G.R. No.

78909 June 30, 1989

MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO, President, petitioner,

vs.
THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR OF LABOR, REGION X,respondents.

MEDIALDEA, J.:

This is a petition for certiorari seeking the annulment of the Decision of the respondent Secretary of Labor dated
September 24, 1986, affirming with modification the Order of respondent Regional Director of Labor, Region X, dated
August 4, 1986, awarding salary differentials and emergency cost of living allowances (ECOLAS) to employees of
petitioner, and the Order denying petitioner's motion for reconsideration dated May 13, 1987, on the ground of grave
abuse of discretion.

Petitioner is a semi-government hospital, managed by the Board of Directors of the Cagayan de Oro Women's Club and
Puericulture Center, headed by Mrs. Antera Dorado, as holdover President. The hospital derives its finances from the
club itself as well as from paying patients, averaging 130 per month. It is also partly subsidized by the Philippine Charity
Sweepstakes Office and the Cagayan De Oro City government.

Petitioner has forty-one (41) employees. Aside from salary and living allowances, the employees are given food, but the
amount spent therefor is deducted from their respective salaries (pp. 77-78, Rollo).

On May 23, 1986, ten (10) employees of the petitioner employed in different capacities/positions filed a complaint with
the Office of the Regional Director of Labor and Employment, Region X, for underpayment of their salaries and ECOLAS,
which was docketed as ROX Case No. CW-71-86.

On June 16, 1986, the Regional Director directed two of his Labor Standard and Welfare Officers to inspect the records
of the petitioner to ascertain the truth of the allegations in the complaints (p. 98, Rollo). Payrolls covering the periods of
May, 1974, January, 1985, November, 1985 and May, 1986, were duly submitted for inspection.

On July 17, 1986, the Labor Standard and Welfare Officers submitted their report confirming that there was
underpayment of wages and ECOLAs of all the employees by the petitioner, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, deficiency on wage and ecola as verified and confirmed per review of the respondent
payrolls and interviews with the complainant workers and all other information gathered by the team, it is respectfully
recommended to the Honorable Regional Director, this office, that Antera Dorado, President be ORDERED to pay the
amount of SIX HUNDRED FIFTY FOUR THOUSAND SEVEN HUNDRED FIFTY SIX & 01/100 (P654,756.01), representing
underpayment of wages and ecola to the THIRTY SIX (36) employees of the said hospital as appearing in the attached
Annex "F" worksheets and/or whatever action equitable under the premises. (p. 99, Rollo)

Based on this inspection report and recommendation, the Regional Director issued an Order dated August 4, 1986,
directing the payment of P723,888.58, representing underpayment of wages and ECOLAs to all the petitioner's
employees, the dispositive portion of which reads:

WHEREFORE, premises considered, respondent Maternity and Children Hospital is hereby ordered to pay the above-
listed complainants the total amount indicated opposite each name, thru this Office within ten (10) days from receipt
thereof. Thenceforth, the respondent hospital is also ordered to pay its employees/workers the prevailing statutory
minimum wage and allowance.

SO ORDERED. (p. 34, Rollo)

Petitioner appealed from this Order to the Minister of Labor and Employment, Hon. Augusto S. Sanchez, who rendered a
Decision on September 24, 1986, modifying the said Order in that deficiency wages and ECOLAs should be computed
only from May 23, 1983 to May 23, 1986, the dispositive portion of which reads:

WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that the deficiency wages and ECOLAs should only be
computed from May 23, 1983 to May 23, 1986. The case is remanded to the Regional Director, Region X, for
recomputation specifying the amounts due each the complainants under each of the applicable Presidential Decrees. (p.
40, Rollo)

On October 24, 1986, the petitioner filed a motion for reconsideration which was denied by the Secretary of Labor in his
Order dated May 13, 1987, for lack of merit (p. 43 Rollo).

The instant petition questions the all-embracing applicability of the award involving salary differentials and ECOLAS, in
that it covers not only the hospital employees who signed the complaints, but also those (a) who are not signatories to
the complaint, and (b) those who were no longer in the service of the hospital at the time the complaints were filed.

Petitioner likewise maintains that the Order of the respondent Regional Director of Labor, as affirmed with
modifications by respondent Secretary of Labor, does not clearly and distinctly state the facts and the law on which the
award was based. In its "Rejoinder to Comment", petitioner further questions the authority of the Regional Director to
award salary differentials and ECOLAs to private respondents, (relying on the case of Encarnacion vs. Baltazar, G.R. No.
L-16883, March 27, 1961, 1 SCRA 860, as authority for raising the additional issue of lack of jurisdiction at any stage of
the proceedings, p. 52, Rollo), alleging that the original and exclusive jurisdiction over money claims is properly lodged in
the Labor Arbiter, based on Article 217, paragraph 3 of the Labor Code.

The primary issue here is whether or not the Regional Director had jurisdiction over the case and if so, the extent of
coverage of any award that should be forthcoming, arising from his visitorial and enforcement powers under Article 128
of the Labor Code. The matter of whether or not the decision states clearly and distinctly statement of facts as well as
the law upon which it is based, becomes relevant after the issue on jurisdiction has been resolved.

This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as amended by E.O. No. 111. Labor
standards refer to the minimum requirements prescribed by existing laws, rules, and regulations relating to wages,
hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety, and
health standards (Section 7, Rule I, Rules on the Disposition of Labor Standards Cases in the Regional Office, dated
September 16, 1987). 1 Under the present rules, a Regional Director exercises both visitorial and enforcement power
over labor standards cases, and is therefore empowered to adjudicate money claims, providedthere still exists an
employer-employee relationship, and the findings of the regional office is not contested by the employer concerned.

Prior to the promulgation of E.O. No. 111 on December 24, 1986, the Regional Director's authority over money claims
was unclear. The complaint in the present case was filed on May 23, 1986 when E.O. No. 111 was not yet in effect, and
the prevailing view was that stated in the case of Antonio Ong, Sr. vs. Henry M. Parel, et al., G.R. No. 76710, dated
December 21, 1987, thus:

. . . the Regional Director, in the exercise of his visitorial and enforcement powers under Article 128 of the Labor Code,
has no authority to award money claims, properly falling within the jurisdiction of the labor arbiter. . . .

. . . If the inspection results in a finding that the employer has violated certain labor standard laws, then the regional
director must order the necessary rectifications. However, this does not include adjudication of money claims, clearly
within the ambit of the labor arbiter's authority under Article 217 of the Code.
The Ong case relied on the ruling laid down in Zambales Base Metals Inc. vs. The Minister of Labor, et al., (G.R. Nos.
73184-88, November 26, 1986, 146 SCRA 50) that the "Regional Director was not empowered to share in the original
and exclusive jurisdiction conferred on Labor Arbiters by Article 217."

We believe, however, that even in the absence of E. O. No. 111, Regional Directors already had enforcement powers
over money claims, effective under P.D. No. 850, issued on December 16, 1975, which transferred labor standards cases
from the arbitration system to the enforcement system.

To clarify matters, it is necessary to enumerate a series of rules and provisions of law on the disposition of labor
standards cases.

Prior to the promulgation of PD 850, labor standards cases were an exclusive function of labor arbiters, under Article 216
of the then Labor Code (PD No. 442, as amended by PD 570-a), which read in part:

Art. 216. Jurisdiction of the Commission. The Commission shall have exclusive appellate jurisdiction over all cases
decided by the Labor Arbiters and compulsory arbitrators.

