitled to out of port benefits of 16 hours overtime and P200 a day out-of port allowance.

Because of the said development, Aguanza questioned the diminution of his benefits. Aguanza insisted
on reporting to work in Manila although his barge, Bismark IV, and its other crew were already
permanently based in Mariveles, Bataan. [Aguanza] was not allowed to time in in Manila because his
work was in Mariveles, Bataan. He therefore was not able to render his services, and was accordingly
not paid for doing nothing.

Issue:

Was Aguanza constructively dismissed?

Ruling:

No. The transfer of operations is a valid exercise of management prerogative. Aguanza asserts that his
transfer constituted constructive dismissal, while ATI asserts that Aguanzas transfer was a valid exercise
of management prerogative.

ATIs transfer of Bismark IVs base from Manila to Bataan was, contrary to Aguanzas assertions, a valid
exercise of management prerogative. The transfer of employees has been traditionally among the acts
identified as a management prerogative subject only to limitations found in law, collective bargaining
agreement, and general principles of fair play and justice. Even as the law is solicitous of the welfare of
employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.

On the other hand, the transfer of an employee may constitute constructive dismissal "when continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or
a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee." Aguanzas situation is not within the purview of this discussion.
Malayan Employees Association, et. al. vs. Malayan Insurance Company

G.R. No. 181357, February 2, 2010

Facts:

Petitioner is the exclusive bargaining agent of the rank-and-file employees of Respondent company
whose CBA with the latter allows union officials to avail of union leaves with pay for the purpose of
attending labor relations activities. While the CBA was in effect, the company issued a rule requiring not
only the prior notice that the CBA expressly requires, but prior approval by the department head before
the union and its members can avail of union leaves. The rule was placed into effect in November 2002
without any objection from the union until a union officer, Mangalino, filed union leave applications in

January and February, 2004. His department head disapproved the applications because the department
was undermanned at that time.

Despite the disapproval, Mangalino proceeded to take the union leave. He said he believed in good faith
that he had complied with the existing company practice and with the procedure set forth in the CBA.
The company responded by suspending him for one week and, thereafter, for a month, for his second
offense in February 2004. After all internal grievance machineries, and subsequent recourse to the
NCMB failed to arrive at a conciliation between the parties, they submitted the matter for voluntary
arbitration. The VA ruled that the suspension was illegal, but on appeal to the CA, the latter reversed
the VA. .

Issue:

Was the suspension based on failure to comply with the companys prior approval rule valid
notwithstanding its absence in the CBA?

Ruling:

Yes. While it is true that the union and its members have been granted union leave privileges under the
CBA, the grant cannot be considered separately from the other provisions of the CBA, particularly the
provision on management prerogatives where the CBA reserved for the company the full and complete
authority in managing and running its business. We see nothing in the wordings of the union leave
provision that removes from the company the right to prescribe reasonable rules and regulations to
govern the manner of availing of union leaves, particularly the prerogative to require prior approval.
Precisely, prior notice is expressly required under the CBA so that the company can appropriately
respond to the request for leave. In this sense, the rule requiring prior approval only made express what
is implied in the terms of the CBA. In any event, the rule on its face is not unreasonable, oppressive, nor
violative of CBA terms.

Furthermore, ample evidence exists in the records indicating the unions acquiescence to the rule.
Notably, no letter from the union complaining about the unilateral change in policy appears on record.
The "prior approval" policy fully supported the validity of the suspensions the company imposed on
Mangalino. As an employee, Mangalino had the clear obligation to comply with the management
disapproval of his requested leave. That he still went on leave, in open disregard of his superiors orders,
rendered Mangalino open to the charge of insubordination, separately from his absence without official
leave

Jimmy Areno, Jr. vs. Sky Cable PCC Baguio

G.R. No. 180302, February 5, 2010

Facts:

Petitioner was an employee of Respondent Sky Cable. Pursuant to a complaint filed by a co-worker
against the Petitioner, Respondent Sky Cable conducted an administrative investigation to determine
the truth on the matter. Both parties were notified and given the opportunity to be heard. After the
proper investigation, the panel found the allegations to be true, and by virtue of the Companys Code of
Discipline, the Petitioner was suspended for three days. Despite the order of suspension, however, the
Petitioner continued to report for work. When the matter was brought to the attention of the
Respondent, the latter issued a 1st Notice of Termination, requiring the Petitioner to explain why he
should not be terminated for insubordination. Unsatisfied by Petitioners explanation, Respondent
terminated the Petitioner, giving notice therefor. Aggrieved, petitioner filed a case for illegal dismissal.
The Labor Arbiter, NLRC and eventually the CA all agreed that the dismissal was valid. Unsatisfied,
Petitioner filed the present petition for Certiorari.

Issue:

Is the petition meritorious?

Ruling:

No. The decision to suspend petitioner was rendered after investigation and a finding by respondent
that petitioner has indeed made malicious statements against a co-employee. It is axiomatic that
appropriate disciplinary sanction is within the purview of management imposition. What should not be
overlooked is the prerogative of an employer company to prescribe reasonable rules and regulations
necessary for the proper conduct of its business and to provide certain disciplinary measures in order to
implement said rules to assure that the same would be complied with. Respondent then acted within its

rights as an employer when it decided to exercise its management prerogative to impose disciplinary
measure on its erring employee. The suspension and subsequent termination were therefore valid.

