Republic

SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 170139

August 5, 2014

SAMEER
OVERSEAS
PLACEMENT
vs.
JOY C. CABILES, Respondent.

AGENCY,

INC., Petitioner,

DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty,
given the facts and the law, to approximate justice for her.
We are asked to decide a petition for review 1 on certiorari assailing the Court of Appeals
decision2 dated June 27, 2005. This decision partially affirmed the National Labor
RelationsCommissions resolution dated March 31, 2004,3declaring respondents
dismissal illegal, directing petitioner to pay respondents three-month salary equivalent
to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00
withheld from respondent, and pay her NT$300.00 attorneys fees.4
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement
agency.5 Responding to an ad it published, respondent, Joy C. Cabiles, submitted her
application for a quality control job in Taiwan.6
Joys application was accepted.7 Joy was later asked to sign a oneyear employment
contract for a monthly salary of NT$15,360.00. 8 She alleged that Sameer Overseas
Agency required her to pay a placement fee of P70,000.00 when she signed the
employment contract.9
Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997. 10 She
alleged that in her employment contract, she agreed to work as quality control for one
year.11 In Taiwan, she was asked to work as a cutter.12
Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang
from Wacoal informedJoy, without prior notice, that she was terminated and that "she
should immediately report to their office to get her salary and passport." 13 She was asked
to "prepare for immediate repatriation."14
Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total
of NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket
to Manila.16
On October 15, 1997, Joy filed a complaint 17 with the National Labor Relations
Commission against petitioner and Wacoal. She claimed that she was illegally
dismissed.18 She asked for the return of her placement fee, the withheld amount for
repatriation costs, payment of her salary for 23 months as well as moral and exemplary
damages.19 She identified Wacoal as Sameer Overseas Placement Agencys foreign
principal.20

Sameer Overseas Placement Agency alleged that respondent's termination was due to
her inefficiency, negligence in her duties, and her "failure to comply with the work
requirements [of] her foreign [employer]."21 The agency also claimed that it did not ask
for a placement fee of P70,000.00.22 As evidence, it showedOfficial Receipt No. 14860
dated June 10, 1997, bearing the amount of P20,360.00.23 Petitioner added that
Wacoal's accreditation with petitioner had already been transferred to the Pacific
Manpower & Management Services, Inc. (Pacific) as of August 6, 1997. 24 Thus,
petitioner asserts that it was already substituted by Pacific Manpower.25
Pacific Manpower moved for the dismissal of petitioners claims against it. 26 It alleged
that there was no employer-employee relationship between them. 27 Therefore, the
claims against it were outside the jurisdiction of the Labor Arbiter. 28 Pacific Manpower
argued that the employment contract should first be presented so that the employers
contractual obligations might be identified.29 It further denied that it assumed liability
for petitioners illegal acts.30
On July 29, 1998, the Labor Arbiter dismissed Joys complaint. 31 Acting Executive Labor
Arbiter Pedro C.Ramos ruled that her complaint was based on mereallegations. 32 The
Labor Arbiter found that there was no excess payment of placement fees, based on the
official receipt presented by petitioner. 33 The Labor Arbiter found unnecessary a
discussion on petitioners transfer of obligations to Pacific 34 and considered the matter
immaterial in view of the dismissal of respondents complaint. 35
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations Commission
declared that Joy was illegally dismissed. 38 It reiterated the doctrine that the burden of
proof to show that the dismissal was based on a just or valid cause belongs to the
employer.39 It found that Sameer Overseas Placement Agency failed to prove that there
were just causes for termination. 40 There was no sufficient proofto show that respondent
was inefficient in her work and that she failed to comply with company
requirements.41 Furthermore, procedural dueprocess was not observed in terminating
respondent.42
The National Labor Relations Commission did not rule on the issue of reimbursement of
placement fees for lack of jurisdiction.43 It refused to entertain the issue of the alleged
transfer of obligations to Pacific.44 It did not acquire jurisdiction over that issue because
Sameer Overseas Placement Agency failed to appeal the Labor Arbiters decision not to
rule on the matter.45
The National Labor Relations Commission awarded respondent only three (3) months
worth of salaryin the amount of NT$46,080, the reimbursement of the NT$3,000
withheld from her, and attorneys fees of NT$300.46
The Commission denied the agencys motion for reconsideration 47 dated May 12, 2004
through a resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a
petition49 for certiorari with the Court of Appeals assailing the National Labor Relations
Commissions resolutions dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations
Commission with respect to the finding of illegal dismissal, Joys entitlement to the
equivalent of three months worth of salary, reimbursement of withheld repatriation
expense, and attorneys fees.51 The Court of Appeals remanded the case to the National
Labor Relations Commission to address the validity of petitioner's allegations against
Pacific.52 The Court of Appeals held, thus: Although the public respondent found the

dismissal of the complainant-respondent illegal, we should point out that the NLRC
merely awarded her three (3) months backwages or the amount of NT$46,080.00,
which was based upon its finding that she was dismissed without due process, a finding
that we uphold, given petitioners lack of worthwhile discussion upon the same in the
proceedings below or before us. Likewise we sustain NLRCs finding in regard to the
reimbursement of her fare, which is squarely based on the law; as well as the award of
attorneys fees.
But we do find it necessary to remand the instant case to the public respondent for
further proceedings, for the purpose of addressing the validity or propriety of
petitioners third-party complaint against the transferee agent or the Pacific Manpower
& Management Services, Inc. and Lea G. Manabat. We should emphasize that as far as
the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby
affirmed with finality, and we hold petitioner liable thereon, but without prejudice to
further hearings on its third party complaint against Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partly
AFFIRMED in accordance with the foregoing discussion, but subject to the caveat
embodied inthe last sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition. 54
We are asked to determine whether the Court of Appeals erred when it affirmed the
ruling of the National Labor Relations Commission finding respondent illegally
dismissed and awarding her three months worth of salary, the reimbursement of the
cost ofher repatriation, and attorneys fees despite the alleged existence of just causes of
termination.
Petitioner reiterates that there was just cause for termination because there was a
finding of Wacoal that respondent was inefficient in her work. 55
Therefore, it claims that respondents dismissal was valid.56
Petitioner also reiterates that since Wacoals accreditation was validly transferred to
Pacific at the time respondent filed her complaint, it should be Pacific that should now
assume responsibility for Wacoals contractual obligations to the workers originally
recruited by petitioner.57
Sameer Overseas Placement Agencyspetition is without merit. We find for respondent.
I
Sameer Overseas Placement Agency failed to show that there was just cause for causing
Joys dismissal. The employer, Wacoal, also failed to accord her due process of law.
Indeed, employers have the prerogative to impose productivity and quality standards at
work.58 They may also impose reasonable rules to ensure that the employees comply
with these standards.59 Failure to comply may be a just cause for their
dismissal.60 Certainly, employers cannot be compelled to retain the services of
anemployee who is guilty of acts that are inimical to the interest of the employer. 61 While
the law acknowledges the plight and vulnerability of workers, it does not "authorize the
oppression or self-destruction of the employer." 62 Management prerogative is
recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is "tempered with the employees
right to security of tenure."63Workers are entitled to substantive and procedural due
process before termination. They may not be removed from employment without a
validor just cause as determined by law and without going through the proper
procedure.
Security of tenure for labor is guaranteed by our Constitution.64
Employees are not stripped of their security of tenure when they move to work in a
different jurisdiction. With respect to the rights of overseas Filipino workers, we follow
the principle of lex loci contractus.Thus, in Triple Eight Integrated Services, Inc. v.
NLRC,65 this court noted:
Petitioner likewise attempts to sidestep the medical certificate requirement by
contending that since Osdana was working in Saudi Arabia, her employment was subject
to the laws of the host country. Apparently, petitioner hopes tomake it appear that the
labor laws of Saudi Arabia do not require any certification by a competent public health
authority in the dismissal of employees due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. There is no question that the contract of
employment in this case was perfected here in the Philippines. Therefore, the Labor
Code, its implementing rules and regulations, and other laws affecting labor apply in
this case.Furthermore, settled is the rule that the courts of the forum will not enforce
any foreign claim obnoxious to the forums public policy. Herein the Philippines,
employment agreements are more than contractual in nature. The Constitution itself, in
Article XIII, Section 3, guarantees the special protection of workers, to wit:
The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities
for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions of
work, and a living wage. Theyshall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
....
This public policy should be borne in mind in this case because to allow foreign
employers to determine for and by themselves whether an overseas contract worker may
be dismissed on the ground of illness would encourage illegal or arbitrary
pretermination of employment contracts.66 (Emphasis supplied, citation omitted)
Even with respect to fundamental procedural rights, this court emphasized in PCL
Shipping Philippines, Inc. v. NLRC,67 to wit:
Petitioners admit that they did notinform private respondent in writing of the charges
against him and that they failed to conduct a formal investigation to give him
opportunity to air his side. However, petitioners contend that the twin requirements
ofnotice and hearing applies strictly only when the employment is within the Philippines
and that these need not be strictly observed in cases of international maritime or
overseas employment.

The Court does not agree. The provisions of the Constitution as well as the Labor Code
which afford protection to labor apply to Filipino employees whether working within the
Philippines or abroad. Moreover, the principle of lex loci contractus (the law of the place
where the contract is made) governs in this jurisdiction. In the present case, it is not
disputed that the Contract of Employment entered into by and between petitioners and
private respondent was executed here in the Philippines with the approval of the
Philippine Overseas Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and other laws affecting labor
apply in this case.68 (Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or
authorized cause and after compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the
employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment for any
of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representatives; and
(e) Other causes analogous to the foregoing.
Petitioners allegation that respondentwas inefficient in her work and negligent in her
duties69 may, therefore, constitute a just cause for termination under Article 282(b), but
only if petitioner was able to prove it.
The burden of proving that there is just cause for termination is on the employer. "The
employer must affirmatively show rationally adequate evidence that the dismissal was
for a justifiable cause."70 Failure to show that there was valid or just cause for
termination would necessarily mean that the dismissal was illegal.71
To show that dismissal resulting from inefficiency in work is valid, it must be shown
that: 1) the employer has set standards of conduct and workmanship against which the
employee will be judged; 2) the standards of conduct and workmanship must have been
communicated tothe employee; and 3) the communication was made at a reasonable
time prior to the employees performance assessment.
This is similar to the law and jurisprudence on probationary employees, which allow
termination ofthe employee only when there is "just cause or when [the probationary
employee] fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his [or her]
engagement."72
However, we do not see why the application of that ruling should be limited to
probationary employment. That rule is basic to the idea of security of tenure and due

process, which are guaranteed to all employees, whether their employment is

probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the
probationary employees fitness, propriety, efficiency, and qualifications as a regular
employee. Due process requires that the probationary employee be informed of such
standards at the time of his or her engagement so he or she can adjusthis or her
character or workmanship accordingly. Proper adjustment to fit the standards upon
which the employees qualifications will be evaluated will increase ones chances of
being positively assessed for regularization by his or her employer.
Assessing an employees work performance does not stop after regularization. The
employer, on a regular basis, determines if an employee is still qualified and efficient,
based on work standards. Based on that determination, and after complying with the
due process requirements of notice and hearing, the employer may exercise its
management prerogative of terminating the employee found unqualified.
The regular employee must constantlyattempt to prove to his or her employer that he or
she meets all the standards for employment. This time, however, the standards to be
met are set for the purpose of retaining employment or promotion. The employee
cannot be expected to meet any standard of character or workmanship if such standards
were not communicated to him or her. Courts should remain vigilant on allegations of
the employers failure to communicatework standards that would govern ones
employment "if [these are] to discharge in good faith [their] duty to adjudicate." 73
In this case, petitioner merely alleged that respondent failed to comply with her foreign
employers work requirements and was inefficient in her work. 74 No evidence was shown
to support such allegations. Petitioner did not even bother to specify what requirements
were not met, what efficiency standards were violated, or what particular acts of
respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards
against which her work efficiency and performance were judged. The parties conflict as
to the position held by respondent showed that even the matter as basic as the job title
was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just
cause for termination. There is no proof that respondent was legally terminated.
Petitioner
failed
the due process requirements

to

comply

with

Respondents dismissal less than one year from hiring and her repatriation on the same
day show not onlyfailure on the partof petitioner to comply with the requirement of the
existence of just cause for termination. They patently show that the employersdid not
comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of
dismissal.75 The employer is required to give the charged employee at least two written
notices before termination.76 One of the written notices must inform the employee of the
particular acts that may cause his or her dismissal. 77 The other notice must "[inform] the
employee of the employers decision."78 Aside from the notice requirement, the
employee must also be given "an opportunity to be heard." 79
Petitioner failed to comply with the twin notices and hearing requirements. Respondent
started working on June 26, 1997. She was told that she was terminated on July 14, 1997
effective on the same day and barely a month from her first workday. She was also

repatriated on the same day that she was informed of her termination. The abruptness
of the termination negated any finding that she was properly notified and given the
opportunity to be heard. Her constitutional right to due process of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the
unexpired portion ofthe employment contract that was violated together with attorneys
fees and reimbursement of amounts withheld from her salary.
Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and
Overseas Filipinos Act of1995, states thatoverseas workers who were terminated without
just, valid, or authorized cause "shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less."
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provisions [sic] shall be
incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and directors and partners as the case
may be, shall themselves be jointly and solidarily liable with the corporation
orpartnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made
locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims
inclusive of damages under this section shall be paid within four (4) months from the
approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less.
....
(Emphasis supplied)
Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the
transport of his [or her] personal belongings shall be the primary responsibility of the
agency which recruited or deployed the worker overseas." The exception is when
"termination of employment is due solely to the fault of the worker," 80 which as we have
established, is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS;

EMERGENCY REPATRIATION FUND. The repatriation of the worker and the

transport of his personal belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas. All costs attendant to repatriation
shall be borne by or charged to the agency concerned and/or its principal. Likewise, the
repatriation of remains and transport of the personal belongings of a deceased worker
and all costs attendant thereto shall be borne by the principal and/or local agency.
However, in cases where the termination of employment is due solely to the fault of the
worker, the principal/employer or agency shall not in any manner be responsible for the
repatriation of the former and/or his belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as
attorneys feeswhen the withholding is unlawful.
The Court of Appeals affirmedthe National Labor Relations Commissions decision to
award respondent NT$46,080.00 or the threemonth equivalent of her salary, attorneys
fees of NT$300.00, and the reimbursement of the withheld NT$3,000.00 salary, which
answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of
the three-month equivalent of respondents salary should, however, be increased to the
amount equivalent to the unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., 82 this
court ruled that the clause "or for three (3) months for every year of the unexpired term,
whichever is less"83 is unconstitutional for violating the equal protection clause and
substantive due process.84
A statute or provision which was declared unconstitutional is not a law. It "confers no
rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative
as if it has not been passed at all."85
We are aware that the clause "or for three (3) months for every year of the unexpired
term, whichever is less"was reinstated in Republic Act No. 8042 upon promulgation of
Republic Act No. 10022 in 2010. Section 7 of Republic Act No. 10022 provides:
Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read
as follows:
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms of damage.
Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with
the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and directors and partners as the case

may be, shall themselves be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment
contract and shall not be affected by any substitution, amendment or modification made
locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims
inclusive of damages under this section shall be paid within thirty (30) days from
approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, or any unauthorized deductions from the migrant workers
salary, the worker shall be entitled to the full reimbursement if [sic] his placement fee
and the deductions made with interest at twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.
In case of a final and executory judgement against a foreign employer/principal, it shall
be automatically disqualified, without further proceedings, from participating in the
Philippine Overseas Employment Program and from recruiting and hiring Filipino
workers until and unless it fully satisfies the judgement award.
Noncompliance with the mandatory periods for resolutions of case providedunder this
section shall subject the responsible officials to any or all of the following penalties:
(a) The salary of any such official who fails to render his decision or resolution
within the prescribed period shall be, or caused to be, withheld until the said
official complies therewith;
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold any appointive public
office for five (5) years.
Provided, however,That the penalties herein provided shall be without prejudice to any
liability which any such official may have incured [sic] under other existing laws or rules
and regulations as a consequence of violating the provisions of this paragraph.
(Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010. This means that the
reinstatement of the clause in Republic Act No. 8042 was not yet in effect at the time of
respondents termination from work in 1997. 86 Republic Act No. 8042 before it was
amended byRepublic Act No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises adversarial
positions in their proper context before considering a prayer to declare it as
unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the
exact clause already declared as unconstitutional, without any perceived substantial
change in the circumstances.
This may cause confusion on the part of the National Labor Relations Commission and
the Court of Appeals.At minimum, the existence of Republic Act No. 10022 may delay
the execution of the judgment in this case, further frustrating remedies to assuage the
wrong done to petitioner.