The Labor Arbiters shall have exclusive jurisdiction to hear and decide the following cases involving all workers whether
agricultural or non-agricultural.

xxx xxx xxx

(c) All money claims of workers, involving non-payment or underpayment of wages, overtime compensation, separation
pay, maternity leave and other money claims arising from employee-employer relations, except claims for workmen's
compensation, social security and medicare benefits;

(d) Violations of labor standard laws;

xxx xxx xxx

(Emphasis supplied)

The Regional Director exercised visitorial rights only under then Article 127 of the Code as follows:

ART. 127. Visitorial Powers. The Secretary of Labor or his duly authorized representatives, including, but not
restricted, to the labor inspectorate, shall have access to employers' records and premises at any time of the day or
night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or in aid in the enforcement of
this Title and of any Wage Order or regulation issued pursuant to this Code.

With the promulgation of PD 850, Regional Directors were given enforcement powers, in addition to visitorial powers.
Article 127, as amended, provided in part:

SEC. 10. Article 127 of the Code is hereby amended to read as follows:

Art. 127. Visitorial and enforcement powers.

xxx xxx xxx

(b) The Secretary of Labor or his duly authorized representatives shall have the power to order and administer, after due
notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation
officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order.

xxx xxx xxx

Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases. Article 216, as then amended by PD 850,
provided in part:

SEC. 22. Article 216 of the Code is hereby amended to read as follows:

Art. 216. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have exclusive jurisdiction to
hear and decide the following cases involving all workers, whether agricultural or non-agricultural:

xxx xxx xxx

(3) All money claims of workers involving non-payment or underpayment of wages, overtime or premium compensation,
maternity or service incentive leave, separation pay and other money claims arising from employer-employee relations,
except claims for employee's compensation, social security and medicare benefits and as otherwise provided in Article
127 of this Code.

xxx xxx xxx

(Emphasis supplied)

Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further amended by PD 850), there were
three adjudicatory units: The Regional Director, the Bureau of Labor Relations and the Labor Arbiter. It became
necessary to clarify and consolidate all governing provisions on jurisdiction into one document. 2 On April 23, 1976,
MOLE Policy Instructions No. 6 was issued, and provides in part (on labor standards cases) as follows:

POLICY INSTRUCTIONS NO. 6

TO: All Concerned

SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES

xxx xxx xxx

1. The following cases are under the exclusive original jurisdiction of the Regional Director.

a) Labor standards cases arising from violations of labor standard lawsdiscovered in the course of inspection or
complaints where employer-employee relations still exist;

xxx xxx xxx

2. The following cases are under the exclusive original jurisdiction of the Conciliation Section of the Regional Office:

a) Labor standards cases where employer-employee relations no longer exist;

xxx xxx xxx

6. The following cases are certifiable to the Labor Arbiters:

a) Cases not settled by the Conciliation Section of the Regional Office, namely:

1) labor standard cases where employer-employee relations no longer exist;

xxx xxx xxx

(Emphasis supplied)

MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued, enunciating the rationale for, and the scope
of, the enforcement power of the Regional Director, the first and second paragraphs of which provide as follows:
POLICY INSTRUCTIONS NO. 7

TO: All Regional Directors

SUBJECT: LABOR STANDARDS CASES

Under PD 850, labor standards cases have been taken from the arbitration system and placed under the enforcement
system, except where a) questions of law are involved as determined by the Regional Director, b) the amount involved
exceeds P100,000.00 or over 40% of the equity of the employer, whichever is lower, c) the case requires evidentiary
matters not disclosed or verified in the normal course of inspection, or d) there is no more employer-employee
relationship.

The purpose is clear: to assure the worker the rights and benefits due to him under labor standards laws without having
to go through arbitration. The worker need not litigate to get what legally belongs to him. The whole enforcement
machinery of the Department of Labor exists to insure its expeditious delivery to him free of charge. (Emphasis supplied)

Under the foregoing, a complaining employee who was denied his rights and benefits due him under labor standards law
need not litigate. The Regional Director, by virtue of his enforcement power, assured "expeditious delivery to him of his
rights and benefits free of charge", provided of course, he was still in the employ of the firm.

After PD 850, Article 216 underwent a series of amendments (aside from being re-numbered as Article 217) and with it a
corresponding change in the jurisdiction of, and supervision over, the Labor Arbiters:

1. PD 1367 (5-1-78) gave Labor Arbiters exclusive jurisdiction over unresolved issues in collective bargaining, etc., and
those cases arising from employer-employee relations duly indorsed by the Regional Directors. (It also removed his
jurisdiction over moral or other damages) In other words, the Labor Arbiter entertained cases certified to him. (Article
228, 1978 Labor Code.)

2. PD 1391 (5-29-78) all regional units of the National Labor Relations Commission (NLRC) were integrated into the
Regional Offices Proper of the Ministry of Labor; effectively transferring direct administrative control and supervision
over the Arbitration Branch to the Director of the Regional Office of the Ministry of Labor. "Conciliable cases" which
were thus previously under the jurisdiction of the defunct Conciliation Section of the Regional Office for purposes of
conciliation or amicable settlement, became immediately assignable to the Arbitration Branch for joint conciliation and
compulsory arbitration. In addition, the Labor Arbiter had jurisdiction even over termination and labor-standards cases
that may be assigned to them for compulsory arbitration by the Director of the Regional Office. PD 1391 merged
conciliation and compulsory arbitration functions in the person of the Labor Arbiter. The procedure governing the
disposition of cases at the Arbitration Branch paralleled those in the Special Task Force and Field Services Division, with
one major exception: the Labor Arbiter exercised full and untrammelled authority in the disposition of the case,
particularly in the substantive aspect, his decisions and orders subject to review only on appeal to the NLRC. 3

3. MOLE Policy Instructions No. 37 Because of the seemingly overlapping functions as a result of PD 1391, MOLE
Policy Instructions No. 37 was issued on October 7, 1978, and provided in part:

POLICY INSTRUCTIONS NO. 37

TO: All Concerned

SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS

Pursuant to the provisions of Presidential Decree No. 1391 and to insure speedy disposition of labor cases, the following
guidelines are hereby established for the information and guidance of all concerned.

1. Conciliable Cases.
Cases which are conciliable per se i.e., (a) labor standards cases where employer-employee relationship no longer exists;
(b) cases involving deadlock in collective bargaining, except those falling under P.D. 823, as amended; (c) unfair labor
practice cases; and (d) overseas employment cases, except those involving overseas seamen, shall be assigned by the
Regional Director to the Labor Arbiter for conciliation and arbitration without coursing them through the conciliation
section of the Regional Office.

2. Labor Standards Cases.

Cases involving violation of labor standards laws where employer- employee relationshipstill exists shall be assigned to
the Labor Arbiters where:

a) intricate questions of law are involved; or

b) evidentiary matters not disclosed or verified in the normal course of inspection by labor regulations officers are
required for their proper disposition.

3. Disposition of Cases.

When a case is assigned to a Labor Arbiter, all issues raised therein shall be resolved by him including those which are
originally cognizable by the Regional Director to avoid multiplicity of proceedings. In other words, the whole case, and
not merely issues involved therein, shall be assigned to and resolved by him.

xxx xxx xxx

(Emphasis supplied)

4. PD 1691(5-1-80) original and exclusive jurisdiction over unresolved issues in collective bargaining and money
claims, which includes moral or other damages.

Despite the original and exclusive jurisdiction of labor arbiters over money claims, however, the Regional Director
nonetheless retained his enforcement power, and remained empowered to adjudicate uncontested money claims.

5. BP 130 (8-21-8l) strengthened voluntary arbitration. The decree also returned the Labor Arbiters as part of the
NLRC, operating as Arbitration Branch thereof.