Pantoja vs. Sca Hygiene Products

G.R. 163554, April 23, 2010

Facts:

Respondent, a corporation engaged in the manufacture, sale and distribution of industrial paper and
tissue products, employed petitioner as a utility man on March 15, 1987. In a Notice of Transfer,
respondent informed petitioner of its reorganization plan and offered him a position at Paper Mill No. 5
under the same terms and conditions of employment in anticipation of the eventual closure and
permanent shutdown of Paper Mill No. 4 effective May 5, 1999. The closure and concomitant
reorganization is in line with respondents decision to streamline and phase out the companys industrial
paper manufacturing operations due to financial difficulties brought about by the low volume of sales
and orders for industrial paper products.

However, petitioner rejected respondents offer for his transfer. Thus, a notice of termination of
employment was sent to petitioner as his position was declared redundant by the closure of Paper Mill
No. 4. He then received his separation pay and thereafter executed a release and quitclaim in favor of
respondent. On June 20, 2000, petitioner filed a complaint for illegal dismissal against respondent
assailing his termination as without any valid cause.

On March 23, 2001, the Labor Arbiter rendered a Decision dismissing petitioners complaint for lack
of merit. Upon appeal by petitioner, the NLRC reversed the Labor Arbiters Decision by finding
petitioners separation from employment illegal. The CA reversed the NLRCs Decision and reinstated
the Labor Arbiters Decision dismissing the compliant. It ruled that there was no illegal dismissal as the
act of petitioner in rejecting the transfer and accepting the separation pay constitutes a valid basis for
the separation from employment.

Issue:

Is the respondent guilty of illegal dismissal?

Ruling:

No. Respondents right of management prerogative was exercised in good faith. Respondent presented
evidence of the low volume of sales and orders for the production of industrial paper in 1999 which
inevitably resulted to the companys decision to streamline its operations. This fact was corroborated by
respondents VP-Tissue Manufacturing Director and was not disputed by petitioner. Exercising its
management prerogative and sound business judgment, respondent decided to cut down on
operational costs by shutting down one of its paper mill. In this case, the abolishment of Paper Mill No.
4 was undoubtedly a business judgment arrived at in the face of the low demand for the production of
industrial paper at the time. Despite an apparent reason to implement a retrenchment program as a
cost-cutting measure, respondent, however, did not outrightly dismiss the workers affected by the
closure of Paper Mill No. 4 but gave them an option to be transferred to posts of equal rank and pay.
This is an indication of good faith on respondents part as it exhausted other possible measures other
than retrenchment. Besides, the employers prerogative to bring down labor costs by retrenching must
be exercised essentially as a measure of last resort, after less drastic means have been tried and found
wanting. Giving the workers an option to be transferred without any diminution in rank and pay
specifically belie petitioners allegation that the alleged streamlining scheme was implemented as a ploy
to ease out employees, thus, the absence of bad faith. Apparently, respondent implemented its
streamlining or reorganization plan with good faith, not in an arbitrary manner and without prejudicing
the tenurial rights of its employees.

GROSS NEGLIGENCE/GROSS AND HABITUAL NEGLECT OF DUTY

Estacio and Manliclic vs. Pampanga I Electric Coop.

G.R. No. 183196, August 19, 2009

Facts:

Petitioner Estacio had been employed at respondent PELCO I as a bill custodian since 1977, while
petitioner Manliclic had been working for respondent PELCO I as a bill collector since June 1992. On 22
August 2002, Nelia D. Lorenzo (Lorenzo), the Internal Auditor of respondent PELCO I, submitted her
"Audit Findings at the San Luis Area Office" to respondent Engr. Allas, pertinent portions of which state:

Evaluation of the results of physical inventory of bills through reconciliation of records such as aging
schedule of consumer accounts receivable balance, collection reports and other related documents
revealed 87 bills amounting to One Hundred Twenty Six Thousand Seven Hundred Fifty and 93/100
(P126,750.93) remained unremitted as of August 20, 2002.

Accounting of which includes the accountability of Ms. Estacio amounting to One Hundred Twenty Three
Thousand Eight Hundred Seven and 14/100 (P123,807.14) representing 86 bills.

Respondent Engr. Allas issued a Memorandum dated 6 September 2002 to petitioner Estacio informing
her of the audit findings, and directing her to explain in writing why no disciplinary action should be
imposed upon her for Gross Negligence of Duty under Section 6.6 of Board Policy No. 01-04 dated 23
July 2001.

Unsatisfied with petitioner Estacios explanation, respondent Engr. Allas issued a Memorandumcharging
Estacio with gross negligence of duty. A formal investigation/hearing then ensued, during which
petitioner Estacio was duly represented by counsel. The investigating committee, in the report it
submitted to respondent Engr. Allas on 23 October 2002, found petitioner Estacio guilty of dishonesty
and gross negligence of duty. Allas then dismissed Estacio from service.