Hence, there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules
concerning the protection and enforcement of constitutional rights." 87 When cases
become mootand academic, we do not hesitate to provide for guidance to bench and bar
in situations where the same violations are capable of repetition but will evade review.
This is analogous to cases where there are millions of Filipinos working abroad who are
bound to suffer from the lack of protection because of the restoration of an identical
clause in a provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the
government may exercise its powers in any manner inconsistent with the Constitution,
regardless of the existence of any law that supports such exercise. The Constitution
cannot be trumped by any other law. All laws must be read in light of the Constitution.
Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the
Constitution,the nullity cannot be cured by reincorporation or reenactment of the same
or a similar law or provision. A law or provision of law that was already declared
unconstitutional remains as such unless circumstances have sochanged as to warrant a
reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so
changed so as to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to
these cases. The new law puts our overseas workers in the same vulnerable position as
they were prior to Serrano. Failure to reiterate the very ratio decidendi of that case will
result in the same untold economic hardships that our reading of the Constitution
intended to avoid. Obviously, we cannot countenance added expenses for further
litigation thatwill reduce their hardearned wages as well as add to the indignity of
having been deprived of the protection of our laws simply because our precedents have
not been followed. There is no constitutional doctrine that causes injustice in the face of
empty procedural niceties. Constitutional interpretation is complex, but it is never
unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of
the Solicitor General to comment on the constitutionality of the reinstated clause in
Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was constitutional. 90 The legislators
intended a balance between the employers and the employees rights by not unduly
burdening the local recruitment agency.91 Petitioner is also of the view that the clause
was already declared as constitutional in Serrano.92
The Office of the Solicitor General also argued that the clause was valid and
constitutional.93 However, since the parties never raised the issue of the constitutionality
of the clause asreinstated in Republic Act No. 10022, its contention is that it is beyond
judicial review.94
On the other hand, respondentargued that the clause was unconstitutional because it
infringed on workers right to contract.95
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022,
violates the constitutional rights to equal protection and due process. 96 Petitioner as well
as the Solicitor General have failed to show any compelling changein the circumstances
that would warrant us to revisit the precedent.

We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should
be recovered by anillegally dismissed overseas worker to three months is both a
violation of due process and the equal protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and
falling within the same class are treated alike, in terms of "privileges conferred and
liabilities enforced."97 It is a guarantee against "undue favor and individual or class
privilege, as well as hostile discrimination or the oppression of inequality." 98
In creating laws, the legislature has the power "to make distinctions and
classifications."99
In exercising such power, it has a wide discretion.100
The equal protection clause does not infringe on this legislative power. 101 A law is void
on this basis, only if classifications are made arbitrarily. 102 There is no violation of the
equal protection clause if the law applies equally to persons within the same class and if
there are reasonable grounds for distinguishing between those falling within the class
and those who do not fall within the class. 103 A law that does not violate the equal
protection clause prescribesa reasonable classification.104
A reasonable classification "(1) must rest on substantial distinctions; (2) must be
germane to the purposes of the law; (3) must not be limited to existing conditions only;
and (4) must apply equally to all members of the same class." 105
The reinstated clause does not satisfy the requirement of reasonable classification.
In Serrano, we identified the classifications made by the reinstated clause. It
distinguished between fixed-period overseas workers and fixedperiod local workers. 106 It
also distinguished between overseas workers with employment contracts of less than
one year and overseas workers with employment contracts of at least one year. 107 Within
the class of overseas workers with at least one-year employment contracts, there was a
distinction between those with at least a year left in their contracts and those with less
than a year left in their contracts when they were illegally dismissed. 108
The Congress classification may be subjected to judicial review. In Serrano, there is a
"legislative classification which impermissibly interferes with the exercise of a
fundamental right or operates to the peculiar disadvantage of a suspect class." 109
Under the Constitution, labor is afforded special protection. 110 Thus, this court in
Serrano, "[i]mbued with the same sense of obligation to afford protection to labor, . . .
employ[ed] the standard of strict judicial scrutiny, for it perceive[d] in the subject clause
a suspect classification prejudicial to OFWs."111
We also noted in Serranothat before the passage of Republic Act No. 8042, the money
claims of illegally terminated overseas and local workers with fixed-term employment
werecomputed in the same manner.112 Their money claims were computed based onthe
"unexpired portions of their contracts."113 The adoption of the reinstated clause in
Republic Act No. 8042 subjected the money claims of illegally dismissed overseas
workers with an unexpired term of at least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims of illegally terminated local
workers with fixed-term employment.115
We observed that illegally dismissed overseas workers whose employment contracts had
a term of less than one year were granted the amount equivalent to the unexpired
portion of their employment contracts.116 Meanwhile, illegally dismissed overseas

workers with employment terms of at least a year were granted a cap equivalent to three
months of their salary for the unexpired portions of their contracts. 117
Observing the terminologies used inthe clause, we also found that "the subject clause
creates a sub-layer of discrimination among OFWs whose contract periods are for more
than one year: those who are illegally dismissed with less than one year left in their
contracts shall be entitled to their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more remaining in their contracts
shall be covered by the reinstated clause, and their monetary benefits limited to their
salaries for three months only."118
We do not need strict scrutiny to conclude that these classifications do not rest on any
real or substantial distinctions that would justify different treatments in terms of the
computation of money claims resulting from illegal termination.
Overseas workers regardless of their classifications are entitled to security of tenure, at
least for the period agreed upon in their contracts. This means that they cannot be
dismissed before the end of their contract terms without due process. If they were
illegally dismissed, the workers right to security of tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are
neither greater than norless than the rights violated when a fixed-period overseas
worker is illegally terminated. It is state policy to protect the rights of workers
withoutqualification as to the place of employment.119 In both cases, the workers are
deprived of their expected salary, which they could have earned had they not been
illegally dismissed. For both workers, this deprivation translates to economic insecurity
and disparity.120 The same is true for the distinctions between overseas workers with an
employment contract of less than one year and overseas workers with at least one year
of employment contract, and between overseas workers with at least a year left in their
contracts and overseas workers with less than a year left in their contracts when they
were illegally dismissed.
For this reason, we cannot subscribe to the argument that "[overseas workers] are
contractual employeeswho can never acquire regular employment status, unlike local
workers"121 because it already justifies differentiated treatment in terms ofthe
computation of money claims.122
Likewise, the jurisdictional and enforcement issues on overseas workers money claims
do not justify a differentiated treatment in the computation of their money claims. 123 If
anything, these issues justify an equal, if not greater protection and assistance to
overseas workers who generally are more prone to exploitation given their physical
distance from our government.
We also find that the classificationsare not relevant to the purpose of the law, which is to
"establish a higher standard of protection and promotion of the welfare of migrant
workers, their families and overseas Filipinos in distress, and for other
purposes."124 Further, we find specious the argument that reducing the liability of
placement agencies "redounds to the benefit of the [overseas] workers." 125
Putting a cap on the money claims of certain overseas workers does not increase the
standard of protection afforded to them. On the other hand, foreign employers are more
incentivizedby the reinstated clause to enter into contracts of at least a year because it
gives them more flexibility to violate our overseas workers rights. Their liability for
arbitrarily terminating overseas workers is decreased at the expense of the workers
whose rights they violated. Meanwhile, these overseas workers who are impressed with
an expectation of a stable job overseas for the longer contract period disregard other
opportunities only to be terminated earlier. They are left with claims that are less than

what others in the same situation would receive. The reinstated clause, therefore,
creates a situation where the law meant to protect them makes violation of rights easier
and simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact
provides a hidden twist affecting the principal/employers liability. While intended as an
incentive accruing to recruitment/manning agencies, the law, as worded, simply limits
the OFWs recovery in wrongfuldismissal situations. Thus, it redounds to the benefit of
whoever may be liable, including the principal/employer the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10 read as a grant of
incentives to recruitment/manning agencies oversteps what it aims to do by effectively
limiting what is otherwise the full liability of the foreign principals/employers. Section
10, in short, really operates to benefit the wrong party and allows that party, without
justifiable reason, to mitigate its liability for wrongful dismissals. Because of this hidden
twist, the limitation ofliability under Section 10 cannot be an "appropriate" incentive, to
borrow the term that R.A. No. 8042 itself uses to describe the incentive it envisions
under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a
grant that, to encourage greater efforts at recruitment, is directly related to extra efforts
undertaken, the law simply limits their liability for the wrongful dismissals of already
deployed OFWs. This is effectively a legally-imposed partial condonation of their
liability to OFWs, justified solely by the laws intent to encourage greater deployment
efforts. Thus, the incentive,from a more practical and realistic view, is really part of a
scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting the
market. . . .
The so-called incentive is rendered particularly odious by its effect on the OFWs the
benefits accruing to the recruitment/manning agencies and their principals are
takenfrom the pockets of the OFWs to whom the full salaries for the unexpired portion
of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure
that an employment contract embodies. Conversely, lesser protection is afforded the
OFW, not only because of the lessened recovery afforded him or her by operation of law,
but also because this same lessened recovery renders a wrongful dismissal easier and
less onerous to undertake; the lesser cost of dismissing a Filipino will always bea
consideration a foreign employer will take into account in termination of employment
decisions. . . .126
Further, "[t]here can never be a justification for any form of government action that
alleviates the burden of one sector, but imposes the same burden on another sector,
especially when the favored sector is composed of private businesses suchas placement
agencies, while the disadvantaged sector is composed ofOFWs whose protection no less
than the Constitution commands. The idea thatprivate business interest can be elevated
to the level of a compelling state interest is odious."127
Along the same line, we held that the reinstated clause violates due process rights. It is
arbitrary as it deprives overseas workers of their monetary claims without any
discernable valid purpose.128
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her
contract, in accordance with Section 10 of Republic Act No. 8042. The award of the
three-month equivalence of respondents salary must be modified accordingly. Since she
started working on June 26, 1997 and was terminated on July 14, 1997, respondent is
entitled to her salary from July 15, 1997 to June 25, 1998. "To rule otherwise would be

iniquitous to petitioner and other OFWs, and would,in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFWs security
of tenure which an employment contract embodies and actually profit from such
violation based on an unconstitutional provision of law." 129
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013,
which revised the interest rate for loan or forbearance from 12% to 6% in the absence of
stipulation,applies in this case. The pertinent portions of Circular No. 799, Series of
2013, read: The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved
the following revisions governing the rate of interest in the absence of stipulation in loan
contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of an express contract as to such
rateof interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for
Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for
Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in
computing legal interest in Nacar v. Gallery Frames:130
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but
when such certainty cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged. 3. When the
judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2,
above, shall be 6% per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to
July 1, 2013, shall not be disturbed and shall continue to be implemented applying the
rate of interest fixed therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits,
and in judgments when there is no stipulation on the applicable interest rate. Further, it
is only applicable if the judgment did not become final and executory before July 1,
2013.132
We add that Circular No. 799 is not applicable when there is a law that states otherwise.
While the Bangko Sentral ng Pilipinas has the power to set or limit interest
rates,133 these interest rates do not apply when the law provides that a different interest
rate shall be applied. "[A] Central Bank Circular cannot repeal a law. Only a law can
repeal another law."134
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated
overseas workers are entitled to the reimbursement of his or her placement fee with an
interest of 12% per annum. Since Bangko Sentral ng Pilipinas circulars cannotrepeal
Republic Act No. 8042, the issuance of Circular No. 799 does not have the effect of
changing the interest on awards for reimbursement of placement fees from 12% to 6%.
This is despite Section 1 of Circular No. 799, which provides that the 6% interest rate
applies even to judgments.
Moreover, laws are deemed incorporated in contracts. "The contracting parties need not
repeat them. They do not even have to be referred to. Every contract, thus, contains not
only what has been explicitly stipulated, but the statutory provisions that have any
bearing on the matter."135 There is, therefore, an implied stipulation in contracts
between the placement agency and the overseasworker that in case the overseas worker
is adjudged as entitled to reimbursement of his or her placement fees, the amount shall
be subject to a 12% interest per annum. This implied stipulation has the effect of
removing awards for reimbursement of placement fees from Circular No. 799s
coverage.
The same cannot be said for awardsof salary for the unexpired portion of the
employment contract under Republic Act No. 8042. These awards are covered by
Circular No. 799 because the law does not provide for a specific interest rate that should
apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there
was no stipulation in the contract providing for a different interest rate, other money
claims under Section 10 of Republic Act No. 8042 shall be subject to the 6% interest per
annum in accordance with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her
money claims from the finality of this judgment.
IV
Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment
agency that facilitated respondents overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the
foreign employer and the local employment agency are jointly and severally liable for
money claims including claims arising out of an employer-employee relationship and/or
damages. This section also provides that the performance bond filed by the local agency
shall be answerable for such money claims or damages if they were awarded to the
employee.