6. BP 227(6-1- 82) original and exclusive jurisdiction over questions involving legality of strikes and lock-outs.

The present petition questions the authority of the Regional Director to issue the Order, dated August 4, 1986, on the
basis of his visitorial and enforcement powers under Article 128 (formerly Article 127) of the present Labor Code. It is
contended that based on the rulings in the Ong vs. Parel (supra) and the Zambales Base Metals, Inc. vs. TheMinister of
Labor (supra) cases, a Regional Director is precluded from adjudicating money claims on the ground that this is an
exclusive function of the Labor Arbiter under Article 217 of the present Code.

On August 4, 1986, when the order was issued, Article 128(b) 4 read as follows:

(b) The Minister of Labor or his duly authorized representatives shall have the power to order and administer, after due
notice and hearing, compliance with the labor standards provisions of this Code based on the findings of labor regulation
officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the
labor regulations officer and raises issues which cannot be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection. (Emphasis supplied)

On the other hand, Article 217 of the Labor Code as amended by P.D. 1691, effective May 1, 1980; Batas Pambansa Blg.
130, effective August 21, 1981; and Batas Pambansa Blg. 227, effective June 1, 1982, inter alia, provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have theoriginal and
exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the case by the parties for
decision, the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of work and other terms and conditions of employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of strikes and
lock-outs. (Emphasis supplied)

The Ong and Zambales cases involved workers who were still connected with the company. However, in the Ong case,
the employer disputed the adequacy of the evidentiary foundation (employees' affidavits) of the findings of the labor
standards inspectors while in the Zambales case, the money claims which arose from alleged violations of labor
standards provisions were not discovered in the course of normal inspection. Thus, the provisions of MOLE Policy
Instructions Nos. 6, (Distribution of Jurisdiction Over Labor Cases) and 37 (Assignment of Cases to Labor Arbiters) giving
Regional Directors adjudicatory powers over uncontested money claims discovered in the course of normal inspection,
provided an employer-employee relationship still exists, are inapplicable.

In the present case, petitioner admitted the charge of underpayment of wages to workers still in its employ; in fact, it
pleaded for time to raise funds to satisfy its obligation. There was thus no contest against the findings of the labor
inspectors.

Barely less than a month after the promulgation on November 26, 1986 of the Zambales Base Metals case, Executive
Order No. 111 was issued on December 24, 1986,5 amending Article 128(b) of the Labor Code, to read as follows:

(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE TO THE CONTRARY NOTWITHSTANDING AND IN CASES WHERE THE
RELATIONSHIP OF EMPLOYER-EMPLOYEE STILL EXISTS, the Minister of Labor and Employment or his duly authorized
representatives shall have the power to order and administer, after due notice and hearing, compliance with the labor
standards provisions of this Code AND OTHER LABOR LEGISLATION based on the findings of labor regulation officers or
industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority
for the enforcement of their orders, except in cases where the employer contests the findings of the labor regulation
officer and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the
normal course of inspection. (Emphasis supplied)

As seen from the foregoing, EO 111 authorizes a Regional Director to order compliance by an employer with labor
standards provisions of the Labor Code and other legislation. It is Our considered opinion however, that the inclusion of
the phrase, " The provisions of Article 217 of this Code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists" ... in Article 128(b), as amended, above-cited,
merelyconfirms/reiterates the enforcement adjudication authority of the Regional Director over uncontested money
claimsin cases where an employer-employee relationship still exists. 6

Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions Nos. 6, 7 and 37, it is clear that it
has always been the intention of our labor authorities to provide our workers immediate access (when still feasible, as
where an employer-employee relationship still exists) to their rights and benefits, without being inconvenienced by
arbitration/litigation processes that prove to be not only nerve-wracking, but financially burdensome in the long run.
Note further the second paragraph of Policy Instructions No. 7 indicating that the transfer of labor standards cases from
the arbitration system to the enforcement system is

. . to assure the workers the rights and benefits due to him under labor standard laws, without having to go through
arbitration. . .

so that

. . the workers would not litigate to get what legally belongs to him. .. ensuring delivery . . free of charge.

Social justice legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application
by long-winded arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience.
Labor laws are meant to promote, not defeat, social justice.

This view is in consonance with the present "Rules on the Disposition of Labor Standard Cases in the Regional Offices
" 7 issued by the Secretary of Labor, Franklin M. Drilon on September 16, 1987.

Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine Inspection", provide as follows:

Section 2. Complaint inspection. All such complaints shall immediately be forwarded to the Regional Director who
shall refer the case to the appropriate unit in the Regional Office for assignment to a Labor Standards and Welfare
Officer (LSWO) for field inspection. When the field inspection does not produce the desired results, the Regional
Director shall summon the parties for summary investigation to expedite the disposition of the case. . . .

Section 3. Complaints where no employer-employee relationship actually exists. Where employer-employee

relationship no longer exists by reason of the fact that it has already been severed, claims for payment of monetary
benefits fall within the exclusive and original jurisdiction of the labor arbiters. . . . (Emphasis supplied)

Likewise, it is also clear that the limitation embodied in MOLE Policy Instructions No. 7 to amounts not exceeding
P100,000.00 has been dispensed with, in view of the following provisions of pars. (b) and (c), Section 7 on "Restitution",
the same Rules, thus:

xxx xxx xxx

(b) Plant-level restitutions may be effected for money claims not exceeding Fifty Thousand (P50,000.00). . . .

(c) Restitutions in excess of the aforementioned amount shall be effected at the Regional Office or at the worksite
subject to the prior approval of the Regional Director.

which indicate the intention to empower the Regional Director to award money claims in excess of
P100,000.00;provided of course the employer does not contest the findings made, based on the provisions of Section 8
thereof:

Section 8. Compromise agreement. Should the parties arrive at an agreement as to the whole or part of the dispute,
said agreement shall be reduced in writing and signed by the parties in the presence of the Regional Director or his duly
authorized representative.

E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of the Secretary of Labor's
decision upholding private respondents' salary differentials and ECOLAs on September 24, 1986. The amendment of the
visitorial and enforcement powers of the Regional Director (Article 128-b) by said E.O. 111 reflects the intention
enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolveuncontested money claims
in cases where an employer-employee relationship still exists. This intention must be given weight and entitled to great
respect. As held in Progressive Workers' Union, et. al. vs. F.P. Aguas, et. al. G.R. No. 59711-12, May 29, 1985, 150 SCRA
429:

. . The interpretation by officers of laws which are entrusted to their administration is entitled to great respect. We see
no reason to detract from this rudimentary rule in administrative law, particularly when later events have proved said
interpretation to be in accord with the legislative intent. ..

The proceedings before the Regional Director must, perforce, be upheld on the basis of Article 128(b) as amended by
E.O. No. 111, dated December 24, 1986, this executive order "to be considered in the nature of a curative statute with
retrospective application." (Progressive Workers' Union, et al. vs. Hon. F.P. Aguas, et al. (Supra); M. Garcia vs. Judge A.
Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA 331).

We now come to the question of whether or not the Regional Director erred in extending the award to all hospital
employees. We answer in the affirmative.

The Regional Director correctly applied the award with respect to those employees who signed the complaint, as well as
those who did not sign the complaint, but were still connected with the hospital at the time the complaint was filed (See
Order, p. 33 dated August 4, 1986 of the Regional Director, Pedrito de Susi, p. 33, Rollo).