In the same "Audit Findings at the San Luis Area Office" submitted to respondent Engineer Allas on 22
August 2002, Internal Auditor Lorenzo reported that petitioner Manliclic, a bill collector, failed to remit
to respondent PELCO I management his collection amounting to P4,813.11, as of 20 August 2002.

Respondent Engr. Allas issued a Memorandum dated 6 September 2002 directing petitioner Manliclic to
explain in writing why no disciplinary action should be taken against him for committing offenses against
respondent PELCO I properties,under Section 2.1 of Board Policy No. 01-04 dated 23 July 2001.

On 11 September 2002, petitioner Manliclic submitted his written explanation admitting the he used the
amount of P4,813.11 from his collection to cover pressing family obligations and requesting two months
to pay the same. With this admission, respondent Engr. Allas issued another Memorandum dated 28
September 2002 dismissing petitioner Manliclic from service effective 1 October 2002, with forfeiture of
benefits.

Issue:

Were Estacio and Manliclic illegally dismissed?

Ruling:

No. The requisites for a valid dismissal are: (a) the employee must be afforded due process, i.e., he must
be given an opportunity to be heard and defend himself; and (b) the dismissal must be for a valid cause
as provided in Article 282 of the Labor Code or for any of the authorized causes under Articles 283 and
284 of the same Code. Well-settled is the rule that the essence of due process is simply an opportunity
to be heard or as applied to administrative proceedings, an opportunity to explain one's side or an
opportunity to seek a reconsideration of the action or ruling complained of.

It is undisputed that petitioners were accorded due process. Through the Memoranda issued by
respondent Engr. Allas, petitioners were duly informed of the results of the audit conducted by Internal
Auditor Lazaro, which were unfavorable to petitioners. Petitioners were given a chance to submit their
written explanations. As to petitioner Estacio, a formal hearing/investigation was even conducted by an
investigating committee. Only thereafter, did respondent Engr. Allas notify petitioners Estacio and
Manliclic, through a Decision dated 25 October 2002 and Memorandum dated 28 September 2002,
respectively, that they were found guilty of the charges against them and were being dismissed from
service. Both petitioners had the opportunity to seek reconsideration of their dismissal.

Llamas vs. Ocean Gateway & Management, Inc.

G.R. No. 179293, August 14, 2009

Facts:

Ocean Gateway Maritime and Management, Inc. hired Eden Llamas on August 1, 2001 as an accounting
manager. On February 9, 2002, Mary Anne T. Macaraig, respondents Chief Executive Officer, called
petitioners attention to her failure, despite repeated demands, to accomplish the long overdue monthly
and annual company financial reports and to remit the companys contributions to the SSS and
PhilHealth for November and December 2001. Subsequently or on February 20, 2002, Mary Anne again

instructed petitioner to remit on that day or until the following day the companys contributions to the
SSS and PhilHealth for January 2002. Again, she failed to comply. On February 26, 2002 Mary Anne sent
a memorandum to petitioner charging her with gross and habitual neglect of duty and/or misconduct or
willful disobedience and insubordination, detailing therein the bases of the charges, and requiring her to
submit a written explanation why she should not be penalized or dismissed from employment.
Complying with the show cause order, petitioner claimed that the delay was due to the fact that she was
overloaded with work and undermanned.

On account of the delay in the remittance of those contributions, respondent was penalized in the
amount of P18,580.41 which it charged to petitioner via salary deductions. Respondent sent her a notice
of termination from employment on July 31, 2002, anchored on gross and habitual neglect of duty
and/or serious misconduct or willful disobedience/insubordination. Petitioner, on the other hand, filed
before the NLRC a Complaint against respondent and Mary Anne for illegal dismissal, damages and
attorneys fees. She later amended her complaint to include as cause of action non-payment of overtime
pay. Still, in her Position Paper, she included illegal deductions as additional cause of action.

Issue:

Was the dismissal valid?

Ruling:

Yes. Under Article 282 (b) of the Labor Code, negligence must be both gross and habitual to justify the
dismissal of an employee. Gross negligence is characterized by want of even slight care, acting or

omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally
with a conscious indifference to consequences insofar as other persons may be affected.

In the present case, petitioner, as respondents Accounting Manager, failed to discharge her important
duty of remitting SSS/PhilHealth contributions not once but quadruple times, resulting in respondents
incurring of penalties totaling P18,580.41, not to mention the employees/members contributions being
unupdated.

Her claim of being overworked and undermanned does not persuade. As noted by respondent, the
company had been in operation for less than three (3) months at the time the negligence and delays
were committed, with only a few transactions and only with one principal, Malaysian Merchant Marine
Bhd., hence, its financial and accounting books should not have been difficult to prepare. Moreover, as
claimed by respondent which was not refuted by petitioner, shefailed to remit the contributions as early
as November 2001 during which time, however, on-the-job trainees were still with the company, hence,
her claim of being undermanned behind such failure does not lie.

On petitioners declaration that "I believe that I did something good for our office when our declaration
of gross income submitted to City Hall for the renewal of our municipal license was lower than our
actual gross income for which the office had paid a lower amount," the Court finds the same as
betraying a streak of dishonesty in her. It partakes of serious misconduct.

For misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must
relate to the performance of the employees duties; and (c) must show that the employee has become

unfit to continue working for the employer. Indeed, an employer may not be compelled to continue to
employ such person whose continuance in the service would be patently inimical to his employers
interest.

For her act of understating the companys profits or financial position was willful and not a mere error of
judgment, committed as it was in order to "save" costs, which to her warped mind, was supposed to
benefit respondent. It was not merely a violation of company policy, but of the law itself, and put
respondent at risk of being made legally liable. Verily, it warrants her dismissal from employment as
respondents Accounting Manager, for as correctly ruled by the appellate court, an employer cannot be
compelled to retain in its employ someone whose services is inimical to its interests.

[1] This is a minute resolution. The ruling did not discuss in detail the prosecutions failure to prove the
existence of a syndicate

ILLEGAL DISMISSAL
CONSTRUCTIVE DISMISSAL

Payno vs. Orizon Trading Corp / Orata Trading G.R. No. 175345, August 19, 2009
Facts:
On October 21, 1993, petitioner Baltazar L. Payno was employed as electrician by Orata Trading, a single
proprietorship engaged in signboard and billboard advertising. He was later promoted to senior installer.
On April 11, 2000, petitioner was informed by the personnel manager that Orata Trading would cease its
business operations and that Orizon Trading Corporation was taking over. Petitioner asked about the
status of his employment, and further inquired if he would be receiving separation pay due to the
closure of Orata Trading. He was told that no separation pay was forthcoming, since Orizon Trading
Corporation was merely absorbing Orata Trading - maintaining its premises, and retaining all its officers
and employees without any diminution in salary and rank. He was, however, informed that he would
have to sign a new employment contract with Orizon Trading Corporation.
Perturbed with the new set-up, petitioner, on May 4, 2000, filed a complaint against Orizon Trading for
payment of separation pay due to the closure of Orata Trading. Petitioner, nonetheless, continued to

work with Orizon Trading Corporation. Subsequently, petitioner was called to the office, and was told
not to report for work anymore if he did not sign the employment contract. The general manager,
respondent Flordeliza Legaspi, offered him the amount of P7,000.00 as separation pay. Petitioner
refused since it was insufficient and not commensurate to the more than seven (7) years he had worked
with Orata Trading.
On June 5, 2000, petitioner filed an Amended Complaint to include "illegal dismissal" as another cause
of action against respondents, maintaining the relief for payment of separation pay, damages and
attorneys fees. Respondent however alleged that it was respondent who resigned.
Issue: Was there constructive/illegal dismissal of Payno?
Ruling:
Yes. In termination cases, it is incumbent upon the employer to prove either the non-existence or the
validity of dismissal. Inasmuch as respondents alleged petitioners resignation as the cause of his
separation from work, respondents had the burden to prove the same. The case of the employer must
stand or fall on its own merits and not on the weakness of the employees defense.
Resignation is the voluntary act of an employee who is in a situation where one believes that personal
reasons cannot be sacrificed in favor of the exigency of the service, and one who has no other choice
but to dissociate oneself from employment. As the intent to relinquish must concur with the overt act of
relinquishment, the acts of the employee before and after the alleged resignation must be considered in
determining whether, in fact, he intended to sever his employment. In this case, we find no overt act on
the part of petitioner that he was ready to sever his employment ties. The alleged resignation was
actually premised by respondents only on the filing of the complaint for separation pay, but this alone is
not sufficient proof that petitioner intended to resign from the company. What strongly negates the
claim of resignation is the fact that petitioner filed the amended complaint for illegal dismissal
immediately after he was not allowed to report for work on June 3, 2000. Resignation is inconsistent
with the filing of the complaint for illegal dismissal.
SMART Communications, Inc. vs. Regina M. Astorga, with G.R. No. 148132, the high court ruled that
Regina Astorga, a former District Sales Manager of the Corporate Sales Marketing Group/Fixed Services
Division (CSMG/FSD) of Smart Communications, Inc. (SMART), was validly terminated due to
redundancy, which is an authorized cause for the dismissal of an employee.
Background
Grievance, Mediation, Arbitration and Appeals
Regina was employed by Smart Communications, Inc. (SMART) as District Sales Manager of the
Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD) on May 8, 1997.
SMART launched an organizational realignment to achieve more efficient operations. Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint

venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since
SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Reginas
division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who garnered the
highest ratings and who were favorably recommended to SNMI. Regina landed last in the performance
evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory
position in the Customer Care Department, but she refused the offer because the position carried lower
salary rank and rate. Despite the abolition of her division, she continued reporting for work until SMART
issued a memorandum March 3, 1998 advising Regina of the termination of her employment on ground
of redundancy.
Regina filed a complaint for illegal dismissal contending that SMART cannot lawfully contract out
services which will displace the employees, especially if the contractor is an in-house agency. She
claimed that abolishing CSMG, thereby terminating her employment, was illegal because it violated her
right to security of tenure. SMART responded that Regina was validly dismissed by reason of
redundancy, an authorized cause for termination of employment under Article 283 of the Labor Code.
The redundancy of Reginas position was the result of the abolition of CSMG and the creation of a
specialized and more technically equipped SNMI, which is a valid and legitimate exercise of
management prerogative.
LABOR ARBITERS DECISION:
The Labor Arbiter (LA) declared Reginas dismissal illegal. While recognizing SMARTs right to abolish any
of its departments, the Labor Arbiter held that such right should be exercised in good faith and for
causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for
causes beyond the control of SMART, but a ploy to terminate Reginas employment. The Arbiter also
ruled that contracting out the functions performed by Regina to an in-house agency like SNMI was
illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code. Accordingly, the Labor
Arbiter ordered Reginas reinstatement to her former position, without loss of seniority rights and other
privileges, with full backwages, inclusive of all allowances and other benefits from the time of her
dismissal to the date of reinstatement.
NLRC DECISION:
SMART appealed the unfavorable ruling of the LA in the illegal dismissal case to the National Labor
Relations Commission (NLRC). The NLRC reversed the LA decision and sustained Reginas dismissal. The
NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services
for SMART a valid organizational action, i.e. a management prerogative. It also declared that
contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are
allowed under the law. The NLRC further found erroneous the Labor Arbiters disquisition that
redundancy to be valid must be impelled by economic reasons, and upheld the redundancy measures
undertaken by SMART. Regina appealed but her action was denied by the NLRC on December 21, 1999.

COURT OF APPEALS DECISION:


Regina then appealed the NLRC decision to the Court of Appeals via certiorari. The CA affirmed the NLRC
resolutions that SMARTs reorganization resulting in the abolition of CSMG was a legitimate exercise of
management prerogative. It rejected Reginas posturing that her non-absorption into SNMI was
tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory onemonth notice prior to the intended termination and is thus obliged to pay the petitioner an equivalent
of her one-month salary.
SUPREME COURT RULING:
Regina was validly terminated due to redundancy, an authorized cause for the dismissal of an employee.
The characterization of an employees services as superfluous or no longer necessary and, therefore,
properly terminable, is an exercise of business judgment on the part of the employer. The wisdom and
soundness of such characterization or decision is not subject to discretionary review provided, of course,
that a violation of law or arbitrary or malicious action is not shown.
An employer is not precluded from adopting a new policy conducive to a more economical and effective
management even if it is not experiencing economic reverses. Neither does the law require that the
employer should suffer financial losses before he can terminate the services of the employee on the
ground of redundancy.
The organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD
and termination of Reginas employment was an honest effort to make SMARTs sales and marketing
departments more efficient and competitive.
It is the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce
overhead costs and enhance prospects of economic gains, albeit always within the framework of
existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by
SMART.
However, SMART failed to comply with the one-month notice prior to termination. The record is clear
that Regina received the notice of termination only on March 16, 1998 or less than a month prior to its
effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the
redundancy program only on March 6, 1998.
SMARTs assertion that Regina cannot complain of lack of notice because the organizational realignment
was made known to all the employees as early as February 1998 fails to sway. Reginas actual
knowledge of the reorganization cannot replace the formal and written notice required by the law.
Notwithstanding her knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination.
The SC also ruled that it is proper to increase the amount of the penalty on SMART to P50,000.00.
However, the award of backwages to Regina by the CA should be deleted for lack of basis. Backwages is
a relief given to an illegally dismissed employee. Since her dismissal is for an authorized cause, Regina is

not entitled to backwages. The CAs award of backwages is totally inconsistent with its finding of valid
dismissal.
COMMENT:
Based on existing laws and prior decisions such as in DAP vs. CA and Jaka Food Processing Corporation v.
Pacot, the SC decided on yet another landmark decision as regards the so-called management
prerogative largely in favor of an employer. In SMART Communications, Inc. vs. Regina M. Astorga, the
employers management prerogatives is reemphasized as another reason, or perhaps excuse, for firing
employees. Although, it is clear that, as provided for by Article 283 of the Labor Code, closure of
establishment and reduction of personnel is allowed to the extent that the employer may terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking, by serving
a written notice on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof, SMART cannot automatically terminate employees after any means
directed to satisfy its profit motive. While such prerogatives must be exercised in good faith and in
accordance with law and jurisprudence, in effect, large companies, corporations and other business
establishments may have the tendency to terminate employment contracts in direct disregard of the
security of tenure clause of Art. XIII, Sec. 3 of the Philippine Constitution by issuing memoranda and
notices that do not serve as the equivalent of formal notice of termination. The decision has shown that
an employee, such as Regina, may lawfully lose his employment even if he/she is not at fault.
The SC ruling is another reflection of SCs tendency to back up government schemes of establishing an
investment-friendly climate in the Philippines. Despite the fact that the SC categorically denies
allegations that it bypasses the executive and legislative branches of the government by instituting an
investment-friendly jurisprudence, it is somewhat clear that the Labor movement in the Philippines can
expect more and more SC decisions that incline towards investors and businessmen. Although the high
court is not considered institutionally as a policy-making body of the government, jurisprudence and
matters arising from the decisions of the Supreme Court translate to the creation of alternative, if not
new, economic policies. The SC seems to tread the economic road to the detriment of workers rights.
- See more at: http://www.learn.org.ph/2010/03/redundancy-due-to-outsourcingabolition-of-positionlabor-case-digest-no-2/#sthash.2jqf1FK9.dpuf
PEOPLES BROADCASTING (BOMBO RADYO PHILS.) VS. SECRETARY OF LABOR
G.R. No. 179652, May 8, 2009
FACTS:
Jandeleon Juezan (Juezan) filed a complaint before the DOLE against Bombo Radyo Phils. (Bombo
Radyo) for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for
holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of