This provision is in line with the states policy of affording protection to labor and
alleviating workers plight.136
In overseas employment, the filing of money claims against the foreign employer is
attended by practical and legal complications.1wphi1 The distance of the foreign
employer alonemakes it difficult for an overseas worker to reach it and make it liable for
violations of the Labor Code. There are also possible conflict of laws, jurisdictional
issues, and procedural rules that may be raised to frustrate an overseas workersattempt
to advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in the
complaint as an indispensable party without which no final determination can be had of
an action.137
The provision on joint and several liability in the Migrant Workers and Overseas
Filipinos Act of 1995 assures overseas workers that their rights will not be frustrated
with these complications. The fundamental effect of joint and several liability is that
"each of the debtors is liable for the entire obligation." 138 A final determination may,
therefore, be achieved even if only oneof the joint and several debtors are impleaded in
an action. Hence, in the case of overseas employment, either the local agency or the
foreign employer may be sued for all claims arising from the foreign employers labor
law violations. This way, the overseas workers are assured that someone the foreign
employers local agent may be made to answer for violationsthat the foreign employer
may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers
have recourse in law despite the circumstances of their employment. By providing that
the liability of the foreign employer may be "enforced to the full extent" 139 against the
local agent,the overseas worker is assured of immediate and sufficientpayment of what
is due them.140
Corollary to the assurance of immediate recourse in law, the provision on joint and
several liability in the Migrant Workers and Overseas Filipinos Act of 1995 shifts the
burden of going after the foreign employer from the overseas worker to the local
employment agency. However, it must be emphasized that the local agency that is held
to answer for the overseas workers money claims is not leftwithout remedy. The law
does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against
the foreign employer.
A further implication of making localagencies jointly and severally liable with the
foreign employer is thatan additional layer of protection is afforded to overseas workers.
Local agencies, which are businesses by nature, are inoculated with interest in being
always on the lookout against foreign employers that tend to violate labor law. Lest they
risk their reputation or finances, local agenciesmust already have mechanisms for
guarding against unscrupulous foreign employers even at the level prior to overseas
employment applications.
With the present state of the pleadings, it is not possible to determine whether there was
indeed a transfer of obligations from petitioner to Pacific. This should not be an obstacle
for the respondent overseas worker to proceed with the enforcement of this judgment.
Petitioner is possessed with the resources to determine the proper legal remedies to
enforce its rights against Pacific, if any.
V

Many times, this court has spoken on what Filipinos may encounter as they travel into
the farthest and mostdifficult reaches of our planet to provide for their families. In
Prieto v. NLRC:141
The Court is not unaware of the many abuses suffered by our overseas workers in the
foreign land where they have ventured, usually with heavy hearts, in pursuit of a more
fulfilling future. Breach of contract, maltreatment, rape, insufficient nourishment, subhuman lodgings, insults and other forms of debasement, are only a few of the inhumane
acts towhich they are subjected by their foreign employers, who probably feel they can
do as they please in their own country. Whilethese workers may indeed have relatively
little defense against exploitation while they are abroad, that disadvantage must not
continue to burden them when they return to their own territory to voice their muted
complaint. There is no reason why, in their very own land, the protection of our own
laws cannot be extended to them in full measure for the redress of their grievances. 142
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be told a million
times over; each of their stories as real as any other. Overseas Filipino workers brave
alien cultures and the heartbreak of families left behind daily. They would count the
minutes, hours, days, months, and years yearning to see their sons and daughters. We
all know of the joy and sadness when they come home to see them all grown up and,
being so, they remember what their work has cost them. Twitter accounts, Facetime,
and many other gadgets and online applications will never substitute for their lost
physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political
and economic crises. They are our true diplomats, they who show the world the
resilience, patience, and creativity of our people. Indeed, we are a people who contribute
much to the provision of material creations of this world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We
default by limiting the contractual wages that should be paid to our workers when their
contracts are breached by the foreign employers. While we sit, this court will ensure that
our laws will reward our overseas workers with what they deserve: their dignity.
Inevitably, their dignity is ours as weil.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is
AFFIRMED with modification. Petitioner Sameer Overseas Placement Agency is
ORDERED to pay respondent Joy C. Cabiles the amount equivalent to her salary for the
unexpired portion of her employment contract at an interest of 6% per annum from the
finality of this judgment. Petitioner is also ORDERED to reimburse respondent the
withheld NT$3,000.00 salary and pay respondent attorney's fees of NT$300.00 at an
interest of 6% per annum from the finality of this judgment.
The clause, "or for three (3) months for every year of the unexpired term, whichever is
less" in Section 7 of Republic Act No. 10022 amending Section 10 of Republic Act No.
8042 is declared unconstitutional and, therefore, null and void.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION
CLAUDIO S. YAP,
Petitioner,

G.R. No. 179532

Present:

- versus -

CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

THENAMARIS SHIPS MANAGEMENT

and INTERMARE MARITIME AGENCIES,
INC.,
Promulgated:
Respondents.
May 30, 2011

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

DECISION
NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Decision[2]dated February 28, 2007, which affirmed with modification the National
Labor Relations Commission (NLRC) resolution[3] dated April 20, 2005.
The undisputed facts, as found by the CA, are as follows:
[Petitioner] Claudio S. Yap was employed as electrician of the vessel, M/T
SEASCOUT on 14 August 2001 by Intermare Maritime Agencies, Inc. in
behalf of its principal, Vulture Shipping Limited. The contract of
employment entered into by Yap and Capt. Francisco B. Adviento, the
General Manager of Intermare, was for a duration of 12 months. On 23
August 2001, Yap boarded M/T SEASCOUT and commenced his job as

electrician. However, on or about 08 November 2001, the vessel was

sold. The Philippine Overseas Employment Administration (POEA) was
informed about the sale on 06 December 2001 in a letter signed by Capt.
Adviento. Yap, along with the other crewmembers, was informed by the
Master of their vessel that the same was sold and will be scrapped. They
were also informed about the Advisory sent by Capt. Constatinou, which
states, among others:
PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE
TRANSFERRED TO OTHER VESSELS AFTER VESSEL S DELIVERY
(GREEK VIA ATHENS-PHILIPINOS VIAMANILA
FOR CREW NOT WISH TRANSFER TO DECLARE THEIR PROSPECTED
TIME FOR REEMBARKATION IN ORDER TO SCHEDULE THEM
ACCLY
Yap received his seniority bonus, vacation bonus, extra bonus along with
the scrapping bonus. However, with respect to the payment of his wage, he
refused to accept the payment of one-month basic wage. He insisted that
he was entitled to the payment of the unexpired portion of his contract
since he was illegally dismissed from employment. He alleged that he
opted for immediate transfer but none was made.
[Respondents], for their part, contended that Yap was not illegally
dismissed. They alleged that following the sale of the M/T SEASCOUT,
Yap signed off from the vessel on 10 November 2001 and was paid his
wages corresponding to the months he worked or until 10 November 2001
plus his seniority bonus, vacation bonus and extra bonus. They further
alleged that Yaps employment contract was validly terminated due to the
sale of the vessel and no arrangement was made for Yaps transfer to
Thenamaris other vessels.[4]

Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with
Damages and Attorneys Fees before the Labor Arbiter (LA). Petitioner claimed that he
was entitled to the salaries corresponding to the unexpired portion of his contract.
Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento
of respondents Intermare Maritime Agencies, Inc. (Intermare) and Thenamaris Ships
Management (respondents), together with C.J. Martionos, Interseas Trading and
Financing Corporation, and Vulture Shipping Limited/Stejo Shipping Limited.
On July 26, 2004, the LA rendered a decision [5] in favor of petitioner, finding the latter
to have been constructively and illegally dismissed by respondents. Moreover, the LA
found that respondents acted in bad faith when they assured petitioner of reembarkation and required him to produce an electrician certificate during the period of
his contract, but actually he was not able to board one despite of respondents numerous
vessels. Petitioner made several follow-ups for his re-embarkation but respondents
failed to heed his plea; thus, petitioner was forced to litigate in order to vindicate his
rights. Lastly, the LA opined that since the unexpired portion of petitioners contract was
less than one year, petitioner was entitled to his salaries for the unexpired portion of his
contract for a period of nine months. The LA disposed, as follows:

WHEREFORE, in view of the foregoing, a decision is hereby

rendered declaring complainant to have been constructively
dismissed. Accordingly, respondents Intermare Maritime Agency
Incorporated, Thenamaris Ships Mgt., and Vulture Shipping Limited are
ordered to pay jointly and severally complainant Claudio S. Yap the sum of
$12,870.00 or its peso equivalent at the time of payment. In addition,
moral damages of ONE HUNDRED THOUSAND PESOS
(P100,000.00) and exemplary damages of FIFTY THOUSAND
PESOS (P50,000.00) are awarded plus ten percent (10%) of the total
award as attorneys fees.
Other money claims are DISMISSED for lack of merit.
SO ORDERED.[6]

Aggrieved, respondents sought recourse from the NLRC.

In its decision[7] dated January 14, 2005, the NLRC affirmed the LAs findings
that petitioner was indeed constructively and illegally dismissed; that respondents bad
faith was evident on their wilful failure to transfer petitioner to another vessel; and that
the award of attorneys fees was warranted. However, the NLRC held that instead of an
award of salaries corresponding to nine months, petitioner was only entitled to salaries
for three months as provided under Section 10 [8] of Republic Act (R.A.) No. 8042,[9] as
enunciated in our ruling in Marsaman Manning Agency, Inc. v. National Labor
Relations Commission.[10] Hence, the NLRC ruled in this wise:
WHEREFORE, premises considered, the decision of the Labor
Arbiter finding the termination of complainant illegal is hereby
AFFIRMED with a MODIFICATION. Complainant[s] salary for the
unexpired portion of his contract should only be limited to three (3)
months basic salary.
Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping
Limited and Thenamaris Ship Management are hereby ordered to jointly
and severally pay complainant, the following:
1.

Three (3) months basic salary US$4,290.00 or its peso

equivalent at the time of actual payment.
2. Moral damages P100,000.00
3. Exemplary damages P50,000.00
4. Attorneys fees equivalent to 10% of the total monetary award.
SO ORDERED.[11]

Respondents filed a Motion for Partial Reconsideration, [12] praying for the reversal and
setting aside of the NLRC decision, and that a new one be rendered dismissing the
complaint. Petitioner, on the other hand, filed his own Motion for Partial
Reconsideration,[13] praying that he be paid the nine (9)-month basic salary, as awarded
by the LA.

On April 20, 2005, a resolution[14] was rendered by the NLRC, affirming the findings of
Illegal Dismissal and respondents failure to transfer petitioner to another vessel.
However, finding merit in petitioners arguments, the NLRC reversed its earlier
Decision, holding that there can be no choice to grant only three (3) months salary for
every year of the unexpired term because there is no full year of unexpired term which
this can be applied. Hence
WHEREFORE, premises considered, complainants Motion for Partial
Reconsideration is hereby granted. The award of three (3) months basic
salary in the sum of US$4,290.00 is hereby modified in that complainant
is entitled to his salary for the unexpired portion of employment contract
in the sum of US$12,870.00 or its peso equivalent at the time of actual
payment.
All aspect of our January 14, 2005 Decision STANDS.
SO ORDERED.[15]
Respondents filed a Motion for Reconsideration, which the NLRC denied.
Undaunted, respondents filed a petition for certiorari[16] under Rule 65 of the
Rules of Civil Procedure before the CA. On February 28, 2007, the CA affirmed the
findings and ruling of the LA and the NLRC that petitioner was constructively and
illegally dismissed. The CA held that respondents failed to show that the NLRC acted
without statutory authority and that its findings were not supported by law,
jurisprudence, and evidence on record. Likewise, the CA affirmed the lower agencies
findings that the advisory of Captain Constantinou, taken together with the other
documents and additional requirements imposed on petitioner, only meant that the
latter should have been re-embarked. In the same token, the CA upheld the lower
agencies unanimous finding of bad faith, warranting the imposition of moral and
exemplary damages and attorneys fees. However, the CA ruled that the NLRC erred in
sustaining the LAs interpretation of Section 10 of R.A. No. 8042. In this regard, the CA
relied on the clause or for three months for every year of the unexpired term,
whichever is less provided in the 5th paragraph of Section 10 of R.A. No. 8042 and held:
In the present case, the employment contract concerned has a term
of one year or 12 months which commenced on August 14, 2001. However,
it was preterminated without a valid cause. [Petitioner] was paid his wages
for the corresponding months he worked until the 10th of November.
Pursuant to the provisions of Sec. 10, [R.A. No.] 8042, therefore, the
option of three months for every year of the unexpired term is applicable.
[17]

Thus, the CA provided, to wit:

WHEREFORE, premises considered, this Petition for Certiorari

is DENIED. The Decision dated
January
14,
2005,
and Resolutions, dated April 20, 2005 and July 29, 2005, respectively,
of public respondent National Labor Relations Commission-Fourth
Division, Cebu City, in NLRC No. V-000038-04 (RAB VIII (OFW)-04-010006) are hereby AFFIRMED with the MODIFICATION that private
respondent is entitled to three (3) months of basic salary computed at
US$4,290.00 or its peso equivalent at the time of actual payment.
Costs against Petitioners.[18]

Both parties filed their respective motions for reconsideration, which the CA,
however, denied in its Resolution[19] dated August 30, 2007.
Unyielding, petitioner filed this petition, raising the following issues:
1)

Whether or not Section 10 of R.A. [No.] 8042, to the extent that it

affords an illegally dismissed migrant worker the lesser benefit of
salaries for [the] unexpired portion of his employment
contractor for three (3) months for every year of the unexpired
term, whichever is less is constitutional; and

2)

Assuming that it is, whether or not the Court of Appeals gravely

erred in granting petitioner only three (3) months backwages when
his unexpired term of 9 months is far short of the every year of the
unexpired term threshold.[20]

In the meantime, while this case was pending before this Court, we declared as
unconstitutional the clause or for three months for every year of the unexpired term,
whichever is less provided in the 5th paragraph of Section 10 of R.A. No. 8042 in the case
of Serrano v. Gallant Maritime Services, Inc.[21] on March 24, 2009.
Apparently, unaware of our ruling in Serrano, petitioner claims that the
5th paragraph of Section 10, R.A. No. 8042, is violative of Section 1, [22] Article III and
Section 3,[23] Article XIII of the Constitution to the extent that it gives an erring
employer the option to pay an illegally dismissed migrant worker only three months for
every year of the unexpired term of his contract; that said provision of law has long been
a source of abuse by callous employers against migrant workers; and that said provision
violates the equal protection clause under the Constitution because, while illegally
dismissed local workers are guaranteed under the Labor Code of reinstatement with full
backwages computed from the time compensation was withheld from them up to their
actual reinstatement, migrant workers, by virtue of Section 10 of R.A. No. 8042, have to
waive nine months of their collectible backwages every time they have a year of
unexpired term of contract to reckon with. Finally, petitioner posits that, assuming said
provision of law is constitutional, the CA gravely abused its discretion when it reduced
petitioners backwages from nine months to three months as his nine-month unexpired

term cannot accommodate the lesser relief of three months for every year of the
unexpired term.[24]
On the other hand, respondents, aware of our ruling in Serrano, aver that our
pronouncement of unconstitutionality of the clause or for three months for every year
of the unexpired term, whichever is less provided in the 5th paragraph of Section 10 of
R.A. No. 8042 in Serrano should not apply in this case because Section 10 of R.A. No.
8042 is a substantive law that deals with the rights and obligations of the parties in case
of Illegal Dismissal of a migrant worker and is not merely procedural in character. Thus,
pursuant to the Civil Code, there should be no retroactive application of the law in this
case. Moreover, respondents asseverate that petitioners tanker allowance of US$130.00
should not be included in the computation of the award as petitioners basic salary, as
provided under his contract, was only US$1,300.00. Respondents submit that the CA
erred in its computation since it included the said tanker allowance. Respondents opine
that petitioner should be entitled only to US$3,900.00 and not to US$4,290.00, as
granted by the CA. Invoking Serrano, respondents claim that the tanker allowance
should be excluded from the definition of the term salary. Also, respondents manifest
that the full sum ofP878,914.47 in Intermares bank account was garnished and
subsequently withdrawn and deposited with the NLRC Cashier of Tacloban City on
February 14, 2007. On February 16, 2007, while this case was pending before the CA,
the LA issued an Order releasing the amount of P781,870.03 to petitioner as his award,
together with the sum of P86,744.44 to petitioners former lawyer as attorneys fees, and
the amount of P3,570.00 as execution and deposit fees. Thus, respondents pray that the
instant petition be denied and that petitioner be directed to return to Intermare the sum
of US$8,970.00 or its peso equivalent.[25]
On this note, petitioner counters that this new issue as to the inclusion of the
tanker allowance in the computation of the award was not raised by respondents before
the LA, the NLRC and the CA, nor was it raised in respondents pleadings other than in
their Memorandum before this Court, which should not be allowed under the
circumstances.[26]
The petition is impressed with merit.
Prefatorily, it bears emphasis that the unanimous finding of the LA, the NLRC
and the CA that the dismissal of petitioner was illegal is not disputed. Likewise not
disputed is the tribunals unanimous finding of bad faith on the part of respondents,
thus, warranting the award of moral and exemplary damages and attorneys fees. What
remains in issue, therefore, is the constitutionality of the 5 th paragraph of Section 10 of
R.A. No. 8042 and, necessarily, the proper computation of the lump-sum salary to be
awarded to petitioner by reason of his illegal dismissal.
Verily, we have already declared in Serrano that the clause or for three months
for every year of the unexpired term, whichever is less provided in the 5th paragraph of
Section 10 of R.A. No. 8042 is unconstitutional for being violative of the rights of