The justification for the award to this group of employees who were not signatories to the complaint is that the visitorial
and enforcement powers given to the Secretary of Labor is relevant to, and exercisable over establishments, not over
the individual members/employees, because what is sought to be achieved by its exercise is the observance of, and/or
compliance by, such firm/establishment with the labor standards regulations. Necessarily, in case of an award resulting
from a violation of labor legislation by such establishment, the entire members/employees should benefit therefrom. As
aptly stated by then Minister of Labor Augusto S. Sanchez:

. . It would be highly derogatory to the rights of the workers, if after categorically finding the respondent hospital guilty
of underpayment of wages and ECOLAs, we limit the award to only those who signed the complaint to the exclusion of
the majority of the workers who are similarly situated. Indeed, this would be not only render the enforcement power of
the Minister of Labor and Employment nugatory, but would be the pinnacle of injustice considering that it would not
only discriminate but also deprive them of legislated benefits.

. . . (pp. 38-39, Rollo).

This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the Disposition of Labor Standards cases
in the Regional Offices" (supra) presently enforced, viz:

SECTION 6. Coverage of complaint inspection. A complaint inspection shall not be limited to the specific allegations or
violations raised by the complainants/workers but shall be a thorough inquiry into and verification of the compliance by
employer with existing labor standards and shall cover all workers similarly situated. (Emphasis supplied)

However, there is no legal justification for the award in favor of those employees who were no longer connectedwith the
hospital at the time the complaint was filed, having resigned therefrom in 1984, viz:

1. Jean (Joan) Venzon (See Order, p. 33, Rollo)

2. Rosario Paclijan

3. Adela Peralta

4. Mauricio Nagales

5. Consesa Bautista
 6. Teresita Agcopra

7. Felix Monleon

8. Teresita Salvador

9. Edgar Cataluna; and

10. Raymond Manija ( p.7, Rollo)

The enforcement power of the Regional Director cannot legally be upheld in cases of separated employees. Article 129
of the Labor Code, cited by petitioner (p. 54, Rollo) is not applicable as said article is in aid of the enforcement power of
the Regional Director; hence, not applicable where the employee seeking to be paid underpayment of wages is already
separated from the service. His claim is purely a money claim that has to be the subject of arbitration proceedings and
therefore within the original and exclusive jurisdiction of the Labor Arbiter.

Petitioner has likewise questioned the order dated August 4, 1986 of the Regional Director in that it does not clearly and
distinctly state the facts and the law on which the award is based.

We invite attention to the Minister of Labor's ruling thereon, as follows:

Finally, the respondent hospital assails the order under appeal as null and void because it does not clearly and distinctly
state the facts and the law on which the awards were based. Contrary to the pretensions of the respondent hospital, we
have carefully reviewed the order on appeal and we found that the same contains a brief statement of the (a) facts of
the case; (b) issues involved; (c) applicable laws; (d) conclusions and the reasons therefor; (e) specific remedy granted
(amount awarded). (p. 40,Rollo)

ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as regards all persons still employed in the
Hospital at the time of the filing of the complaint, but GRANTED as regards those employees no longer employed at that
time.

SO ORDERED.
 FEDERICO M. LEDESMA, JR., G.R. No. 174585
Petitioner,

- versus - Promulgated:

NATIONAL LABOR RELATIONS COMMISSION October 19, 2007

(NLRC-SECOND DIVISION) HONS. RAUL T.
AQUINO, VICTORIANO R. CALAYCAY
and ANGELITA A. GACUTAN ARE THE
COMMISSIONERS, PHILIPPINE NAUTICAL
TRAINING INC., ATTY. HERNANI FABIA,
RICKY TY, PABLO MANOLO, C. DE LEON and
TREENA CUEVA,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner Federico Ledesma,
Jr., seeking to reverse and set aside the Decision,[1] dated 28 May 2005, and the Resolution,[2] dated 7 September 2006, of
the Court of Appeals in CA-G.R. SP No. 79724. The appellate court, in its assailed Decision and Resolution, affirmed the
Decision dated 15 April 2003, and Resolution dated 9 June 2003, of the National Labor Relations Commission (NLRC),
dismissing petitioners complaint for illegal dismissal and ordering the private respondent Philippine National Training
Institute (PNTI) to reinstate petitioner to his former position without loss of seniority rights.

The factual and procedural antecedents of the instant petition are as follows:

On 4 December 1998, petitioner was employed as a bus/service driver by the private respondent on probationary basis,
as evidenced by his appointment.[3] As such, he was required to report at private respondents training site
inDasmarias, Cavite, under the direct supervision of its site administrator, Pablo Manolo de Leon (de Leon).[4]

On 11 November 2000, petitioner filed a complaint against de Leon for allegedly abusing his authority as site administrator
by using the private respondents vehicles and other facilities for personal ends. In the same complaint, petitioner also
accused de Leon of immoral conduct allegedly carried out within the private respondents premises. A copy of the
complaint was duly received by private respondents Chief Accountant, Nita Azarcon (Azarcon).[5]

On 27 November 2000, de Leon filed a written report against the petitioner addressed to private respondents Vice-
President for Administration, Ricky Ty (Ty), citing his suspected drug use.

In view of de Leons report, private respondents Human Resource Manager, Trina Cueva (HR Manager Cueva), on 29
November 2000, served a copy of a Notice to petitioner requiring him to explain within 24 hours why no disciplinary action
should be imposed on him for allegedly violating Section 14, Article IV of the private respondents Code of Conduct.[6]

On 3 December 2000, petitioner filed a complaint for illegal dismissal against private respondent before the Labor Arbiter.
In his Position Paper,[7] petitioner averred that in view of the complaint he filed against de Leon for his abusive conduct as
site administrator, the latter retaliated by falsely accusing petitioner as a drug user. VP for Administration Ty, however,
instead of verifying the veracity of de Leons report, readily believed his allegations and together with HR Manager Cueva,
verbally dismissed petitioner from service on 29 November 2000.

Petitioner alleged that he was asked to report at private respondents main office in Espaa, Manila, on 29 November
2000. There, petitioner was served by HR Manager Cueva a copy of the Notice to Explain together with the copy of de
Leons report citing his suspected drug use. After he was made to receive the copies of the said notice and report, HR
Manager Cueva went inside the office of VP for Administration Ty. After a while, HR Manager Cueva came out of the office
with VP for Administration Ty. To petitioners surprise, HR Manager Cueva took back the earlier Notice to Explain given to
him and flatly declared that there was no more need for the petitioner to explain since his drug test result revealed that
he was positive for drugs. When petitioner, however, asked for a copy of the said drug test result, HR Manager Cueva told
him that it was with the companys president, but she would also later claim that the drug test result was already with the
proper authorities at Camp Crame.[8]

Petitioner was then asked by HR Manager Cueva to sign a resignation letter and also remarked that whether or not
petitioner would resign willingly, he was no longer considered an employee of private respondent. All these events
transpired in the presence of VP for Administration Ty, who even convinced petitioner to just voluntarily resign with the
assurance that he would still be given separation pay. Petitioner did not yet sign the resignation letter replying that he
needed time to think over the offers. When petitioner went back to private respondents training site in Dasmarias, Cavite,
to get his bicycle, he was no longer allowed by the guard to enter the premises.[9]

On the following day, petitioner immediately went to St. Dominic Medical Center for a drug test and he was found negative
for any drug substance. With his drug result on hand, petitioner went back to private respondents main office in Manila to
talk to VP for Administration Ty and HR Manager Cueva and to show to them his drug test result. Petitioner then told VP
for Administration Ty and HR Manager Cueva that since his drug test proved that he was not guilty of the drug use charge
against him, he decided to continue to work for the private respondent.[10]

On 2 December 2000, petitioner reported for work but he was no longer allowed to enter the training site for he was
allegedly banned therefrom according to the guard on duty. This incident prompted the petitioner to file the complaint
for illegal dismissal against the private respondent before the Labor Arbiter.