SSS, PAG-IBIG and Philhealth. On the basis of the complaint, the DOLE conducted a plant level
inspection. The Labor Inspector in his report wrote,

Management representative informed that (Juezan) complainant is a drama talent hired on a per drama
participation basis hence no employer-employer relationship existed between them. As proof of this,
management presented photocopies of cash vouchers, billing statement, employments of specific
undertaking, etc. The management has no control of the talent if he ventures into another contract with
other broadcasting industries.

The DOLE Regional Director issued an order ruling that Juezan is an employee of Bombo Radyo, and that
Juezan is entitled to his money claims. Bombo Radyo sought reconsideration claiming that the Regional
Director gave credence to the documents offered by Juezan without examining the originals, but at the
same time the Regional Director missed or failed to consider Bombo Radyos evidence. The motion for
reconsideration was denied. On appeal, the Acting DOLE Secretary dismissed the appeal on the ground
that Bombo Radyo did not post a cash or surety bond and instead submitted a Deed of Assignment of
Bank Deposit.

Bombo Radyo elevated the case to the Court of Appeals, claiming that it was denied due process when
the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute
the claims of Juezan. It maintained that no employer-employee relationship had ever existed between it
and Juezan because it was the drama directors and producers who paid, supervised and disciplined him.
It also added that the case was beyond the DOLEs jurisdiction because Juezans claim exceeded P5,000.
The Court of Appeals held that the DOLE Secretary had the power to order and enforce compliance with
labor standard laws irrespective of the amount of individual claims because the limitation imposed by
Art. 29 of the Labor Code had been repealed by R.A. 7730.

Bombo Radyo argues that the NLRC (not the DOLE Secretary) has jurisdiction over Juezans claim, in view
of Arts. 217 and 128 of the Labor Code. It adds that the Court of Appeals committed grave abuse of
discretion when it dismissed their appeal without delving on the issue of employer-employee
relationship.

ISSUE: Whether or not the Secretary of Labor has the power to determine the existence of an employeremployee relationship.

HELD: NO. Art. 128 (b) of the Labor Code, as amended by R.A. 7730 reads:

Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
authorized representatives shall have the power to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of inspection.
The provision is explicit that the visitorial and enforcement power of the DOLE comes into play only in
cases when the relationship of employer-employee still exists. This clause signifies that the employeremployee relationship must have existed even before the emergence of the controversy. Necessarily,
the DOLEs power does not apply in two instances, namely: (i) where the employer-employee
relationship has ceased; and (ii) where no such relationship has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor
Standards Cases issued by the DOLE Secretary. It reads:
Where employer-employee relationship no longer exists by reason of the fact that it has already been
severed, claims for payment of monetary benefits fall within the exclusive and original jurisdiction of the
labor arbiters. Accordingly, if on the face of the complaint, it can be ascertained that employeremployee relationship no longer exists, the case, whether accompanied by an allegation of illegal
dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the
National Labor Relations Commission (NLRC).

The law accords a prerogative to the NLRC over the claim when the employer-employee relationship has
terminated or such relationship has not arisen at all. The existence of an employer-employee
relationship is a matter which is not easily determinable from an ordinary inspection because the
elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and
implications of an employer-employee relationship demand that the level of scrutiny should be far
above the superficial. While documents, particularly documents found in the employers office are the
primary source materials, what may prove decisive are factors related to the history of the employers
business operations, its current state as well as accepted contemporary practices in the industry. More
often than not, the question of employer-employee relationship becomes a battle of evidence, the
determination of which should be comprehensive and intensive and therefore best left to the
specialized quasi-judicial body of the NLRC.

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to
make a determination of the existence of an employer-employee relationship. However, such
determination cannot be coextensive with the visitorial and enforcement power itself. Such is merely

preliminary, incidental and collateral to the DOLEs primary function of enforcing labor standards
provisions. The determination of the existence of employer-employee relationship is still primarily
lodged with the NLRC. This is the meaning of the clause in cases where the relationship of employeremployee still exists in Art. 128 (b).

Thus, before the DOLE may exercise its powers under Art. 128, two important questions must be
resolved: (i) Does the employer-employee relationship still exist, or alternatively, was there ever an
employer-employee relationship to speak of; and (ii) Are there violations of the Labor Code or of any
labor law?