Overseas Filipino Workers (OFWs) to equal protection of the laws. In an exhaustive

discussion of the intricacies and ramifications of the said clause, this Court, in Serrano,
pertinently held:
The Court concludes that the subject clause contains a
suspect classification in that, in the computation of the
monetary benefits of fixed-term employees who are illegally
discharged, it imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local
workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a
peculiar disadvantage.[27]
Moreover, this Court held therein that the subject clause does not state or imply
any definitive governmental purpose; hence, the same violates not just therein
petitioners right to equal protection, but also his right to substantive due process under
Section 1, Article III of the Constitution.[28] Consequently, petitioner therein was
accorded his salaries for the entire unexpired period of nine months and 23 days of his
employment contract, pursuant to law and jurisprudence prior to the enactment of R.A.
No. 8042.
We have already spoken. Thus, this case should not be different from Serrano.
As a general rule, an unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is inoperative as if it
has not been passed at all. The general rule is supported by Article 7 of the Civil Code,
which provides:
Art. 7. Laws are repealed only by subsequent ones, and their
violation or non-observance shall not be excused by disuse or custom or
practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned

general rule. In Planters Products, Inc. v. Fertiphil Corporation,[29] we held:
The doctrine of operative fact, as an exception to the general rule,
only applies as a matter of equity and fair play. It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior to
a determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be
erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality
will impose an undue burden on those who have relied on the invalid law.
Thus, it was applied to a criminal case when a declaration of
unconstitutionality would put the accused in double jeopardy or would put
in limbo the acts done by a municipality in reliance upon a law creating it.
[30]

Following Serrano, we hold that this case should not be included in the
aforementioned exception. After all, it was not the fault of petitioner that he lost his job
due to an act of illegal dismissal committed by respondents. To rule otherwise would be
iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFWs security
of tenure which an employment contract embodies and actually profit from such
violation based on an unconstitutional provision of law.
In the same vein, we cannot subscribe to respondents postulation that the tanker
allowance of US$130.00 should not be included in the computation of the lump-sum
salary to be awarded to petitioner.
First. It is only at this late stage, more particularly in their Memorandum, that
respondents are raising this issue. It was not raised before the LA, the NLRC, and the
CA. They did not even assail the award accorded by the CA, which computed the lumpsum salary of petitioner at the basic salary of US$1,430.00, and which clearly included
the US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that
this Court cannot now, for the first time on appeal, pass upon this question. Matters not
taken up below cannot be raised for the first time on appeal. They must be raised
seasonably in the proceedings before the lower tribunals. Questions raised on appeal
must be within the issues framed by the parties; consequently, issues not raised before
the lower tribunals cannot be raised for the first time on appeal. [31]
Second. Respondents invocation of Serrano is unavailing. Indeed, we made the
following pronouncements in Serrano, to wit:
The word salaries in Section 10(5) does not include
overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment
Contract of Seafarers, in which salary is understood as the basic
wage, exclusive of overtime, leave pay and other bonuses;
whereas overtime pay is compensation for all work performed in excess of
the regular eight hours, and holiday pay is compensation for any work
performed on designated rest days and holidays.[32]

A close perusal of the contract reveals that the tanker allowance of US$130.00
was not categorized as a bonus but was rather encapsulated in the basic salary clause,
hence, forming part of the basic salary of petitioner. Respondents themselves in their
petition for certiorari before the CA averred that petitioners basic salary, pursuant to
the contract, was US$1,300.00 + US$130.00 tanker allowance.[33] If respondents
intended it differently, the contract per se should have indicated that said allowance
does not form part of the basic salary or, simply, the contract should have separated it
from the basic salary clause.

A final note.
We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v.
Nayona,[34] this Court held that:
Our overseas workers belong to a disadvantaged class. Most of them
come from the poorest sector of our society. Their profile shows they live
in suffocating slums, trapped in an environment of crimes. Hardly literate
and in ill health, their only hope lies in jobs they find with difficulty in our
country. Their unfortunate circumstance makes them easy prey to
avaricious employers. They will climb mountains, cross the seas, endure
slave treatment in foreign lands just to survive. Out of despondence, they
will work under sub-human conditions and accept salaries below the
minimum. The least we can do is to protect them with our laws.

WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision

dated February 28, 2007 and Resolution dated August 30, 2007 are
hereby MODIFIED to the effect that petitioner is AWARDED his salaries for the
entire unexpired portion of his employment contract consisting of nine months
computed at the rate of US$1,430.00 per month. All other awards are
hereby AFFIRMED. No costs.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
EN BANC
ANTONIO M. SERRANO,
Petitioner,

- versus -

GALLANT MARITIME SERVICES,

G.R. No. 167614

Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, Jr.,
NACHURA,
LEONARDO-DE CASTRO,
BRION, and
PERALTA, JJ.

INC. and MARLOW NAVIGATION

CO., INC.,
Promulgated:
Respondents.
March 24, 2009
x----------------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and
communities out of poverty. Their earnings have built houses, provided health
care, equipped schools and planted the seeds of businesses. They have woven
together the world by transmitting ideas and knowledge from country to country.
They have provided the dynamic human link between cultures, societies and
economies. Yet, only recently have we begun to understand not only
how much international migration impacts development, but how
smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 2007[1]
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5 th paragraph of
Section 10, Republic Act (R.A.) No. 8042,[2] to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with
interest of twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their entitlement
in case of illegal dismissal to their lump-sum salary either for the unexpired portion of their
employment contract or for three months for every year of the unexpired term, whichever is less
(subject clause).Petitioner claims that the last clause violates the OFWs' constitutional rights in
that it impairs the terms of their contract, deprives them of equal protection and denies them due
process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision[3] and April 1, 2005 Resolution[4] of the Court of Appeals (CA), which
applied the subject clause, entreating this Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and conditions:
Duration of contract 12 months
Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with pay 7.00 days per month[5]
On March 19, 1998, the date of his departure, petitioner was constrained to accept a
downgraded employment contract for the position of Second Officer with a monthly salary of
US$1,000.00, upon the assurance and representation of respondents that he would be made
Chief Officer by the end of April 1998.[6]
Respondents did not deliver on their promise to make petitioner Chief Officer.[7] Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26,
1998.[8]
Petitioner's employment contract was for a period of 12 months or from March 19, 1998
up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two
(2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months
and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint [9] against respondents for
constructive dismissal and for payment of his money claims in the total amount of
US$26,442.73, broken down as follows:
May 27/31,
1998 (5 days)
incl. Leave
pay
June 01/30,
1998
July 01/31,
1998
August
01/31, 1998
Sept. 01/30,
1998
Oct. 01/31,
1998
Nov. 01/30,
1998
Dec. 01/31,
1998
Jan. 01/31,
1999
Feb. 01/28,
1999
Mar.
1/19,

US$ 413.90

2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
1,640.00

1999
(19
days)
incl.
leave pay
------------------------------------------------------------------------------25,382.23

Amount
adjusted to
chief mate's
salary
(March
1,060.50[10]
19/31, 1998
to April 1/30,
1998) +
--------------------------------------------------------------------------------------------TOTAL
US$ 26,442.73[11]
CLAIM
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner
illegal and awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that
the dismissal of the complainant (petitioner) by the respondents in the aboveentitled case was illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount of EIGHT
THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US
$8,770.00), representing the complainants salary for three (3)
months of the unexpired portion of the aforesaid contract of
employment.
The respondents are likewise ordered to pay the complainant [petitioner], jointly
and severally, in Philippine Currency, based on the rate of exchange prevailing at
the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),
[12]
representing the complainants claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and severally, in
Philippine Currency, at the exchange rate prevailing at the time of payment, the
complainants (petitioner's) claim for attorneys fees equivalent to ten percent
(10%) of the total amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby
DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.[13] (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation
on the salary period of three months only -- rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause. However,
the LA applied the salary rate of US$2,590.00, consisting of petitioner's [b]asic salary,

US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation

leave pay = US$2,590.00/compensation per month.[14]
Respondents appealed[15] to the National Labor Relations Commission (NLRC) to
question the finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed[16] to the NLRC on the sole issue that the LA erred in not applying
the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission[17] that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.[18]
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.
Respondents are hereby ordered to pay complainant, jointly and severally, in
Philippine currency, at the prevailing rate of exchange at the time of payment the
following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorneys fees 424.50
TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.[19]
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner
by reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042
does not provide for the award of overtime pay, which should be proven to have been actually
performed, and for vacation leave pay.[20]
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.[21] The NLRC denied the motion.[22]
Petitioner filed a Petition for Certiorari[23] with the CA, reiterating the constitutional
challenge against the subject clause.[24] After initially dismissing the petition on a technicality, the
CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7,
2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the
reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by
petitioner.[25]
His Motion for Reconsideration[26] having been denied by the CA,[27] petitioner brings his
cause to this Court on the following grounds:

The Court of Appeals and the labor tribunals have decided the case in a
way not in accord with applicable decision of the Supreme Court involving similar
issue of granting unto the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to three (3) months
II

In the alternative that the Court of Appeals and the Labor Tribunals were
merely applying their interpretation of Section 10 of Republic Act No. 8042, it is
submitted that the Court of Appeals gravely erred in law when it failed to
discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional
issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back wages
of overseas workers to three (3) months.
III

Even without considering the constitutional limitations [of] Sec. 10 of

Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding
from petitioners award the overtime pay and vacation pay provided in his contract
since under the contract they form part of his salary.[28]
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is
already old and sickly, and he intends to make use of the monetary award for his medical
treatment and medication.[29] Required to comment, counsel for petitioner filed a motion, urging
the court to allow partial execution of the undisputed monetary award and, at the same time,
praying that the constitutional question be resolved.[30]
Considering that the parties have filed their respective memoranda, the Court now takes
up the full merit of the petition mindful of the extreme importance of the constitutional question
raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was
illegal is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to
petitioner in all three fora. What remains disputed is only the computation of the lump-sum
salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of
petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the
unexpired portion of nine months and 23 days of his employment contract or a total of
US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition
to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a
total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00.[31]
The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs
the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package. [32] It also impinges on the equal
protection clause, for it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal
dismissal, while setting no limit to the same monetary award for local workers when their
dismissal is declared illegal; that the disparate treatment is not reasonable as there is no
substantial distinction between the two groups;[33] and that it defeats Section 18,[34] Article II of
the Constitution which guarantees the protection of the rights and welfare of all Filipino workers,
whether deployed locally or overseas.[35]
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in
line with existing jurisprudence on the issue of money claims of illegally dismissed
OFWs. Though there are conflicting rulings on this, petitioner urges the Court to sort them out
for the guidance of affected OFWs.[36]
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042
serves no other purpose but to benefit local placement agencies. He marks the statement made
by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign employer
is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money claims was
reduced under Section 10 of R.A. No. 8042. [37] (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject
clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers
better off than local employers because in cases involving the illegal dismissal of employees,
foreign employers are liable for salaries covering a maximum of only three months of the
unexpired employment contract while local employers are liable for the full lump-sum salaries of
their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the
amount of backwages they have to give their employees they have illegally
dismissed, following well-entrenched and unequivocal jurisprudence on the
matter. On the other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3) months unpaid
salaries notwithstanding the unexpired term of the contract that can be more than
three (3) months.[38]
Lastly, petitioner claims that the subject clause violates the due process clause, for it
deprives him of the salaries and other emoluments he is entitled to under his fixed-period
employment contract.[39]

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue
should not be entertained, for this was belatedly interposed by petitioner in his appeal before the
CA, and not at the earliest opportunity, which was when he filed an appeal before the NLRC.[40]
The Arguments of the Solicitor General
The Solicitor General (OSG)[41] points out that as R.A. No. 8042 took effect on July 15,
1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A.
No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the
minimum terms of petitioner's employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.[42]
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature
of their employment, such that their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that distinguish OFWs from local
workers: first, while local workers perform their jobs within Philippine territory, OFWs perform
their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or
against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v.
National Labor Relations Commission[43] and Millares v. National Labor Relations
Commission,[44] OFWs are contractual employees who can never acquire regular employment
status, unlike local workers who are or can become regular employees. Hence, the OSG posits
that there are rights and privileges exclusive to local workers, but not available to OFWs; that
these peculiarities make for a reasonable and valid basis for the differentiated treatment under
the subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision
does not violate the equal protection clause nor Section 18, Article II of the Constitution.[45]
Lastly, the OSG defends the rationale behind the subject clause as a police power measure
adopted to mitigate the solidary liability of placement agencies for this redounds to the benefit of
the migrant workers whose welfare the government seeks to promote. The survival of legitimate
placement agencies helps [assure] the government that migrant workers are properly deployed
and are employed under decent and humane conditions.[46]
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its coequals, such as the Congress, it does so only when these conditions obtain: (1) that there is an
actual case or controversy involving a conflict of rights susceptible of judicial determination;[47] (2)
that the constitutional question is raised by a proper party[48] and at the earliest opportunity;
[49]
and (3) that the constitutional question is the very lis mota of the case,[50] otherwise the
Court will dismiss the case or decide the same on some other ground.[51]

Without a doubt, there exists in this case an actual controversy directly involving
petitioner who is personally aggrieved that the labor tribunals and the CA computed his
monetary award based on the salary period of three months only as provided under the subject
clause.
The constitutional challenge is also timely. It should be borne in mind that the
requirement that a constitutional issue be raised at the earliest opportunity entails the
interposition of the issue in the pleadings before a competent court, such that, if the issue is
not raised in the pleadings before that competent court, it cannot be considered at the trial and, if
not considered in the trial, it cannot be considered on appeal. [52] Records disclose that the issue
on the constitutionality of the subject clause was first raised, not in petitioner's appeal with the
NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,[53] and reiterated in
his Petition for Certiorari before the CA.[54] Nonetheless, the issue is deemed seasonably raised
because it is not the NLRC but the CA which has the competence to resolve the constitutional
issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its function in
the present case is limited to determiningquestions of fact to which the legislative policy of R.A.
No. 8042 is to be applied and to resolving such questions in accordance with the standards laid
down by the law itself;[55] thus, its foremost function is to administer and enforce R.A. No. 8042,
and not to inquire into the validity of its provisions. The CA, on the other hand, is vested with the
power of judicial review or the power to declare unconstitutional a law or a provision thereof,
such as the subject clause.[56] Petitioner's interposition of the constitutional issue before the CA
was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its
decision.
The third condition that the constitutional issue be critical to the resolution of the case
likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire
unexpired portion of his 12-month employment contract, and not just for a period of three
months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary package he will receive [57] is not
tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,[58] and cannot affect acts or contracts already perfected;[59] however, as to
laws already in existence, their provisions are read into contracts and deemed a part thereof.
[60]
Thus, the non-impairment clause under Section 10, Article II is limited in application to laws
about to be enacted that would in any way derogate from existing acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the
execution of the employment contract between petitioner and respondents in 1998. Hence, it
cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment
contract of the parties. Rather, when the parties executed their 1998 employment contract, they
were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be
declared unconstitutional on the ground that it impinges on the impairment clause, for the law
was enacted in the exercise of the police power of the State to regulate a business, profession or
calling, particularly the recruitment and deployment of OFWs, with the noble end in view of
ensuring respect for the dignity and well-being of OFWs wherever they may be employed.
[61]
Police power legislations adopted by the State to promote the health, morals, peace, education,
good order, safety, and general welfare of the people are generally applicable not only to future
contracts but even to those already in existence, for all private contracts must yield to the superior
and legitimate measures taken by the State to promote public welfare.[62]
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law
nor shall any person be denied the equal protection of the law.
Section 18,[63] Article II and Section 3,[64] Article XIII accord all members of the labor
sector, without distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions
translate to economic security and parity: all monetary benefits should be equally enjoyed by
workers of similar category, while all monetary obligations should be borne by them in equal
degree; none should be denied the protection of the laws which is enjoyed by, or spared the
burden imposed on, others in like circumstances.[65]
Such rights are not absolute but subject to the inherent power of Congress to incorporate,
when it sees fit, a system of classification into its legislation; however, to be valid, the classification

must comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to

the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to
all members of the class.[66]
There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a legitimate state
interest;[67] b) the middle-tier or intermediate scrutiny in which the government must show that
the challengedclassification serves an important state interest and that the classification is at
least substantially related to serving that interest;[68] and c) strict judicial
scrutiny[69] in which a legislative classification which impermissibly interferes with the exercise
of a fundamental right[70] or operates to the peculiar disadvantage of a suspect class [71] is
presumed unconstitutional, and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest and that it is the least
restrictive means to protect such interest.[72]
Under American jurisprudence, strict judicial scrutiny is triggered by suspect
classifications[73] based on race[74] or gender[75] but not when the classification is drawn along
income categories.[76]
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng
Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas,[77] the constitutionality of a
provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial
institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been
exempted from the SSL by their respective charters. Finding that the disputed provision
contained a suspect classification based on salary grade, the Court deliberately employed the
standard of strict judicial scrutiny in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad outlines of its judicial
philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification,
and its policies should be accorded recognition and respect by the courts of justice
except when they run afoul of the Constitution. The deference stops where the
classification violates a fundamental right, or prejudices persons accorded
special protection by the Constitution. When these violations arise, this
Court must discharge its primary role as the vanguard of constitutional
guaranties, and require a stricter and more exacting adherence to constitutional
limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded
special protection by the Constitution requires a stricter judicial
scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per
se controlling in this jurisdiction. At best, they are persuasive and have
been used to support many of our decisions. We should not place undue and
fawning reliance upon them and regard them as indispensable mental crutches
without which we cannot come to our own decisions through the employment of

our own endowments. We live in a different ambience and must decide our own
problems in the light of our own interests and needs, and of our qualities and even
idiosyncrasies as a people, and always with our own concept of law and justice.
Our laws must be construed in accordance with the intention of our own
lawmakers and such intent may be deduced from the language of each law and the
context of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all of all
our laws. And it need not be stressed that our public interest is distinct and
different from others.
xxxx
Further, the quest for a better and more equal world calls for the use of
equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims equality as an ideal precisely in protest
against crushing inequities in Philippine society. The command to promote social
justice in Article II, Section 10, in all phases of national development, further
explicitated in Article XIII, are clear commands to the State to take affirmative
action in the direction of greater equality. x x x [T]here is thus in the Philippine
Constitution no lack of doctrinal support for a more vigorous state effort towards
achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing
vital social and economic rights to marginalized groups of society,
including labor. Under the policy of social justice, the law bends
over backward to accommodate the interests of the working class
on the humane justification that those with less privilege in life
should have more in law. And the obligation to afford protection to
labor is incumbent not only on the legislative and executive
branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for the humanization of laws and
the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at
least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion given to
Congress in exercising its legislative power. Judicial scrutiny would be based on
the rational basis test, and the legislative discretion would be given deferential
treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against persons
favored by the Constitution with special protection, judicial
scrutiny ought to be more strict. A weak and watered down view would call
for the abdication of this Courts solemn duty to strike down any law repugnant to
the Constitution and the rights it enshrines. This is true whether the actor
committing the unconstitutional act is a private person or the government itself or
one of its instrumentalities. Oppressive acts will be struck down regardless of the
character or nature of the actor.
xxxx

In the case at bar, the challenged proviso operates on the basis of the
salary grade or officer-employee status. It is akin to a distinction based on
economic class and status, with the higher grades as recipients of a
benefit specifically withheld from the lower grades. Officers of the BSP
now receive higher compensation packages that are competitive with the industry,
while the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are paid
the strictly regimented rates of the SSL while employees higher in rank possessing higher and better education and opportunities for career advancement
- are given higher compensation packages to entice them to stay. Considering
that majority, if not all, the rank-and-file employees consist of
people whose status and rank in life are less and limited, especially
in terms of job marketability, it is they - and not the officers - who
have the real economic and financial need for the adjustment . This is
in accord with the policy of the Constitution "to free the people from poverty,
provide adequate social services, extend to them a decent standard of living, and
improve the quality of life for all. Any act of Congress that runs counter to
this constitutional desideratum deserves strict scrutiny by this
Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of obligation to afford protection to labor, the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the subject
clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all
OFWs. However, a closer examination reveals that the subject clause has a discriminatory intent
against, and an invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis
OFWs with employment contracts of one year or more;
and

Second, among OFWs with employment contracts of more than one year;
Third, OFWs vis--vis local workers with fixed-period employment;

OFWs with employment contracts of less

than
one
year vis--vis OFWs
with
employment contracts of one year or more
As pointed out by petitioner,[78] it was in Marsaman Manning Agency, Inc. v. National
Labor Relations Commission[79] (Second Division, 1999) that the Court laid down the following
rules on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of
which amount to award an illegally dismissed overseas contract
worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of
the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words for every year of the
unexpired term which follows the words salaries x x x for three
months. To follow petitioners thinking that private respondent is entitled to

three (3) months salary only simply because it is the lesser amount is to
completely disregard and overlook some words used in the statute while giving
effect to some. This is contrary to the well-established rule in legal hermeneutics
that in interpreting a statute, care should be taken that every part or word thereof
be given effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res magis
valeat quam pereat.[80] (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month
contract, but was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting
rulings on Section 10(5). One was Asian Center for Career and Employment System and
Services v. National Labor Relations Commission (Second Division, October 1998),
[81]
which involved an OFW who was awarded a two-year employment contract, but was
dismissed after working for one year and two months. The LA declared his dismissal illegal and
awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of
his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to his three
months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas
employment without just, valid or authorized cause is entitled to his salary for the
unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents
employment contract is eight (8) months. Private respondent should therefore be
paid his basic salary corresponding to three (3) months or a total of SR3,600.[82]
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations
Commission (Third Division, December 1998),[83] which involved an OFW (therein respondent
Erlinda Osdana) who was originally granted a 12-month contract, which was deemed renewed
for another 12 months. After serving for one year and seven-and-a-half months, respondent
Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired
portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following
cases:

Case Title

Contract Period of Unexpired

Period
Service
Period

Skippers
v. 6 months 2 months 4 months
Maguad[84]

Period Applied
in
the
Computation
of
the
Monetary
Award
4 months

Bahia Shippin 9 months 8 months 4 months

g v. Reynaldo
Chua[85]

4 months

Centennial
9 months 4 months 5 months
Transmarine
v. dela Cruz
l[86]

5 months

Talidano
Falcon[87]

v. 12 months 3 months 9 months

3 months

Univan v.
CA [88]

12 months 3 months 9 months

3 months

Oriental v.
CA [89]

12 months more than 10 months

2 months

3 months

PCL
NLRC[90]

v. 12 months more than more or less 9 3 months

2 months months

Olarte
Nayona[91]

v. 12 months 21 days

11 months and 3 months

9 days

12 months 16 days

11 months and 3 months

24 days

JSS v.
Ferrer[92]

Pentagon v. 12 months 9 months 2 months and 2 months and

Adelantar[93]
and 7 days 23 days
23 days
Phil. Employ 12 months 10 month 2 months
v. Paramio,
s
et al.[94]
Flourish
2 years
Maritime v.
Almanzor [95]

26 days

Athenna
1 year, 10 1 month
Manpower v. months
Villanos [96]
and
28
days

Unexpired
portion

23 months and 6 months or 3

4 days
months
for
each year of
contract
1
year,
9 6 months or 3
months and months
for
28 days
each year of
contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two
categories. The first category includes OFWs with fixed-period employment contracts of less than
one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired
portion of their contract. The second category consists of OFWs with fixed-period employment
contracts of one year or more; in case of illegal dismissal, they are entitled to monetary
award equivalent to only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his
salaries for the remaining 4 months. In contrast, the respondent OFWs
in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts
were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even
the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months
out of their 12-month contracts before being illegally dismissed were awarded their salaries for
only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A
with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a
hypothetical OFW-B with an employment contract of 15 months with the same monthly salary
rate of US$1,000.00. Both commenced work on the same day and under the same employer,
and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be
entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract,
whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of
the unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14
months of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account
jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,[97] illegally
dismissed OFWs, no matter how long the period of their employment contracts, were entitled to
their salaries for the entire unexpired portions of their contracts. The matrix below speaks for
itself:
Case Title

Contract
Period

Period of Unexpired Period Applied in

Service
Period
the Computation
of the Monetary
Award

ATCI v. CA,
et al.[98]

2 years

2 months

22 months

Phil.
2 years
Integrated v.
NLRC[99]

7 days

23 months 23 months and 23

and 23 days days

JGB
NLC[100]

v. 2 years

9 months

15 months

15 months

Agoy
NLRC[101]

v. 2 years

2 months

22 months

22 months

EDI v. NLRC, 2 years

et al.[102]

5 months

19 months

19 months

Barros
v. 12 months
NLRC, et al.

4 months

8 months

8 months

22 months

[103]

Philippine
Transmarine
v. Carilla[104]

12 months

6 months 5
months 5 months and 18
and
22 and 18 days days
days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the
unexpired portions thereof, were treated alike in terms of the computation of their monetary
benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of
computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their employment
periods, in the process singling out one category whose contracts have an unexpired portion of
one year or more and subjecting them to the peculiar disadvantage of having their monetary
awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's
unexpired contractsfall short of one year.
Among OFWs With Employment
Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the Court
now has misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause or for three (3) months for every year of the
unexpired term, whichever is less contains the qualifying phrases every year and unexpired
term. By its ordinary meaning, the word term means a limited or definite extent of time.
[105]
Corollarily, that every year is but part of an unexpired term is significant in many
ways: first, the unexpired term mustbe at least one year, for if it were any
shorter, there would be no occasion for such unexpired term to be measured by every year;
and second, the original term must be more than one year, for otherwise, whatever would be the
unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause for three (3) months forevery year of the unexpired
term, whichever is less shall apply is not the length of the original contract period as held
in Marsaman,[106] but the length of the unexpired portion of the contract period -- the subject
clause applies in cases when the unexpired portion of the contract period is at least one year,
which arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs
whose contract periods are for more than one year: those who are illegally dismissed with less
than one year left in their contracts shall be entitled to their salaries for the entire unexpired
portion thereof, while those who are illegally dismissed with one year or more remaining in their
contracts shall be covered by the subject clause, and their monetary benefits limited to their
salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject
clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract
at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and
OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the contract
period of OFW-C, the subject clause applies to the computation of the latter's monetary
benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12
months unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the
latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other

hand, OFW-D is spared from the effects of the subject clause, for there are only 11 months left in
the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent
to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the
monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable
even to local workers with fixed-term employment.[107]
The earliest rule prescribing a uniform system of computation was actually Article 299 of
the Code of Commerce (1888),[108] to wit:
Article 299. If the contracts between the merchants and their
shop clerks and employees should have been made of a fixed
period, none of the contracting parties, without the consent of the
other, may withdraw from the fulfillment of said contract until the
termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the following
articles.
In Reyes v. The Compaia Maritima,[109] the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein held the shipping company liable
for the salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with
the agent should be for a definite period or voyage, they cannot be discharged until
the fulfillment of their contracts, except for reasons of insubordination in serious
matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or
to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,[110] in
which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,[111] Article 299 of the Code of
Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired
for a certain time and for a certain work cannot leave or be dismissed
without sufficient cause, before the fulfillment of the contract. (Emphasis
supplied.)

Citing Manresa, the Court in Lemoine v. Alkan[112] read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time
certain although for no particular skill. This interpretation of Article 1586 was reiterated
in Garcia Palomar v. Hotel de France Company.[113] And in both Lemoine and Palomar, the
Court adopted the general principle that in actions for wrongful discharge founded on Article
1586, local workers are entitled to recover damages to the extent of the amount stipulated to be
paid to them by the terms of their contract. On the computation of the amount of such damages,
the Court in Aldaz v. Gay[114] held:
The doctrine is well-established in American jurisprudence, and nothing
has been brought to our attention to the contrary under Spanish jurisprudence,
that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of reducing
the damages resulting from such wrongful discharge. However, while this is the
general rule, the burden of showing that he failed to make an effort to secure other
employment of a like nature, and that other employment of a like nature was
obtainable, is upon the defendant. When an employee is wrongfully
discharged under a contract of employment his prima facie damage
is the amount which he would be entitled to had he continued in
such employment until the termination of the period. (Howard vs. Daly,
61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2,
98 Mich., 43.)[115] (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of
Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.[116] Much like Article
1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for
the remedies available to a fixed-term worker who is illegally discharged. However, it is noted
that in Mackay Radio & Telegraph Co., Inc. v. Rich,[117] the Court carried over the principles on
the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same
to a case involving the illegal discharge of a local worker whose fixed-period
employment contract was entered into in 1952, when the new Civil Code was already in effect.[118]
More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in First
Asian Trans & Shipping Agency, Inc. v. Ople,[119] involving seafarers who were illegally
discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission,
[120]
an OFW who was illegally dismissed prior to the expiration of her fixed-period employment
contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her
contract.The Court arrived at the same ruling in Anderson v. National Labor Relations
Commission,[121] which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two
years, but who was illegally dismissed after only nine months on the job -- the Court awarded him
salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World
Recruitment, Inc. v. National Labor Relations Commission,[122] a Filipino working as a security
officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month
contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National
Labor Relations Commission,[123] an OFW whose 12-month contract was illegally cut short in the
second month was declared entitled to his salaries for the remaining 10 months of his contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment
who were illegally discharged were treated alike in terms of the computation of their money
claims: they were uniformly entitled to their salaries for the entire unexpired portions of their
contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject
clause, illegally dismissed OFWs with an unexpired portion of one year or more in their
employment contract have since been differently treated in that their money claims are subject to
a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term
employment.
The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of fixed-term
employees who are illegally discharged, it imposes a 3-month cap on the claim of
OFWs with an unexpired portion of one year or more in their contracts, but none
on the claims of other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the
Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines
whether it serves a compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers
arrayed in the Constitution and calibrated by history.[124] It is akin to the paramount interest of
the state[125] for which some individual liberties must give way, such as the public interest in
safeguarding health or maintaining medical standards,[126] or in maintaining access to
information on matters of public concern.[127]
In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign employers. The limitation also
protects the interest of local placement agencies, which otherwise may be made to shoulder
millions of pesos in termination pay.[128]
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign employer
is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose

welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly
deployed and are employed under decent and humane conditions. [129] (Emphasis
supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its
perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated; [130] but the
speech makes no reference to the underlying reason for the adoption of the subject clause. That is
only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims,
to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC)
shall have the original and exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the claim arising
out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas employment including claims for actual,
moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any
and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any
money claims exclusive of damages under this Section shall not be less than fifty
percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be
more than two (2) months. Any compromise/voluntary agreement in violation of
this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases
provided under this Section shall subject the responsible officials to any or all of
the following penalties:
(1) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without
prejudice to any liability which any such official may have incurred under other
existing laws or rules and regulations as a consequence of violating the provisions
of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of
money claims.
A rule on the computation of money claims containing the subject clause was inserted
and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined
the rationale of the subject clause in the transcripts of the Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of
Senate Bill No. 2077 and House Bill No. 14314). However, the Court finds no discernible state
interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of
the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against OFWs
under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous and
cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is composed of OFWs whose protection no
less than the Constitution commands. The idea that private business interest can be elevated to
the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that
can be employed to achieve that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of LandBased Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures
on erring foreign employers who default on their contractual obligations to migrant workers
and/or their Philippine agents. These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative
disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of
aiding local placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of
the right of petitioner and other OFWs to equal protection.