For its part, private respondent countered that petitioner was never dismissed from employment but merely served a
Notice to Explain why no disciplinary action should be filed against him in view of his superiors report that he was
suspected of using illegal drugs. Instead of filing an answer to the said notice, however, petitioner prematurely lodged a
complaint for illegal dismissal against private respondent before the Labor Arbiter.[11]

Private respondent likewise denied petitioners allegations that it banned the latter from entering private respondents
premises. Rather, it was petitioner who failed or refused to report to work after he was made to explain his alleged drug
use. Indeed, on 3 December 2000, petitioner was able to claim at the training site his salary for the period of 16-30
November 2000, as evidenced by a copy of the pay voucher bearing petitioners signature. Petitioners accusation that he
was no longer allowed to enter the training site was further belied by the fact that he was able to claim his 13th month pay
thereat on 9 December 2000, supported by a copy of the pay voucher signed by petitioner.[12]

On 26 July 2002, the Labor Arbiter rendered a Decision,[13] in favor of the petitioner declaring illegal his separation from
employment. The Labor Arbiter, however, did not order petitioners reinstatement for the same was no longer practical,
and only directed private respondent to pay petitioner backwages. The dispositive portion of the Labor Arbiters Decision
reads:

WHEREFORE, premises considered, the dismissal of the [petitioner] is herein declared to be illegal. [Private respondent]
is directed to pay the complainant backwages and separation pay in the total amount of One Hundred Eighty Four
Thousand Eight Hundred Sixty One Pesos and Fifty Three Centavos (P184, 861.53).[14]

Both parties questioned the Labor Arbiters Decision before the NLRC. Petitioner assailed the portion of the Labor Arbiters
Decision denying his prayer for reinstatement, and arguing that the doctrine of strained relations is applied only to
confidential employees and his position as a driver was not covered by such prohibition.[15] On the other hand, private
respondent controverted the Labor Arbiters finding that petitioner was illegally dismissed from employment, and insisted
that petitioner was never dismissed from his job but failed to report to work after he was asked to explain regarding his
suspected drug use.[16]

On 15 April 2003, the NLRC granted the appeal raised by both parties and reversed the Labor Arbiters Decision.[17] The
NLRC declared that petitioner failed to establish the fact of dismissal for his claim that he was banned from entering the
training site was rendered impossible by the fact that he was able to subsequently claim his salary and 13 th month
pay. Petitioners claim for reinstatement was, however, granted by the NLRC. The decretal part of the NLRC Decision reads:

WHEREFORE, premises considered, the decision under review is, hereby REVERSED and SET ASIDE, and another entered,
DISMISSING the complaint for lack of merit.

[Petitioner] is however, ordered REINSTATED to his former position without loss of seniority rights, but WITHOUT
BACKWAGES.[18]

The Motion for Reconsideration filed by petitioner was likewise denied by the NLRC in its Resolution dated 29 August
2003.[19]

The Court of Appeals dismissed petitioners Petition for Certiorari under Rule 65 of the Revised Rules of Court, and affirmed
the NLRC Decision giving more credence to private respondents stance that petitioner was not dismissed from
employment, as it is more in accord with the evidence on record and the attendant circumstances of the instant
case.[20] Similarly ill-fated was petitioners Motion for Reconsideration, which was denied by the Court of Appeals in its
Resolution issued on 7 September 2006. [21]

Hence, this instant Petition for Review on Certiorari[22] under Rule 45 of the Revised Rules of Court, filed by petitioner
assailing the foregoing Court of Appeals Decision and Resolution on the following grounds:

I.

WHETHER, THE HON. COURT OF APPEALS COMMITTED A MISAPPREHENSION OF FACTS, AND THE ASSAILED DECISION IS
NOT SUPPORTED BY THE EVIDENCE ON RECORD. PETITIONERS DISMISSAL WAS ESTABLISHED BY THE UNCONTRADICTED
EVIDENCES ON RECORD, WHICH WERE MISAPPRECIATED BY PUBLIC RESPONDENT NLRC, AND HAD THESE BEEN
CONSIDERED THE INEVITABLE CONCLUSION WOULD BE THE AFFIRMATION OF THE LABOR ARBITERS DECISION FINDING
ILLEGAL DISMISSAL
II.

WHETHER, THE HON. COURT OF APPEALS SUBVERTED DUE PROCESS OF LAW WHEN IT DID NOT CONSIDER THE EVIDENCE
ON RECORD SHOWING THAT THERE WAS NO JUST CAUSE FOR DISMISSAL AS PETITIONER IS NOT A DRUG USER AND THERE
IS NO EVIDENCE TO SUPPORT THIS GROUND FOR DISMISSAL.

III.

WHETHER, THE HON. COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW IN NOT FINDING THAT RESPONDENTS
SUBVERTED PETITIONERS RIGHT TO DUE PROCESS OF THE LAW.[23]

Before we delve into the merits of this case, it is best to stress that the issues raised by petitioner in this instant petition
are factual in nature which is not within the office of a Petition for Review.[24] The raison detre for this rule is that, this
Court is not a trier of facts and does not routinely undertake the re-examination of the evidence presented by the
contending parties for the factual findings of the labor officials who have acquired expertise in their own fields are
accorded not only respect but even finality, and are binding upon this Court.[25]

However, when the findings of the Labor Arbiter contradict those of the NLRC, departure from the general rule is
warranted, and this Court must of necessity make an infinitesimal scrunity and examine the records all over again including
the evidence presented by the opposing parties to determine which findings should be preferred as more conformable
with evidentiary facts.[26]

The primordial issue in the petition at bar is whether the petitioner was illegally dismissed from employment.

The Labor Arbiter found that the petitioner was illegally dismissed from employment warranting the payment of his
backwages. The NLRC and the Court of Appeals found otherwise.

In reversing the Labor Arbiters Decision, the NLRC underscored the settled evidentiary rule that before the burden of proof
shifts to the employer to prove the validity of the employees dismissal, the employee must first sufficiently establish that
he was indeed dismissed from employment. The petitioner, in the present case, failed to establish the fact of his
dismissal. The NLRC did not give credence to petitioners allegation that he was banned by the private respondent from
entering the workplace, opining that had it been true that petitioner was no longer allowed to enter the training site when
he reported for work thereat on 2 December 2000, it is quite a wonder he was able to do so the very next day, on 3
December 2000, to claim his salary.[27]

The Court of Appeals validated the above conclusion reached by the NLRC and further rationated that petitioners positive
allegations that he was dismissed from service was negated by substantial evidence to the contrary.Petitioners averments
of what transpired inside private respondents main office on 29 November 2000, when he was allegedly already dismissed
from service, and his claim that he was effectively banned from private respondents premises are belied by the fact that
he was able to claim his salary for the period of 16-30 November 2000 at private respondents training site.

Petitioner, therefore, is now before this Court assailing the Decisions handed down by the NLRC and the Court of Appeals,
and insisting that he was illegally dismissed from his employment. Petitioner argues that his receipt of his earned salary
for the period of 16-30 November 2000, and his 13th month pay, is neither inconsistent with nor a negation of his allegation
of illegal dismissal. Petitioner maintains that he received his salary and benefit only from the guardhouse, for he was
already banned from the work premises.
We are not persuaded.

Well-entrenched is the principle that in order to establish a case before judicial and quasi-administrative bodies, it is
necessary that allegations must be supported by substantial evidence.[28] Substantial evidence is more than a mere
scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[29]

In the present case, there is hardly any evidence on record so as to meet the quantum of evidence required, i.e.,
substantial evidence. Petitioners claim of illegal dismissal is supported by no other than his own bare, uncorroborated
and, thus, self-serving allegations, which are also incoherent, inconsistent and contradictory.