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on


the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale
underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor
and the NLRC. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers
absent the first requisite, his office confers jurisdiction on itself which it cannot otherwise acquire.
Nevertheless, a mere assertion of absence of employer-employee relationship does not deprive the
DOLE of jurisdiction over the claim. At least a prima facie showing of such absence of relationship, as in
this case, is needed to preclude the DOLE from the exercise of its power. Without a doubt, Bombo
Radyo, since the inception of this case had been consistent in maintaining that Juezan is not its
employee. A preliminary determination, based on the evidence offered and noted by the Labor
Inspector during the inspection as well as submitted during the proceedings before the Regional
Director puts in genuine doubt the existence of employer-employee relationship. From that point on,
the prudent recourse on the part of the DOLE should have been to refer Juezan to the NLRC for the
proper dispensation of his claims. Furthermore, even the evidence relied on by the Regional Director in
his order are mere self-serving declarations of Juezan, and hence cannot be relied upon as proof of
employer-employee relationship.

MONEY CLAIMS
Grandteq Industrial Steel Products vs. Edna Margallo
G.R. No. 181393, July 28, 2009
Facts:
Grandteq is a domestic corporation engaged in the business of selling welding electrodes, alloy steels,
aluminum and copper alloys. Gonzales is the President/Owner of Grandteq. Grandteq employed
Margallo as Sales Engineer. Margallo claimed she availed herself of the car loan program offered to her

by Grandteq as a reward for being "Salesman of the Year." She paid the down payment on a brand new
Toyota Corolla, amounting to P201,000.00, out of her own pocket. The monthly amortization for the car
was P10,302.00, of which P5,302.00 was to be her share and P5,000.00 was to be the share of Grandteq.
On 29 December 2003, Margallo received a letter allegedly questioning Margalloss acts of working
with JVM Industrial Supply and Allied Services concurrent with being employed with Grandteq Industrial
Steel Products, Margallo claims that she was following her supervisors orders. Margallo then averred
that in January 2004, De Leon asked her to just resign, promising that if she did, she would still be paid
her commissions and other benefits, as well as be reimbursed her car loan payments. Relying on De
Leons promise, Margallo tendered on 13 January 2004, her irrevocable resignation, effective
immediately.
Margallo, however, alleged that she was never paid her money claims. Grandteq failed to pay her
commissions in the sum of P87,508.00, equivalent to 5% of the total sales that she collected as of
January 2004, which amounted to P1,750,148.84. Grandteq likewise failed to refund the "sales
accommodations" or advances she gave her customers. In addition, after Margallos resignation,
Grandteq sold her car to Annaliza Estrella, another employee, for P550,000.00.12

The Labor Arbiter held that Margallo was not able to prove by substantial evidence her entitlement to
the sales commission, the payment of cash incentive and no right to the reimbursement of her car loan
payments under her car loan agreement with Grandteq.
NLRC partially reversed the decision and ordered Grandteq and Gonzales reimburse the car loan
payments made by Margallo the NLRC reasoned. NLRC affirmed her entitlement to the unpaid sales
commission, but not to the cash incentive. Like the NLRC, the Court of Appeals found that Margallo had
a right to be reimbursed her car loan payments, and the terms of the car loan agreement between
Margallo and Grandteq should not be applied for being highly prejudicial to the employees interest. The
Court of Appeals likewise affirmed the order of the NLRC that Grandteq and Gonzales pay Margallo her
sales commission, placing the burden upon the employer to prove that the employees money claims
had been paid:
Issue:
Is Margallo entitled reimbursement for car loans?

Ruling:
The Court, is in agreement with the Court of Appeals and the NLRC. Generally speaking, contracts are
respected as the law between the contracting parties. 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 customs, public order or public policy. The Court rigorously disapproves

contracts that demonstrate a clear attempt to exploit the employee and deprive him of the protection
sanctioned by both the Constitution and the Labor Code. The Constitution and the Labor Code mandate
the protection of labor. Hence, as a matter of judicial policy, this Court has, in a number of instances,
leaned backwards to protect labor and the working class against the machinations and incursions of
their more financially entrenched employers.

Although not strictly a labor contract, the car loan agreement herein involves a benefit extended by the
employers, Grandteq and Gonzales, to their employee, Margallo. It should benefit, and not unduly
burden, Margallo. The Court cannot, in any way, uphold a car loan agreement that threatens the
employee with the forfeiture of all the car loan payments he/she had previously made, plus loss of the
possession of the car, should the employee wish to resign; otherwise, said agreement can then be used
by the employer as an instrument to either hold said employee hostage to the job or punish him/her for
resigning.

The Court further finds no error in the grant by the Court of Appeals and the NLRC of Margallos claim
for sales commission. In cases involving money claims of employees, the employer has the burden of
proving that the employees did receive their wages and benefits and that the same were paid in
accordance with law. It is settled that once the employee has set out with particularity in his complaint,
position paper, affidavits and other documents the labor standard benefits he is entitled to, and which
the employer allegedly failed to pay him, it becomes the employers burden to prove that it has paid
these money claims. One who pleads payment has the burden of proving it; and even where the
employees must allege nonpayment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove nonpayment.