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,[131] Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,,[132] there are some
which this Court has declared not judicially enforceable, Article XIII being one,
[133]
particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor
Relations Commission,[134] has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of
tenure may be deemed as self-executing in the sense that these are automatically
acknowledged and observed without need for any enabling legislation. However,
to declare that the constitutional provisions are enough to guarantee the full
exercise of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view
presents the dangerous tendency of being overbroad and exaggerated. The
guarantees of "full protection to labor" and "security of tenure", when examined in
isolation, are facially unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of removal regardless
of circumstance. This interpretation implies an unimpeachable right to continued
employment-a utopian notion, doubtless-but still hardly within the contemplation
of the framers. Subsequent legislation is still needed to define the parameters of
these guaranteed rights to ensure the protection and promotion, not only the
rights of the labor sector, but of the employers' as well. Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own
conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its
own, be a source of a positive enforceable right to stave off the dismissal
of an employee for just cause owing to the failure to serve proper notice or hearing.
As manifested by several framers of the 1987 Constitution, the provisions on social
justice require legislative enactments for their enforceability.[135] (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional. It may
unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working
class any actual enforceable right, but merely clothes it with the status of a sector for whom
the Constitution urges protection through executive or legislative action and judicial
recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working
class. And it was in fact consistent with that constitutional agenda that the Court in Central
Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated
the judicial precept that when the challenge to a statute is premised on the perpetuation of
prejudice against persons favored by the Constitution with special protection -- such as the

working class or a section thereof -- the Court may recognize the existence of a suspect
classification and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated
in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection clause, has
no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.[136]
The argument of the Solicitor General, that the actual purpose of the subject clause of
limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give
them a better chance of getting hired by foreign employers. This is plain speculation. As earlier
discussed, there is nothing in the text of the law or the records of the deliberations leading to its
enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is
for that precise reason that the clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section 1,[137] Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the
entire unexpired period of nine months and 23 days of his employment contract, pursuant to law
and jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in
the computation of his monetary award, because these are fixed benefits that have been
stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers
like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment
Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave
pay and other bonuses; whereas overtime pay is compensation for all work performed in excess
of the regular eight hours, and holiday pay is compensation for any work performed on
designated rest days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime
and holiday pay in the computation of petitioner's monetary award, unless there is evidence that
he performed work during those periods. As the Court held in Centennial Transmarine, Inc. v.
Dela Cruz,[138]
However, the payment of overtime pay and leave pay should be disallowed
in light of our ruling in Cagampan v. National Labor Relations Commission, to
wit:
The rendition of overtime work and the submission of
sufficient proof that said was actually performed are conditions to
be satisfied before a seaman could be entitled to overtime pay
which should be computed on the basis of 30% of the basic
monthly salary. In short, the contract provision guarantees the
right to overtime pay but the entitlement to such benefit must first
be established.
In the same vein, the claim for the day's leave pay for the unexpired
portion of the contract is unwarranted since the same is given
during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause or for three
months for every year of the unexpired term, whichever is less in the 5th paragraph of Section 10
of Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8,
2004 Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the
effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of
US$1,400.00 per month.
No costs.
SO ORDERED.

SECOND DIVISION

SKIPPERS UNITED PACIFIC, INC. and G.R. No. 175558

SKIPPERS MARITIME SERVICES,
INC., LTD., Present:
Petitioners,

CARPIO, J., C

BRION,
PEREZ,
- versus - SERENO, and

REYES

NATHANIEL DOZA,
NAPOLEON DE GRACIA,
ISIDRO L. LATA, and
CHARLIE APROSTA, Promulgated:
Respondents. February 8, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO, J.:

The Case

This is a Petition for Review under Rule 45 assailing the 5 July 2006 Decision 1 and 7
November 2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 88148.3

This
arose
from
consolidated labor case4 filed
by
seafarers
Napoleon
De Gracia (De Gracia),
Isidro
L. Lata (Lata),
Charlie Aprosta (Aprosta),
and
Nathaniel Doza (Doza) against local manning agency Skippers United Pacific, Inc. and
its foreign principal, Skippers Maritime Services, Inc., Ltd. (Skippers) for unremitted
home allotment for the month of December 1998, salaries for the unexpired portion of
their employment contracts, moral damages, exemplary damages, and attorneys fees.
Skippers, on the other hand, answered with a claim for reimbursement of
De Gracia, Aprosta and Latas repatriation expenses, as well as award of moral damages
and attorneys fees.

De Gracia, Lata, Aprosta and Dozas (De Gracia, et al.) claims were dismissed by
the Labor Arbiter for lack of merit.5 The Labor Arbiter also dismissed Skippers
claims.6 De Gracia,
et
al.
appealed7 the Labor Arbiters
decision
with
the
National Labor Relations Commission (NLRC), but the First Division of the NLRC
dismissed the appeal for lack of merit.8 Doza, et al.s Motion for Reconsideration was
likewise denied by the NLRC,9 so they filed a Petition for Certiorari with the Court of
Appeals (CA).10

The CA granted the petition, reversed the Labor Arbiter and NLRC Decisions, and
awarded
to
De Gracia, Lata and Aprosta their
unremitted
home allotment,
three months salary each representing the unexpired portion of their employment
contracts and attorneys fees.11 No award was given to Doza for lack of factual basis.12 The
CA denied Skippers Motion for Partial Reconsideration.13 Hence, this Petition.
The Facts

Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata,

and Aprosta to work on board the vessel MV Wisdom Star, under the following terms
and conditions:
Name: Napoleon O. De Gracia
Position: 3rd Engineer
Contract Duration: 10 months
Basic Monthly Salary: US$800.00
Contract Date: 17 July 199814

Name: Isidro L. Lata

Position: 4th Engineer
Contract Duration: 12 months
Basic Monthly Salary: US$600.00
Contract Date: 17 April 199815

Name: Charlie A. Aprosta

Position: Third Officer
Contract Duration: 12 months
Basic Monthly Salary: US$600.00

Contract Date: 17 April 199816

Paragraph 2 of all the employment contracts stated that: The terms and conditions of
the Revised Employment Contract Governing the Employment of All Seafarers approved
per Department Order No. 33 and Memorandum Circular No. 55, both series of 1996
shall be strictly and faithfully observed.17 No employment contract was submitted for
NathanielDoza.

De Gracia, et al. claimed that Skippers failed to remit their respective allotments for
almost five months, compelling them to air their grievances with the Romanian
Seafarers Free Union.18 On 16 December 1998, ITF Inspector Adrian Mihalcioiu of the
Romanian Seafarers Union sent Captain Savvas of Cosmos Shipping a fax letter,
relaying the complaints of his crew, namely: home allotment delay, unpaid salaries (only
advances), late provisions, lack of laundry services (only one washing machine), and
lack of maintenance of the vessel (perforated and unrepaired deck). 19 To date, however,
Skippers only failed to remit the home allotment for the month of December 1998. 20 On
28 January 1999, De Gracia, et al. were unceremoniously discharged from MV Wisdom
Stars and immediately repatriated.21 Upon arrival in the Philippines, De Gracia, et al.
filed a complaint for illegal dismissal with theLabor Arbiter on 4 April 1999 and prayed
for payment of their home allotment for the month of December 1998, salaries for the
unexpired portion of their contracts, moral damages, exemplary damages, and attorneys
fees.22

Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998,
De Gracia, smelling strongly of alcohol, went to the cabin of Gabriel Oleszek, Master of
MV Wisdom Stars, and was rude, shouting noisily to the master. 23 De Gracia left the
masters cabin after a few minutes and was heard shouting very loudly somewhere down
the corridors.24 This incident was evidenced by the Captains Report sent via telex to
Skippers on said date.25
Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers,
namely Aprosta, De Gracia, Lata and Doza, arrived in the masters cabin and demanded
immediate repatriation because they were not satisfied with the ship. 26 De Gracia, et al.
threatened that they may become crazy any moment and demanded for all outstanding
payments due to them.27 This is evidenced by a telex of Cosmoship MV Wisdom to
Skippers, which however bears conflicting dates of 22 January 1998 and 22 January
1999.28

Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other
seafarers disembarked under abnormal circumstsances. 29 For this reason, it was
suggested that Polish seafarers be utilized instead of Filipino seamen. 30 This is again
evidenced by a fax of Cosmoship MV Wisdom to Skippers, which bears conflicting dates
of 24 January 1998 and 24 January 1999.31

Skippers, in its Position Paper, admitted non-payment of home allotment for the month
of December 1998, but prayed for the offsetting of such amount with the repatriation
expenses in the following manner:32

Seafarer

Repatriation
Expense

Home Allotment

Balance

De Gracia

US$1,340.00

US$900.00

US$440.00

Aprosta

US$1,340.00

US$600.00

US$740.00

Lata

US$1,340.00

US$600.00

US$740.00

Since De Gracia, et al. pre-terminated their contracts, Skippers claims they are liable for
their repatriation expenses33 in accordance with Section 19(G) of Philippine Overseas
Employment Administration (POEA) Memorandum Circular No. 55, series of 1996
which states:

G. A seaman who requests for early termination of his contract shall be liable for
his repatriation cost as well as the transportation cost of his replacement. The
employer may, in case of compassionate grounds, assume the transportation cost
of the seafarers replacement.
Skippers also prayed for payment of moral damages and attorneys fees. 34

The Decision of the Labor Arbiter

The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive
portion declaring:

WHEREFORE, judgment is hereby rendered dismissing herein action for lack of

merit. Respondents claim for reimbursement of the expenses they incurred in the
repatriation of complainant Nathaniel Doza is likewise dismissed.

SO ORDERED.35

The Labor Arbiter dismissed De Gracia, et al.s complaint for illegal dismissal because
the seafarers voluntarily pre-terminated their employment contracts by demanding for
immediate repatriation due to dissatisfaction with the ship. 36 The Labor Arbiter held
that such voluntary pre-termination of employment contract is akin to resignation, 37 a
form of termination by employee of his employment contract under Article 285 of
the Labor Code. The Labor Arbiter gave weight and credibility to the telex of the master
of the vessel to Skippers, claiming that De Gracia, et al. demanded for immediate
repatriation.38 Due to the absence of illegal dismissal, De Gracia, et. al.s claim for
salaries representing the unexpired portion of their employment contracts was
dismissed.39

The Labor Arbiter also dismissed De Gracia et al.s claim for home allotment for
December 1998.40 The Labor Arbiter explained that payment for home allotment is in
the nature of extraordinary money where the burden of proof is shifted to the worker
who must prove he is entitled to such monetary benefit. 41 Since De Gracia, et al. were not
able to prove their entitlement to home allotment, such claim was dismissed. 42

Lastly, Skippers claim for reimbursement of repatriation expenses was likewise denied,
since Article 19(G) of POEA Memorandum Circular No. 55, Series of 1996 allows the
employer, in case the seafarer voluntarily pre-terminates his contract, to assume the
repatriation cost of the seafarer on compassionate grounds. 43

The Decision of the NLRC

The NLRC, on 28 October 2002, dismissed De Gracia, et al.s appeal for lack of merit and
affirmed the Labor Arbiters decision.44 The NLRC considered De Gracia, et al.s claim for
home allotment for December 1998 unsubstantiated, since home allotment is a benefit
which De Gracia, et al. must prove their entitlement to.45 The NLRC also denied the
claim for illegal dismissal because De Gracia, et al. were not able to refute the telex
received by Skippers from the vessels master that De Gracia, et al. voluntarily preterminated their contracts and demanded immediate repatriation due to their
dissatisfaction with the ships operations.46

The Decision of the Court of Appeals

The CA, on 5 July 2006, granted De Gracia, et al.s petition and reversed the decisions of
the Labor Arbiter and NLRC, its dispositive portion reading as follows:

WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution

dated October 28, 2002 and the Order dated August 31, 2004 rendered by the
public respondent NLRC are ANNULLED and SET ASIDE. Let another judgment
be entered holding private respondents jointly and severally liable to petitioners
for the payment of:

1.

Unremitted home allotment pay for the month of December, 1998 or the
equivalent thereof in Philippine pesos:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00

2.

Salary for the unexpired portion of the employment contract or for 3 months
for every year of the unexpired term, whichever is less, or the equivalent thereof
in Philippine pesos:
a. De Gracia = US$2,400.00
b. Lata = US$1,800.00
c. Aprosta = US$1,800.00

3.

Attorneys fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED.47

The CA declared the Labor Arbiter and NLRC to have committed grave abuse of
discretion when they relied upon the telex message of the captain of the vessel stating
that De Gracia, et al. voluntarily pre-terminated their contracts and demanded
immediate repatriation.48 The telex message was a self-serving document that does not
satisfy the requirement of substantial evidence, or that amount of relevant evidence
which a reasonable mind might accept as adequate to justify the conclusion that
petitioners indeed voluntarily demanded their immediate repatriation.49 For this reason,
the repatriation of De Gracia, et al. prior to the expiration of their contracts showed they
were illegally dismissed from employment.50

In addition, the failure to remit home allotment pay was effectively admitted by
Skippers, and prayed to be offset from the repatriation expenses. 51 Since there is no
proof that DeGracia, et al. voluntarily pre-terminated their contracts, the repatriation
expenses are for the account of Skippers, and cannot be offset with the home allotment
pay for December 1998.52

No relief was granted to Doza due to lack of factual basis to support his
petition.53 Attorneys fees equivalent to 10% of the total claims was granted since it

involved an action for recovery of wages or where the employee was forced to litigate
and incur expenses to protect his rights and interest.54

The Issues

Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA
Decision:

a) The Court of Appeals seriously erred in not giving due credence to the masters
telex message showing that the respondents voluntarily requested to be
repatriated.

b) The Court of Appeals seriously erred in finding petitioners liable to

pay backwages and the alleged unremitted home allotment pay despite the
finding of the Labor Arbiter and the NLRC that the claims are baseless.

c) The Court of Appeals seriously erred in awarding attorneys fees in favor of

respondents despite its findings that the facts attending in this case do not
support the claim for moral and exemplary damages. 55

The Ruling of this Court

We deny the petition and affirm the CA Decision, but modify the award.

For a workers dismissal to be considered valid, it must comply with both procedural and
substantive due process. The legality of the manner of dismissal constitutes procedural
due process, while the legality of the act of dismissal constitutes substantive due
process.56

Procedural due process in dismissal cases consists of the twin requirements of notice
and hearing. The employer must furnish the employee with two written notices before
the termination of employment can be effected: (1) the first notice apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2)

the second notice informs the employee of the employers decision to dismiss him.
Before the issuance of the second notice, the requirement of a hearing must be complied
with by giving the worker an opportunity to be heard. It is not necessary that an actual
hearing be conducted.57

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

In this case, there was no written notice furnished to De Gracia, et al. regarding the
cause of their dismissal. Cosmoship furnished a written notice (telex) to Skippers, the
local manning agency, claiming that De Gracia, et al. were repatriated because the latter
voluntarily pre-terminated their contracts. This telex was given credibility and weight by
the Labor Arbiter and NLRC in deciding that there was pre-termination of the
employment contract akin to resignation and no illegal dismissal. However, as correctly
ruled by the CA, the telex message is a biased and self-serving document that does not
satisfy the requirement of substantial evidence. If, indeed, De Gracia, et al. voluntarily
pre-terminated their contracts, then De Gracia, et al. should have submitted their
written resignations.

Article 285 of the Labor Code recognizes termination by the employee of the
employment contract by serving written notice on the employer at least one (1) month in
advance. Given that provision, the law contemplates the requirement of a written notice
of resignation. In the absence of a written resignation, it is safe to presume that the
employer terminated the seafarers. In addition, the telex message relied upon by
the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January
1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998,
De Gracia, et al. were not even employed yet by the foreign principal. For these reasons,
the dismissal of De Gracia, et al. was illegal.
On the issue of home allotment pay, Skippers effectively admitted non-remittance of
home allotment pay for the month of December 1998 in its Position Paper. Skippers
sought the repatriation expenses to be offset with the home allotment pay. However,
since De Gracia, et al.s dismissal was illegal, their repatriation expenses were for the
account of Skippers and could not be offset with the home allotment pay.