Petitioner himself narrated that when his presence was requested on 29 November 2000 at the private respondents main
office where he was served with the Notice to Explain his superiors report on his suspected drug use, VP for
Administration Ty offered him separation pay if he will just voluntarily resign from employment. While we do not condone
such an offer, neither can we construe that petitioner was dismissed at that instance. Petitioner was only being given the
option to either resign and receive his separation pay or not to resign but face the possible disciplinary charges against
him. The final decision, therefore, whether to voluntarily resign or to continue working still, ultimately rests with the
petitioner. In fact, by petitoners own admission, he requested from VP for Administration Ty more time to think over the
offer.

Moreover, the petitioner alleged that he was not allowed to enter the training site by the guard on duty who told him that
he was already banned from the premises. Subsequently, however, petitioner admitted in his Supplemental Affidavit that
he was able to return to the said site on 3 December 2000, to claim his 16-30 November 2000 salary, and again on 9
December 2000, to receive his 13th month pay. The fact alone that he was able to return to the training site to claim his
salary and benefits raises doubt as to his purported ban from the premises.

Finally, petitioners stance that he was dismissed by private respondent was further weakened with the presentation of
private respondents payroll bearing petitioners name proving that petitioner remained as private respondents employee
up to December 2000. Again, petitioners assertion that the payroll was merely fabricated for the purpose of supporting
private respondents case before the NLRC cannot be given credence. Entries in the payroll, being entries in the course of
business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court. It is therefore incumbent
upon the petitioner to adduce clear and convincing evidence in support of his claim of fabrication and to overcome such
presumption of regularity.[30] Unfortunately, petitioner again failed in such endeavor.

On these scores, there is a dearth of evidence to establish the fact of petitioners dismissal. We have scrupulously examined
the records and we found no evidence presented by petitioner, other than his own contentions that he was indeed
dismissed by private respondent.

While this Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden of proof to
prove that the termination was for a valid or authorized cause in the case at bar, however, the facts and the evidence did
not establish a prima facie case that the petitioner was dismissed from employment.[31] Before the private respondent
must bear the burden of proving that the dismissal was legal, petitioner must first establish by substantial evidence the
fact of his dismissal from service. Logically, if there is no dismissal, then there can be no question as to the legality or
illegality thereof.

In Machica v. Roosevelt Services Center, Inc.,[32] we had underscored that the burden of proving the allegations rest upon
the party alleging, to wit:
The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were burdened to prove their
allegation that respondents dismissed them from their employment. It must be stressed that the evidence to prove this
fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal dismissal cases
finds no application here because the respondents deny having dismissed the petitioners.[33]

In Rufina Patis Factory v. Alusitain,[34] this Court took the occasion to emphasize:

It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the
allegations ei incumbit probatio, qui dicit, non qui negat. If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.[35]

It is true that the Constitution affords full protection to labor, and that in light of this Constitutional mandate, we must be
vigilant in striking down any attempt of the management to exploit or oppress the working class. However, it does not
mean that we are bound to uphold the working class in every labor dispute brought before this Court for our resolution.

The law in protecting the rights of the employees, authorizes neither oppression nor self-destruction of the employer. It
should be made clear that when the law tilts the scales of justice in favor of labor, it is in recognition of the inherent
economic inequality between labor and management. The intent is to balance the scales of justice; to put the two parties
on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of
management but never should the scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est -- justice is to be denied to none.[36]

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated 28 May 2005 and
its Resolution dated 7 September 2006 in CA-G.R. SP No. 79724 are hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.
G.R. No. 81958 June 30, 1988

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,

vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D. ACHACOSO, as Administrator of
the Philippine Overseas Employment Administration, respondents.

Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J.:

The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged principally in the
recruitment of Filipino workers, male and female, for overseas placement," 1 challenges the Constitutional validity of
Department Order No. 1, Series of 1988, of the Department of Labor and Employment, in the character of "GUIDELINES
GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," in
this petition for certiorari and prohibition. Specifically, the measure is assailed for "discrimination against males or
females;" 2 that it "does not apply to all Filipino workers but only to domestic helpers and females with similar
skills;" 3 and that it is violative of the right to travel. It is held likewise to be an invalid exercise of the lawmaking power,
police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution, providing for worker
participation "in policy and decision-making processes affecting their rights and benefits as may be provided by
law."4 Department Order No. 1, it is contended, was passed in the absence of prior consultations. It is claimed, finally, to
be in violation of the Charter's non-impairment clause, in addition to the "great and irreparable injury" that PASEI
members face should the Order be further enforced.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and Administrator of the
Philippine Overseas Employment Administration, filed a Comment informing the Court that on March 8, 1988, the
respondent Labor Secretary lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United
States, Italy, Norway, Austria, and Switzerland. * In submitting the validity of the challenged "guidelines," the Solicitor
General invokes the police power of the Philippine State.

It is admitted that Department Order No. 1 is in the nature of a police power measure. The only question is whether or
not it is valid under the Constitution.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general welfare." 5 As defined, it
consists of (1) an imposition of restraint upon liberty or property, (2) in order to foster the common good. It is not
capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive
embrace.

"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest
benefits." 6

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the Charter. Along with the
taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, 7 refers to it succinctly as the plenary power of the State "to govern its citizens." 8
"The police power of the State ... is a power coextensive with self- protection, and it is not inaptly termed the "law of
overwhelming necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit
all things hurtful to the comfort, safety, and welfare of society." 9

It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the conception that men
in organizing the state and imposing upon its government limitations to safeguard constitutional rights did not intend
thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such salutary
measures calculated to ensure communal peace, safety, good order, and welfare." 10 Significantly, the Bill of Rights itself
does not purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the greatest of all
rights, is not unrestricted license to act according to one's will." 11 It is subject to the far more overriding demands and
requirements of the greater number.

Notwithstanding its extensive sweep, police power is not without its own limitations. For all its awesome consequences,
it may not be exercised arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose for which it is
exercised, that is, to advance the public good. Thus, when the power is used to further private interests at the expense
of the citizenry, there is a clear misuse of the power. 12

In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear and convincing evidence to the
contrary, the presumption logically stands.

The petitioner has shown no satisfactory reason why the contested measure should be nullified. There is no question
that Department Order No. 1 applies only to "female contract workers," 14 but it does not thereby make an undue
discrimination between the sexes. It is well-settled that "equality before the law" under the Constitution 15does not
import a perfect Identity of rights among all men and women. It admits of classifications, provided that (1) such
classifications rest on substantial distinctions; (2) they are germane to the purposes of the law; (3) they are not confined
to existing conditions; and (4) they apply equally to all members of the same class. 16

The Court is satisfied that the classification made-the preference for female workers rests on substantial distinctions.

As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our female labor force
abroad, especially domestic servants, amid exploitative working conditions marked by, in not a few cases, physical and
personal abuse. The sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of
torture, confirmed by testimonies of returning workers, are compelling motives for urgent Government action. As
precisely the caretaker of Constitutional rights, the Court is called upon to protect victims of exploitation. In fulfilling
that duty, the Court sustains the Government's efforts.

The same, however, cannot be said of our male workers. In the first place, there is no evidence that, except perhaps for
isolated instances, our men abroad have been afflicted with an Identical predicament. The petitioner has proffered no
argument that the Government should act similarly with respect to male workers. The Court, of course, is not impressing
some male chauvinistic notion that men are superior to women. What the Court is saying is that it was largely a matter
of evidence (that women domestic workers are being ill-treated abroad in massive instances) and not upon some
fanciful or arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of unquestionable
demonstration and evidence this Court accepts. The Court cannot, however, say the same thing as far as men are
concerned. There is simply no evidence to justify such an inference. Suffice it to state, then, that insofar as classifications
are concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this case is justified.