LEGEND HOTEL (MANILA), OLWNED BY TITANIUM CORPORATION AND/OR, NELSON NAPUD, IN HIS
CAPACITY AS THE PRESIDENT OF PETITIONER CORPORATION, PETITIONER, VS. HERNANI S. REALUYO,
ALSO KNOWN AS JOEY ROA, RESPONDENT.
G.R. No. 153511, July 18, 2012
FACTS:
- This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. August 9, 1999: Realuyo, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor
practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for
holidays, separation pay, service incentive leave pay, and 13th month pay. He prayed for attorneys fees,
moral damages of P100,000.00 and exemplary damages for P100,000.00 - Roa averred that he had
worked as a Pianist at the Legend Hotels Tanglaw Restaurant from September 1992 with an initial rate
of P400.00/night; and that it had increased to P750.00/night. During his employment, he could not

choose the time of performance, which had been fixed from 7:00PM to 10:00pm for three to six times a
week. - July 9, 1999: the management had notified him that as a cost-cutting measure, his services as a
pianist would no longer be required effective July 30, 1999. - In its defense, petitioner denied the
existence of an employer-employee relationship with Roa, insisting that he had been only a talent
engaged to provide live music at Legend Hotels Madison Coffee Shop for three hours/day on two days
each week; and stated that the economic crisis that had hit the country constrained management to
dispense with his services. - December 29,1999: the Labor Arbiter (LA) dismissed the complaint for lack
of merit upon finding that the parties had no employer-employee relationship, because Roa was
receiving talent fee and not salary, which was reinforced by the fact that Roa received his talent fee
nightly, unlike the regular employees of the hotel who are paid monthly. NLRC affirmed the LAs decision on May 31, 2001.
- CA set aside the decision of the NLRC, saying CA failed to take into consideration that in Roas line of
work, he was supervised and controlled by the hotels restaurant manager who at certain times would
require him to perform only tagalong songs or music, or wear barong tagalong to conform with the
Filipinana motif of the place and the time of his performance is fixed. As to the status of Roa, he is
considered a regular employee of the hotel since his job was in furtherance of the restaurant business of
the hotel. Granting that Roa was initially a contractual employee, by the sheer length of service he had
rendered for the company, he had been converted into a regular employee. - CA held that the dismissal
was due to retrenchment in order to avoid or minimize business losses, which is recognized by law
under Art. 283 of the Labor Code.
ISSUES:
- WON there was employer-employee relationship between the two, and if so, - WON Roa was validly
terminated
RULING:
-

YES. Employer-employee relationship existed between the parties.

o Roa was undeniably employed as a pianist of the restaurant. The hotel wielded the power of selection
at the time it entered into the service contract dated Sept. 1, 1992 with Roa. The hotel could not seek
refuge behind the service contract entered into with Roa. It is the law that defines and governs an
employment relationship, whose terms are not restricted to those fixed in the written contract, for
other factors, like the nature of the work the employee has been called upon to perform, are also
considered.
o The law affords protection to an employee, and does not countenance any attempt to subvert its spirit
and intent. Any stipulation in writing can be ignored when the employer utilizes the stipulation to
deprive the employee of his security of tenure. The inequality that characterizes employer-employee
relationship generally tips the scales in favor of the employer, such that the employee is often scarcely
provided real and better options.

o The argument that Roa was receiving talent fee and not salary is baseless. There is no denying that the
remuneration denominated as talent fees was fixed on the basis of his talent, skill, and the quality of
music he played during the hours of his performance. Roas remuneration, albeit denominated as talent
fees, was still considered as included in the term wage in the sense and context of the Labor Code,
regardless of how petitioner chose to designate the remuneration, as per Article 97(f) of the Labor Code.
o The power of the employer to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. This is the so-called control test,
and is premised on whether the person for whom the services are performed reserves the right to
control both the end achieved and the manner and means used to achieve that end
o Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject
to its Code of Discipline, and that the power to terminate the working relationship was mutually vested
in the parties, in that either party might terminate at will, with or without cause. This claim is contrary to
the records. Indeed, the memorandum informing respondent of the discountinuance of his service
because of the financial condition of petitioner showed the latter had the power to dismiss him from
employment. NO. Roa was not validly terminated.
o The conclusion that Roas termination was by reason of retrenchment due to an authorized cause
under the labor Code is inevitable.
o Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor
Code. It is a management prerogative resorted to by employers to avoid ro to minimize business losses.
On this matter, Article 283 of the Labor Code states:
Article 283. Closure of establishment and reduction of personnel.

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

o Justifications for retrenchment: a. The expected losses should be substantial and not merely de
minimis in extent; b. The substantial losses apprehended must be reasonably imminent; c. The
retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and d.

The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must
be proved by sufficient and convincing evidence.
o In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests
upon the employer. Here, petitioner did not submit evidence of the losses to its business operations and
the economic havoc it would thereby imminently sustain. It only claimed that Roas termination was due
to its present business/financial condition. This bare statement fell short of the norm to show a valid
retrenchment. Hence, there was no valid cause for the retrenchment of respondent.
Since the lapse of time since the retrenchment might have rendered Roas reinstatement to his former
job no longer feasible, Legend Hotel should pay him separation pay at the rate of one month pay for
every year of service computed from September 1992 until the finality of this decision, and full
backwages from the time his compensation was withheld until the finality of this decision. Petition
denied

You might also like