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

The seafarer is required to make an allotment which is payable once a month to

his designated allottee in the Philippines through any authorized Philippine bank.
The master/employer/agency shall provide the seafarer with facilities to do so at
no expense to the seafarer. The allotment shall be at least eighty percent
(80%) of the seafarers monthly basic salary including backwages, if any.
(Emphasis supplied)

Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated

the provisions of above Memorandum Circular No. 55, series of 1996, in the
employment contracts. Since said memorandum states that home allotment of seafarers
actually constitutes at least eighty percent (80%) of their salary, home allotment pay is
not in the nature of an extraordinary money or benefit, but should actually be
considered as salary which should be paid for services rendered. For this reason, such
non-remittance of home allotment pay should be considered as unpaid salaries, and
Skippers shall be liable to pay the home allotment pay of De Gracia, et al. for the month
of December 1998.

Damages

As admitted by Skippers in its Position Paper, the home allotment pay for December
1998 due to De Gracia, Lata and Aprosta is:

Seafarer

Home Allotment Pay

De Gracia

US$900.00

Aprosta

US$600.00

Lata

US$600.00

The monthly salary of De Gracia, according to his employment contract, is only

US$800.00. However, since Skippers admitted in its Position Paper a higher home
allotment pay for DeGracia, we award the higher amount of home allotment pay for
De Gracia in the amount of US$900.00. Since the home allotment pay can be
considered as unpaid salaries, the peso equivalent of the dollar amount should be
computed using the prevailing rate at the time of termination since it was due and
demandable to De Gracia, et al. on 28 January 1999.

Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims
in cases of unjust termination of employment contracts:

In case of termination of overseas employment without just, valid or authorized

cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term, whichever is less.

The Migrant Workers Act provides that salaries for the unexpired portion of
the employent contract or three (3) months for every year of the unexpired term,
whichever is less, shall be awarded to the overseas Filipino worker, in cases of illegal
dismissal. However, in 24 March 2009, Serrano v. Gallant Maritime Services and
Marlow Navigation Co. Inc.,58 the Court, in an En Banc Decision, declared
unconstitutional the clause or for three months for every year of the unexpired term,
whichever is less and awarded the entire unexpired portion of the employment contract
to the overseas Filipino worker.
On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended
Section 10 of the Migrant Workers Act, and once again reiterated the provision of
awarding the unexpired portion of the employent contract or three (3) months for every
year of the unexpired term, whichever is less.

Nevertheless, since the termination occurred on January 1999 before the passage of the
amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the
constitutionality of Section 7 of RA 10022.

The declaration in March 2009 of the unconstitutionality of the clause or for three
months for every year of the unexpired term, whichever is less in RA 8042 shall be given
retroactive effect to the termination that occurred in January 1999 because an
unconstitutional clause in the law confers no rights, imposes no duties and affords no
protection. The unconstitutional provision is inoperative, as if it was not passed into law
at all.59
As such, we compute the claims as follows:

Seafarer

Contract
Term

Contract
Date

Repatriation
Date

Unexpired Monthly
Term
Salary

Total Claims

De Gracia

10 months 17
Jul. 28 Jan. 1999 3 months US$800
1998
& 20 days

US$2933.34

Lata

12 months 17
Apr. 28 Jan. 1999 2 months US$600
1998
& 20 days

US$1600

Aprosta

12 months 17
Apr. 28 Jan. 1999 2 months US$600
1998
& 20 days

US$1600

Given the above computation, we modify the CAs imposition of award, and grant to
De Gracia, et al. salaries representing the unexpired portion of their contracts, instead of
salaries for three (3) months.
Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages
in certain cases:

Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No.
3 of this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.

Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary
damages:

Art. 2229. Exemplary or corrective damages are imposed, by way of example or

correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.

In this case, we agree with the CA in not awarding moral and exemplary damages for
lack of factual basis.

Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and
expenses of litigation:

Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation,
other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiffs plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In actions for indemnity under workmens compensation and employers
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys
fees and expenses of litigation should be recovered.

In all cases, the attorneys fees and expenses of litigation must be reasonable.

Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of
recovery of wages:

Art. 111. Attorneys fees.

a.

In cases of unlawful withholding of wages, the culpable party may be assessed

attorneys fees equivalent to ten percent of the amount of wages recovered.

b.

It shall be unlawful for any person to demand or accept, in any judicial or

administrative proceedings for the recovery of wages, attorneys fees which exceed
ten percent of the amount of wages recovered.

Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid
salaries and protect their interest, we agree with the CAs imposition of attorneys fees in
the amount of ten percent (10%) of the total claims.

WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006
with MODIFICATION. Petitioners Skippers United Pacific, Inc. and Skippers
Maritime Services Inc., Ltd. are jointly and severally liable for payment of the following:
1) Unremitted home allotment pay for the month of December 1998 in its equivalent
rate in Philippine Pesos at the time of termination on 28 January 1999:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00
2) Salary for the unexpired portion of the employment contract or its current equivalent
in Philippine Pesos:
a. De Gracia = US$2,933.34
b. Lata = US$1,600.00
c. Aprosta = US$1,600.00
3) Attorneys fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED.
Republic
SUPREME
Manila
SECOND DIVISION

of

the

Philippines
COURT

G.R. No. 145587

October 26, 2007
EDI-STAFFBUILDERS
INTERNATIONAL,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S.
GRAN, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the
January 15, 1999 Decision3 and September 30, 1999 Resolution4 rendered by the
National Labor Relations Commission (NLRC) (Third Division) in POEA ADJ (L) 9406-2194, ordering Expertise Search International (ESI), EDI-Staffbuilders
International, Inc. (EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and
severally to pay Eleazar S. Gran (Gran) the amount of USD 16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement of Overseas
Filipino Workers (OFWs).5 ESI is another recruitment agency which collaborated with
EDI to process the documentation and deployment of private respondent to Saudi
Arabia.
Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for
OAB, in Riyadh, Kingdom of Saudi Arabia.6
It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of
qualified applicants for the position of Computer Specialist. 7 In a facsimile
transmission dated November 29, 1993, OAB informed EDI that, from the
applicants curricula vitaesubmitted to it for evaluation, it selected Gran for the position
of Computer Specialist. The faxed letter also stated that if Gran agrees to the terms
and conditions of employment contained in it, one of which was a monthly salary of SR
(Saudi Riyal) 2,250.00 (USD 600.00), EDI may arrange for Grans immediate dispatch. 8
After accepting OABs offer of employment, Gran signed an employment contract 9 that
granted him a monthly salary of USD 850.00 for a period of two years. Gran was then
deployed to Riyadh, Kingdom of Saudi Arabia on February 7, 1994.

To Order "Valid Dismissal" click the Book

Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salaryhis
employment contract stated USD 850.00; while his Philippine Overseas Employment
Agency (POEA) Information Sheet indicated USD 600.00 only. However, through the
assistance of the EDI office in Riyadh, OAB agreed to pay Gran USD 850.00 a month. 10
After Gran had been working for about five months for OAB, his employment was
terminated through OABs July 9, 1994 letter,11 on the following grounds:
1. Non-compliance to contract requirements by the recruitment agency primarily on
your salary and contract duration.

2. Non-compliance to pre-qualification requirements by the recruitment agency[,] vide

OAB letter ref. F-5751-93, dated October 3, 1993.12
3. Insubordination or disobedience to Top Management Order and/or instructions
(non-submittal of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing
his final pay, and on the same day, he executed a Declaration 13 releasing OAB from any
financial obligation or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against
ESI/EDI, OAB, Country Bankers Insurance Corporation, and Western Guaranty
Corporation with the NLRC, National Capital Region, Quezon City, which was docketed
as POEA ADJ (L) 94-06-2194 for underpayment of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday, to whom Grans
case was assigned, ruled that there was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of salaries since according
to the POEA-Overseas Contract Worker (OCW) Information Sheet, Grans monthly
salary was USD 600.00, and in his Confirmation of Appointment as Computer
Specialist, his monthly basic salary was fixed at SR 2,500.00, which was equivalent to
USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no
claim for unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to
refute EDIs allegations; namely, (1) that Gran did not submit a single activity report of
his daily activity as dictated by company policy; (2) that he was not qualified for the job
as computer specialist due to his insufficient knowledge in programming and lack of
knowledge in ACAD system; (3) that Gran refused to follow managements instruction
for him to gain more knowledge of the job to prove his worth as computer specialist; (4)
that Grans employment contract had never been substituted; (5) and that Gran was
paid a monthly salary of USD 850.00, and USD 350.00 monthly as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work
due to insubordination, disobedience, and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Grans complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC, Third Division.
However, it appears from the records that Gran failed to furnish EDI with a copy of his
Appeal Memorandum.
The Ruling of the NLRC
The NLRC held that EDIs seemingly harmless transfer of Grans contract to ESI is
actually reprocessing, which is a prohibited transaction under Article 34 (b) of the
Labor Code. This scheme constituted misrepresentation through the conspiracy between
EDI and ESI in misleading Gran and even POEA of the actual terms and conditions of
the OFWs employment. In addition, it was found that Gran did not commit any act that
constituted a legal ground for dismissal. The alleged non-compliance with contractual
stipulations relating to Grans salary and contract duration, and the absence of prequalification requirements cannot be attributed to Gran but to EDI, which dealt directly
with OAB. In addition, the charge of insubordination was not substantiated, and Gran
was not even afforded the required notice and investigation on his alleged offenses.

Thus, the NLRC reversed the Labor Arbiters Decision and rendered a new one, the
dispositive portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search
International, Inc., EDI Staffbuilders Intl., Inc. and Omar Ahmed Ali Bin Bechr Est.
(OAB) are hereby ordered jointly and severally liable to pay the complainant Eleazar
Gran the Philippine peso equivalent at the time of actual payment of SIXTEEN
THOUSAND ONE HUNDRED FIFTY US DOLLARS (US$16,150.00) representing his
salaries for the unexpired portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment 17 on March 29, 1999 with the NLRC
and petitioner receiving a copy of this motion on the same date. 18
To prevent the execution, petitioner filed an Opposition 19 to Grans motion arguing that
the Writ of Execution cannot issue because it was not notified of the appellate
proceedings before the NLRC and was not given a copy of the memorandum of appeal
nor any opportunity to participate in the appeal.
Seeing that the NLRC did not act on Grans motion after EDI had filed its Opposition,
petitioner filed, on August 26, 1999, a Motion for Reconsideration of the NLRC Decision
after receiving a copy of the Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioners Motion for Reconsideration,
ratiocinating that the issues and arguments raised in the motion had already been
amply discussed, considered, and ruled upon in the Decision, and that there was no
cogent reason or patent or palpable error that warrant any disturbance thereof.
Unconvinced of the NLRCs reasoning, EDI filed a Petition for Certiorari before the CA.
Petitioner claimed in its petition that the NLRC committed grave abuse of discretion in
giving due course to the appeal despite Grans failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues of EDIs petition.
On the procedural issue, the appellate court held that Grans failure to furnish a copy of
his appeal memorandum [to EDI was] a mere formal lapse, an excusable neglect and not
a jurisdictional defect which would justify the dismissal of his appeal. 22 The court also
held that petitioner EDI failed to prove that private respondent was terminated for a
valid cause and in accordance with due process; and that Grans Declaration releasing
OAB from any monetary obligation had no force and effect. The appellate court
ratiocinated that EDI had the burden of proving Grans incompetence; however, other
than the termination letter, no evidence was presented to show how and why Gran was
considered to be incompetent. The court held that since the law requires the recruitment
agencies to subject OFWs to trade tests before deployment, Gran must have been
competent and qualified; otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Grans failure to submit a
Daily Activity Report, the appellate court found that EDI failed to show that the
submission of the Daily Activity Report was a part of Grans duty or the companys
policy. The court also held that even if Gran was guilty of insubordination, he should
have just been suspended or reprimanded, but not dismissed.
The CA also held that Gran was not afforded due process, given that OAB did not abide
by the twin notice requirement. The court found that Gran was terminated on the same
day he received the termination letter, without having been apprised of the bases of his
dismissal or afforded an opportunity to explain his side.
Finally, the CA held that the Declaration signed by Gran did not bar him from
demanding benefits to which he was entitled. The appellate court found that the
Declaration was in the form of a quitclaim, and as such is frowned upon as contrary to

public policy especially where the monetary consideration given in the Declaration was
very much less than what he was legally entitled tohis backwages amounting to USD
16,150.00.
As a result of these findings, on October 18, 2000, the appellate court denied the
petition to set aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS APPEAL
MEMORANDUM TO PETITIONER EDI WOULD CONSTITUTE A JURISDICTIONAL
DEFECT AND A DEPRIVATION OF PETITIONER EDIS RIGHT TO DUE PROCESS AS
WOULD JUSTIFY THE DISMISSAL OF GRANS APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF SUBSTANTIAL
EVIDENCE THAT GRANS TERMINATION WAS JUSTIFIABLE BY REASON OF
INCOMPETENCE. COROLLARY HERETO, WHETHER THE PRIETO VS. NLRC
RULING, AS APPLIED BY THE COURT OF APPEALS, IS APPLICABLE IN THE
INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF SUBSTANTIAL
EVIDENCE THAT GRANS TERMINATION WAS JUSTIFIABLE BY REASON OF
INSUBORDINATION AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED
PORTION OF HIS CONTRACT.23
The Courts Ruling
The petition lacks merit except with respect to Grans failure to furnish EDI with his
Appeal Memorandum filed with the NLRC.
First Issue: NLRCs Duty is to Require Respondent to Provide Petitioner a
Copy of the Appeal
Petitioner EDI claims that Grans failure to furnish it a copy of the Appeal Memorandum
constitutes a jurisdictional defect and a deprivation of due process that would warrant a
rejection of the appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish a copy of the
appeal to the adverse party is not fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this Court set aside the order of
the NLRC which dismissed an appeal on the sole ground that the appellant did not
furnish the appellee a memorandum of appeal contrary to the requirements of Article
223 of the New Labor Code and Section 9, Rule XIII of its Implementing Rules and
Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an
appeal to the NLRC based on the ground that there is no showing whatsoever that a
copy of the appeal was served by the appellant on the appellee25 was annulled. The
Court ratiocinated as follows:

The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an
excusable neglect. Time and again We have acted on petitions to review decisions of the
Court of Appeals even in the absence of proof of service of a copy thereof to the Court of
Appeals as required by Section 1 of Rule 45, Rules of Court. We act on the petitions
and simply require the petitioners to comply with the rule.26 (Emphasis
supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor
Union-FFW v. National Labor Relations Commission, 27Pagdonsalan v. NLRC,28 and
in Sunrise Manning Agency, Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to furnish the adverse
party with a copy of the appeal is treated only as a formal lapse, an excusable neglect,
and hence, not a jurisdictional defect. Accordingly, in such a situation, the appeal should
not be dismissed; however, it should not be given due course either. As enunciated
in J.D. Magpayo, the duty that is imposed on the NLRC, in such a case, is to
require the appellant to comply with the rule that the opposing party should
be provided with a copy of the appeal memorandum.
While Grans failure to furnish EDI with a copy of the Appeal Memorandum is
excusable, the abject failure of the NLRC to order Gran to furnish EDI with the Appeal
Memorandum constitutes grave abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of
the Appeal Memorandum. The NLRC then ordered Gran to present proof of service. In
compliance with the order, Gran submitted a copy of Camp Crame Post Offices list of
mail/parcels sent on April 7, 1998. 30 The post offices list shows that private respondent
Gran sent two pieces of mail on the same date: one addressed to a certain Dan O. de
Guzman of Legaspi Village, Makati; and the other appears to be addressed to Neil B.
Garcia (or Gran),31of Ermita, Manilaboth of whom are not connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed received a copy of
the Appeal Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness
of service in proceedings before the NLRC:
Section 5.32 Proof and completeness of service.The return is prima facie proof of the
facts indicated therein. Service by registered mail is complete upon receipt by
the addressee or his agent; but if the addressee fails to claim his mail from the post
office within five (5) days from the date of first notice of the postmaster, service shall
take effect after such time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only deemed complete when
the addressee or his agent received the mail or after five (5) days from the date of first
notice of the postmaster. However, the NLRC Rules do not state what would constitute
proper proof of service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.Proof of personal service shall consist of a written
admission of the party served or the official return of the server, or the affidavit of the
party serving, containing a full statement of the date, place and manner of service. If the
service is by ordinary mail, proof thereof shall consist of an affidavit of the person
mailing of facts showing compliance with section 7 of this Rule. If service is made by
registered mail, proof shall be made by such affidavit and registry receipt
issued by the mailing office. The registry return card shall be filed
immediately upon its receipt by the sender, or in lieu thereof the unclaimed
letter together with the certified or sworn copy of the notice given by the
postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted by Gran is not
conclusive proof that he had served a copy of his appeal memorandum to EDI, nor is it

conclusive proof that EDI received its copy of the Appeal Memorandum. He should have
submitted an affidavit proving that he mailed the Appeal Memorandum together with
the registry receipt issued by the post office; afterwards, Gran should have immediately
filed the registry return card.
Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not
have simply accepted the post offices list of mail and parcels sent; but it should have
required Gran to properly furnish the opposing parties with copies of his
Appeal Memorandum as prescribed in J.D. Magpayo and the other cases.
The NLRC should not have proceeded with the adjudication of the case, as this
constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a
copy of the Appeal Memorandum before rendering judgment reversing the dismissal of
Grans complaint constitutes an evasion of the pertinent NLRC Rules and established
jurisprudence. Worse, this failure deprived EDI of procedural due process guaranteed
by the Constitution which can serve as basis for the nullification of proceedings in the
appeal before the NLRC. One can only surmise the shock and dismay that OAB, EDI,
and ESI experienced when they thought that the dismissal of Grans complaint became
final, only to receive a copy of Grans Motion for Execution of Judgment which also
informed them that Gran had obtained a favorable NLRC Decision. This is not level
playing field and absolutely unfair and discriminatory against the employer and the job
recruiters. The rights of the employers to procedural due process cannot be cavalierly
disregarded for they too have rights assured under the Constitution.
However, instead of annulling the dispositions of the NLRC and remanding the case for
further proceedings we will resolve the petition based on the records before us to avoid a
protracted litigation.33
The second and third issues have a common matterwhether there was just cause for
Grans dismissalhence, they will be discussed jointly.
Second and Third Issues: Whether Grans dismissal is justifiable by reason
of incompetence, insubordination, and disobedience
In cases involving OFWs, the rights and obligations among and between the OFW, the
local recruiter/agent, and the foreign employer/principal are governed by the
employment contract. A contract freely entered into is considered law between the
parties; and hence, should be respected. In formulating the contract, the 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.34
In the present case, the employment contract signed by Gran specifically states that
Saudi Labor Laws will govern matters not provided for in the contract (e.g. specific
causes for termination, termination procedures, etc.). Being the law intended by the
parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all
matters relating to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or
case has the burden of proving the foreign law. The foreign law is treated as a question
of fact to be properly pleaded and proved as the judge or labor arbiter cannot take
judicial notice of a foreign law. He is presumed to know only domestic or forum law. 35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter;
thus, the International Law doctrine of presumed-identity approach or processual
presumption comes into play.36 Where a foreign law is not pleaded or, even if pleaded, is
not proved, the presumption is that foreign law is the same as ours. 37 Thus, we apply
Philippine labor laws in determining the issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally dismissed due to
incompetence and insubordination or disobedience.

This claim has no merit.

In illegal dismissal cases, it has been established by Philippine law and jurisprudence
that the employer should prove that the dismissal of employees or personnel is legal and
just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to security of tenure and their right to
be protected against dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his representative if
he so desires in accordance with company rules and regulations promulgated pursuant
to guidelines set by the Department of Labor and Employment. Any decision taken by
the employer shall be without prejudice to the right of the workers to contest the validity
or legality of his dismissal by filing a complaint with the regional branch of the National
Labor Relations Commission. The burden of proving that the termination was
for a valid or authorized cause shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or illegal dismissal cases,
the employer has the burden of proving that the dismissal is for just and valid causes;
and failure to do so would necessarily mean that the dismissal was not justified and
therefore illegal.40 Taking into account the character of the charges and the penalty
meted to an employee, the employer is bound to adduce clear, accurate, consistent, and
convincing evidence to prove that the dismissal is valid and legal. 41 This is consistent
with the principle ofsecurity of tenure as guaranteed by the Constitution and reinforced
by Article 277 (b) of the Labor Code of the Philippines.42
In the instant case, petitioner claims that private respondent Gran was validly dismissed
for just cause, due to incompetence and insubordination or disobedience. To prove its
allegations, EDI submitted two letters as evidence. The first is the July 9, 1994
termination letter,43 addressed to Gran, from Andrea E. Nicolaou, Managing Director of
OAB. The second is an unsigned April 11, 1995 letter 44 from OAB addressed to EDI and
ESI, which outlined the reasons why OAB had terminated Grans employment.
Petitioner claims that Gran was incompetent for the Computer Specialist position
because he had insufficient knowledge in programming and zero knowledge of [the]
ACAD system.45 Petitioner also claims that Gran was justifiably dismissed due to
insubordination or disobedience because he continually failed to submit the required
Daily Activity Reports.46 However, other than the abovementioned letters, no other
evidence was presented to show how and why Gran was considered incompetent,
insubordinate, or disobedient. Petitioner EDI had clearly failed to overcome the burden
of proving that Gran was validly dismissed.
Petitioners imputation of incompetence on private respondent due to his insufficient
knowledge in programming and zero knowledge of the ACAD system based only on the
above mentioned letters, without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation. Incompetence may be
shown by weighing it against a standard, benchmark, or criterion. However, EDI failed
to establish any such bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of insubordination or willful
disobedience to prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the following twin elements
must concur: (1) the employees assailed conduct must have been willful, that is,

characterized by a wrongful and perverse attitude; and (2) the order violated must have
been reasonable, lawful, made known to the employee and must pertain to the duties
which he had been engaged to discharge.47
EDI failed to discharge the burden of proving Grans insubordination or willful
disobedience. As indicated by the second requirement provided for in Micro Sales
Operation Network, in order to justify willful disobedience, we must determine whether
the order violated by the employee is reasonable, lawful, made known to the employee,
and pertains to the duties which he had been engaged to discharge. In the case at bar,
petitioner failed to show that the order of the company which was violatedthe
submission of Daily Activity Reportswas part of Grans duties as a Computer
Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company
policy, Grans job description, or any other document that would show that the Daily
Activity Reports were required for submission by the employees, more particularly by a
Computer Specialist.
Even though EDI and/or ESI were merely the local employment or recruitment agencies
and not the foreign employer, they should have adduced additional evidence to
convincingly show that Grans employment was validly and legally terminated. The
burden devolves not only upon the foreign-based employer but also on the employment
or recruitment agency for the latter is not only an agent of the former, but is also
solidarily liable with the foreign principal for any claims or liabilities arising from the
dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably dismissed due to
incompetence, insubordination, or willful disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision,
is not applicable to the present case.
In Prieto, this Court ruled that [i]t is presumed that before their deployment, the
petitioners were subjected to trade tests required by law to be conducted by the
recruiting agency to insure employment of only technically qualified workers for the
foreign principal.50 The CA, using the ruling in the said case, ruled that Gran must have
passed the test; otherwise, he would not have been hired. Therefore, EDI was at fault
when it deployed Gran who was allegedly incompetent for the job.
According to petitioner, the Prieto ruling is not applicable because in the case at hand,
Gran misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he
was not qualified for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the required trade test is to weed
out incompetent applicants from the pool of available workers. It is supposed to reveal
applicants with false educational backgrounds, and expose bogus qualifications. Since
EDI deployed Gran to Riyadh, it can be presumed that Gran had passed the required
trade test and that Gran is qualified for the job. Even if there was no objective trade test
done by EDI, it was still EDIs responsibility to subject Gran to a trade test; and its
failure to do so only weakened its position but should not in any way prejudice Gran. In
any case, the issue is rendered moot and academic because Grans incompetency is
unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and
regulations shall govern the relationship between Gran and EDI. Thus, our laws and
rules on the requisites of due process relating to termination of employment shall apply.
Petitioner EDI claims that private respondent Gran was afforded due process, since he
was allowed to work and improve his capabilities for five months prior to his
termination.51 EDI also claims that the requirements of due process, as enunciated
in Santos, Jr. v. NLRC,52and Malaya Shipping Services, Inc. v. NLRC,53 cited by the CA
in its Decision, were properly observed in the present case.
This position is untenable.

In Agabon v. NLRC,54 this Court held that:

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles 283 and 284, the employer must
give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be given two (2) notices before
their employment could be terminated: (1) a first notice to apprise the employees of
their fault, and (2) a second notice to communicate to the employees that their
employment is being terminated. In between the first and second notice, the employees
should be given a hearing or opportunity to defend themselves personally or by counsel
of their choice.55
A careful examination of the records revealed that, indeed, OABs manner of dismissing
Gran fell short of the two notice requirement. While it furnished Gran the written notice
informing him of his dismissal, it failed to furnish Gran the written notice apprising him
of the charges against him, as prescribed by the Labor Code. 56 Consequently, he was
denied the opportunity to respond to said notice. In addition, OAB did not schedule a
hearing or conference with Gran to defend himself and adduce evidence in support of
his defenses. Moreover, the July 9, 1994 termination letter was effective on the same
day. This shows that OAB had already condemned Gran to dismissal, even before Gran
was furnished the termination letter. It should also be pointed out that OAB failed to
give Gran the chance to be heard and to defend himself with the assistance of a
representative in accordance with Article 277 of the Labor Code. Clearly, there was no
intention to provide Gran with due process. Summing up, Gran was notified and his
employment arbitrarily terminated on the same day, through the same letter, and for
unjustified grounds. Obviously, Gran was not afforded due process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal
damages as indemnity for violating the employees right to statutory due process. Since
OAB was in breach of the due process requirements under the Labor Code and its
regulations, OAB, ESI, and EDI, jointly and solidarily, are liable to Gran in the amount
of PhP 30,000.00 as indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed period of
employment, in cases arising before the effectivity of R.A. No. 8042 58 (Migrant Workers
and Overseas Filipinos Act) on August 25, 1995, that when the contract is for a fixed
term and the employees are dismissed without just cause, they are entitled to the
payment of their salaries corresponding to the unexpired portion of their contract. 59 On
the other hand, for cases arising after the effectivity of R.A. No. 8042, when the
termination of employment is without just, valid or authorized cause as defined by law
or contract, the worker shall be entitled to the full reimbursement of his placement fee
with interest of twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the
unexpired term whichever is less.60
In the present case, the employment contract provides that the employment contract
shall be valid for a period of two (2) years from the date the employee starts to work
with the employer.61 Gran arrived in Riyadh, Saudi Arabia and started to work on
February 7, 1994;62hence, his employment contract is until February 7, 1996. Since he
was illegally dismissed on July 9, 1994, before the effectivity of R.A. No. 8042, he is
therefore entitled to backwages corresponding to the unexpired portion of his contract,
which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the
Declaration which is claimed to have been freely and voluntarily executed by Gran. The
relevant portions of the Declaration are as follows:

I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL

SETTLEMENT ON THIS DATE THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I
RENDERED TO OAB ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY
FAVOUR AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN
WHATEVER FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY
SIGNATURE VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more
particularly those executed by employees. This requirement was clearly articulated by
Chief Justice Artemio V. Panganiban in Land and Housing Development Corporation
v. Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor
of workers should be strictly scrutinized to protect the weak and the disadvantaged. The
waivers should be carefully examined, in regard not only to the words and
terms used, but also the factual circumstances under which they have been
executed.63 (Emphasis supplied.)
This Court had also outlined in Land and Housing Development Corporation,
citing Periquet v. NLRC,64 the parameters for valid compromise agreements, waivers,
and quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step
in to annul the questionable transaction. But where it is shown that the person
making the waiver did so voluntarily, with full understanding of what he
was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.
(Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is
unreasonably low. As correctly pointed out by the courta quo, the payment of SR
2,948.00 is even lower than his monthly salary of SR 3,190.00 (USD 850.00). In
addition, it is also very much less than the USD 16,150.00 which is the amount Gran is
legally entitled to get from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for
Grans salary for the services he rendered to OAB as Computer Specialist. If the

Declaration is a quitclaim, then the consideration should be much much more than the
monthly salary of SR 3,190.00 (USD 850.00)although possibly less than the estimated
Grans salaries for the remaining duration of his contract and other benefits as employee
of OAB. A quitclaim will understandably be lower than the sum total of the amounts and
benefits that can possibly be awarded to employees or to be earned for the remainder of
the contract period since it is a compromise where the employees will have to forfeit a
certain portion of the amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such amount is
unconscionably low or unreasonable although the employee voluntarily agreed to it. In
the case of the Declaration, the amount is unreasonably small compared to the future
wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show
that Gran did not voluntarily and freely execute the document. Consider the following
chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his
plane ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was forced to sign the Declaration and
constrained to receive the amount of SR 2,948.00 even if it was against his willsince
he was told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other choice
but to sign the Declaration as he needed the amount of SR 2,948.00 for the payment of
his ticket. He could have entertained some apprehensions as to the status of his stay or
safety in Saudi Arabia if he would not sign the quitclaim.
4. The court a quo is correct in its finding that the Declaration is a contract of adhesion
which should be construed against the employer, OAB. An adhesion contract is contrary
to public policy as it leaves the weaker partythe employeein a take-it-or-leave-it
situation. Certainly, the employer is being unjust to the employee as there is no
meaningful choice on the part of the employee while the terms are unreasonably
favorable to the employer.66
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under
Philippine laws in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers
of employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the
employees are giving up in consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the employee in English,
Filipino, or in the dialect known to the employeesthat by signing the waiver or
quitclaim, they are forfeiting or relinquishing their right to receive the benefits which
are due them under the law; and

4. A statement that the employees signed and executed the document voluntarily, and
had fully understood the contents of the document and that their consent was freely
given without any threat, violence, duress, intimidation, or undue influence exerted on
their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect
known to the employee. There should be two (2) witnesses to the execution of the
quitclaim who must also sign the quitclaim. The document should be subscribed and
sworn to under oath preferably before any administering official of the Department of
Labor and Employment or its regional office, the Bureau of Labor Relations, the NLRC
or a labor attach in a foreign country. Such official shall assist the parties regarding the
execution of the quitclaim and waiver.67 This compromise settlement becomes final and
binding under Article 227 of the Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the Bureau
of Labor Relations or the regional office of the DOLE, shall be final and binding upon
the parties and the NLRC or any court shall not assume jurisdiction over issues
involved therein except in case of non-compliance thereof or if there is prima
facie evidence that the settlement was obtained through fraud, misrepresentation, or
coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon
to govern said contracts. Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R.
SP No. 56120 of the Court of Appeals affirming the January 15, 1999 Decision and
September 30, 1999 Resolution of the NLRC
is AFFIRMED with
the MODIFICATION that
petitioner
EDI-Staffbuilders
International, Inc. shall pay the amount of PhP 30,000.00 to respondent Gran as
nominal damages for non-compliance with statutory due process.
No costs.
SO ORDERED.