As we have furthermore indicated, executive determinations are generally final on the Court. Under a republican
regime, it is the executive branch that enforces policy. For their part, the courts decide, in the proper cases, whether
that policy, or the manner by which it is implemented, agrees with the Constitution or the laws, but it is not for them to
question its wisdom. As a co-equal body, the judiciary has great respect for determinations of the Chief Executive or his
subalterns, especially when the legislature itself has specifically given them enough room on how the law should be
effectively enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with this at greater length
shortly, that Department Order No. 1 implements the rule-making powers granted by the Labor Code. But what should
be noted is the fact that in spite of such a fiction of finality, the Court is on its own persuaded that prevailing conditions
indeed call for a deployment ban.

There is likewise no doubt that such a classification is germane to the purpose behind the measure. Unquestionably, it is
the avowed objective of Department Order No. 1 to "enhance the protection for Filipino female overseas
workers" 17 this Court has no quarrel that in the midst of the terrible mistreatment Filipina workers have suffered
abroad, a ban on deployment will be for their own good and welfare.

The Order does not narrowly apply to existing conditions. Rather, it is intended to apply indefinitely so long as those
conditions exist. This is clear from the Order itself ("Pending review of the administrative and legal measures, in the
Philippines and in the host countries . . ."18), meaning to say that should the authorities arrive at a means impressed with
a greater degree of permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of a necessary
malleability, depending on the circumstances of each case. Accordingly, it provides:

9. LIFTING OF SUSPENSION. The Secretary of Labor and Employment (DOLE) may, upon recommendation of the
Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers. 19

The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas workers. That it does
not apply to "all Filipina workers" 20 is not an argument for unconstitutionality. Had the ban been given universal
applicability, then it would have been unreasonable and arbitrary. For obvious reasons, not all of them are similarly
circumstanced. What the Constitution prohibits is the singling out of a select person or group of persons within an
existing class, to the prejudice of such a person or group or resulting in an unfair advantage to another person or group
of persons. To apply the ban, say exclusively to workers deployed by A, but not to those recruited by B, would obviously
clash with the equal protection clause of the Charter. It would be a classic case of what Chase refers to as a law that
"takes property from A and gives it to B." 21 It would be an unlawful invasion of property rights and freedom of contract
and needless to state, an invalid act. 22 (Fernando says: "Where the classification is based on such distinctions that make
a real difference as infancy, sex, and stage of civilization of minority groups, the better rule, it would seem, is to
recognize its validity only if the young, the women, and the cultural minorities are singled out for favorable treatment.
There would be an element of unreasonableness if on the contrary their status that calls for the law ministering to their
needs is made the basis of discriminatory legislation against them. If such be the case, it would be difficult to refute the
assertion of denial of equal protection." 23 In the case at bar, the assailed Order clearly accords protection to certain
women workers, and not the contrary.)

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment. From scattered
provisions of the Order, it is evident that such a total ban has hot been contemplated. We quote:

5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills defined herein to the
following [sic] are authorized under these guidelines and are exempted from the suspension.

5.1 Hirings by immediate members of the family of Heads of State and Government;

5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and

5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations.
5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements or understanding.

xxx xxx xxx

7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing domestic helpers and/or workers
of similar skills shall be allowed to process with the POEA and leave for worksite only if they are returning to the same
employer to finish an existing or partially served employment contract. Those workers returning to worksite to serve a
new employer shall be covered by the suspension and the provision of these guidelines.

xxx xxx xxx

9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment (DOLE) may, upon recommendation of the
Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers. 24

xxx xxx xxx

The consequence the deployment ban has on the right to travel does not impair the right. The right to travel is subject,
among other things, to the requirements of "public safety," "as may be provided by law." 25 Department Order No. 1 is a
valid implementation of the Labor Code, in particular, its basic policy to "afford protection to labor,"26 pursuant to the
respondent Department of Labor's rule-making authority vested in it by the Labor Code. 27 The petitioner assumes that it
is unreasonable simply because of its impact on the right to travel, but as we have stated, the right itself is not absolute.
The disputed Order is a valid qualification thereto.

Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of legislative power.
It is true that police power is the domain of the legislature, but it does not mean that such an authority may not be
lawfully delegated. As we have mentioned, the Labor Code itself vests the Department of Labor and Employment with
rulemaking powers in the enforcement whereof. 28

The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and decision-making
processes affecting their rights and benefits" 29 is not well-taken. The right granted by this provision, again, must submit
to the demands and necessities of the State's power of regulation.

The Constitution declares that:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all. 30

"Protection to labor" does not signify the promotion of employment alone. What concerns the Constitution more
paramountly is that such an employment be above all, decent, just, and humane. It is bad enough that the country has
to send its sons and daughters to strange lands because it cannot satisfy their employment needs at home. Under these
circumstances, the Government is duty-bound to insure that our toiling expatriates have adequate protection,
personally and economically, while away from home. In this case, the Government has evidence, an evidence the
petitioner cannot seriously dispute, of the lack or inadequacy of such protection, and as part of its duty, it has precisely
ordered an indefinite ban on deployment.

The Court finds furthermore that the Government has not indiscriminately made use of its authority. It is not contested
that it has in fact removed the prohibition with respect to certain countries as manifested by the Solicitor General.
The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier purposes targetted by
the Government. 31 Freedom of contract and enterprise, like all other freedoms, is not free from restrictions, more so in
this jurisdiction, where laissez faire has never been fully accepted as a controlling economic way of life.

This Court understands the grave implications the questioned Order has on the business of recruitment. The concern of
the Government, however, is not necessarily to maintain profits of business firms. In the ordinary sequence of events, it
is profits that suffer as a result of Government regulation. The interest of the State is to provide a decent living to its
citizens. The Government has convinced the Court in this case that this is its intent. We do not find the impugned Order
to be tainted with a grave abuse of discretion to warrant the extraordinary relief prayed for.

WHEREFORE, the petition is DISMISSED. No costs.

SO ORDERED.
G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

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, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th 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 Resolution4 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 month5

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 Complaint9 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 US$ 413.90

June 01/30, 1998 2,590.00

July 01/31, 1998 2,590.00

August 01/31, 1998 2,590.00

Sept. 01/30, 1998 2,590.00

Oct. 01/31, 1998 2,590.00

Nov. 01/30, 1998 2,590.00

Dec. 01/31, 1998 2,590.00

Jan. 01/31, 1999 2,590.00

Feb. 01/28, 1999 2,590.00

Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00

---------------------------
---------------------------
--------------------------
 25,382.23

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010

---------------------------
---------------------------
---------------------------
-------------

TOTAL CLAIM US$ 26,442.7311

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 above-entitled 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.1avvphi1

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 appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA that
petitioner was illegally dismissed.

Petitioner also appealed16 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 Commission17 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 Certiorari23 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 Reconsideration26 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
Commission43 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 co-equals, 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 party48 and at the
earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case,50otherwise 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.54Nonetheless, 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 determining questions 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 receive57 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,58and
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.61Police 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 challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect
class71 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 classifications73 based on race74 or
gender75 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 ofone year or
more;

Second, among OFWs with employment contracts of more than one year; and

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
Commission79 (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 Period Applied in

Period Service the Computation of
the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping 9 months 8 months 4 months 4 months

v. Reynaldo
Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87

Univan v. CA 88 12 months 3 months 9 months 3 months

 Oriental v. CA89 12 months more than 2 10 months 3 months
months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days

JSS v.Ferrer92 12 months 16 days 11 months and 24 3 months

days

Pentagon v. 12 months 9 months and 2 months and 23 2 months and 23

Adelantar93 7 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each
Almanzor 95 year of contract

Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3

Manpower v. months and and 28 days months for each
Villanos 96 28 days 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
inTalidano 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 of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98

Phil. Integrated 2 years 7 days 23 months 23 months and 23 days

v. NLRC99 and 23 days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. NLRC101 2 years 2 months 22 months 22 months

EDI v. NLRC, et 2 years 5 months 19 months 19 months

al.102

Barros v. NLRC, 12 months 4 months 8 months 8 months

et al.103

Philippine 12 months 6 months 5 months and 5 months and 18 days

Transmarine v. and 22 days 18 days
Carilla104

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 contracts fall 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 must be 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. Alkan112 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. Gay114held:

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,119involving
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 state125 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-vistheir
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 Land-Based 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.1avvphi1

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 3,131Article 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 DECLAREDUNCONSTITUTIONAL;
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.
G.R. No. 79255 January 20, 1992

UNION OF FILIPRO EMPLOYEES (UFE), petitioner,

vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES, INC. (formerly FILIPRO,
INC.), respondents.

Jose C. Espinas for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.:

This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor
in the computation of benefits from 251 to 261 days.

On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations
Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its
monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees Association
v. Ople (138 SCRA 273 [1985]).

Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed
respondent Benigno Vivar, Jr. as voluntary arbitrator.

On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:

pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and
limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo,
p. 31)

Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen,
sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales
personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for
overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145)

Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that
their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor
is an established employee benefit which cannot be diminished.

On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award
shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company's
sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of
10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment
for overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor.

Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two
motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding the
case to the respondent arbitrator on the ground that it has no jurisdiction to review decisions in voluntary arbitration
cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as
implemented by Section 5 of the rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that
he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1, 1986.

Hence, this petition.

The petitioner union raises the following issues:

1) Whether or not Nestle's sales personnel are entitled to holiday pay; and

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and
whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and
sick leave pay.

The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The
respondent company controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural
employees who regularly perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with reasonable certainty."

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be
determined with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and
come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working
hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The
company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00
a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00 a.m.
and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of
purely management prerogative of providing administrative control over such personnel. This does not in any manner
provide a reasonable level of determination on the actual field work of the employees which can be reasonably
ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report for work at 8:00
a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is
surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and
ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00
or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which are subject to their
individual capacity and industry and which "cannot be determined with reasonable certainty." This is the reason why
effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is
practically a physical impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-
37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty"
must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Rule IV Holidays with Pay

Sec. 1. Coverage This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis
supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless
attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that
the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the
company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element
to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the
employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field
cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82
which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be
determined with reasonable certainty, query must be made as to whether or not such employee's time and
performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and
performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the
office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an
employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their
performance is proof that their actual hours of work in the field can be determined with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good
collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal
market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in
measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the
actual hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the
nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:

The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works
individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the
range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject to the personal supervision of his
employer, and his employer has no way of knowing the number of hours he works per day.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their
exclusion as field personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the
divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should
reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the
basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no longer
251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of interpretation which
accounts for what is claimed as falling within the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that
251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional ten
days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of
computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement
of such overpayment with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p.
34)

The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid
employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank
Employees Association v. Ople (supra). In that case, We held:

It is argued that even without the presumption found in the rules and in the policy instruction, the company practice
indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The
petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime
compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the
employees are already paid for all non-working days, the divisor should be 365 and not 251.

In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates
that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the
purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is
violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same
daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should
correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the
employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of
10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by
261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime
and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate,
since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail
in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1,
1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that
the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had
the chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This
ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore,
respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This
Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain
the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless
he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products,
Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues
so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court
resolved to take up the matter of effectivity of the holiday pay award raised by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered
Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the
Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to
as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No.
9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded
monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of
clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction
amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added
the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the
presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case
on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to
a legislative or executive act subsequently declared invalid:

xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must
have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions.
What could be more fitting than that in a subsequent litigation regard be had to what has been done while such
legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine
that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the government organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be
no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination
of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to
be considered in various aspects, with respect to particular relations, individual and corporate, and particular
conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This
language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision
in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting
unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to
1975now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this
case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity
of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to
give holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its
employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent
Nestle's employees are among the highest paid in the industry. With this consideration, it would be unfair to impose
additional burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to
Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the
Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of
promulgation of the IBAA case.

WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay
shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects, the
order of the respondent arbitrator is hereby AFFIRMED.

SO ORDERED.
[G.R. No. 116542. July 30, 1996]

THE HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and EMMANUEL A. MENESES, respondents.

DECISION

PANGANIBAN, J.:

What species of dishonesty would constitute a ground for termination? Is a provision in the employees handbook stating
that any form of dishonesty shall constitute serious offense(s) calling for termination valid and binding upon the
respondent NLRC?

These questions are answered by this Court in resolving the instant petition for certiorari which seeks a partial reversal
of the Decision[1] of the respondent National Labor Relations Commission[2] promulgated on April 19, 1994 insofar as it
directs reinstatement of private respondent to his former position.

The Antecedent Facts

The undisputed facts, as summarized in the Labor Arbiters decision, are as follows:

Complainant is a regular rank and file employee of Hongkong and Shanghai Banking Corp. Ltd., with office address at
Royal Match Building, Ayala Avenue, Makati, Metro Manila. He started working with the said bank in July 1986 as a clerk
until his dismissal on February 17, 1993.

It appears that on February 3, 1993, complainant called the bank to inform the latter that he had an upset stomach and
would not be able to report for work. His superior, however, requested him to report for work because the department
he was then in was undermanned but complainant insisted that it was impossible for him to report for work, hence, he
was allowed to go on sick leave on that day.

Later on that day, the bank called complainant at his given Tel. No. 521-17-54 in order to obtain vital information from
him, but the bank was informed by the answering party at the phone number given by complainant that complainant
had left early that morning.

When complainant reported for work the following day, February 4, 1993, he was asked by his superior to explain why
he was not at his residence on February 3, 1993 when he was on sick leave because of an upset stomach.

Complainant explained that he indeed suffered from an upset stomach and that he even consulted Dr. Arthur Logos at
4:00 oclock in the afternoon of the same day and the reason why he could not be reached by telephone was because he
had not been staying at his given residence for over a week.

On February 4, 1993 the bank called up Dr. Logos to verify the truth of complainants statement but the doctor denied
that he examined or attended to complainant on February 3, 1993 and the last time complainant consulted him was in
December 1992. For this reason, the bank directed complainant to explain his acts of dishonesty because allegedly he
was not honest in telling the bank that he had an upset stomach on February 3, 1993, and that he consulted Dr. Logos
on that day.

In his written statement, by way of answer to the memorandum, complainant insisted that he had diarrhea on February
3, 1993 and attached a certification from his aunt where he stayed from the evening of February 2, 1993 and the whole
day of February 3, 1993 as well as a certification from his uncle named Andre R. Lozano attesting to the conversation
between complainant and Melvin Morales regarding the whereabouts of complainant on that day. Complainant further
admitted that his statement about his not staying at his house for one week and his consulting a doctor was incorrect,
but that the said statement was not given with malicious intention or deceit or meant to commit fraud against the bank,
its operations, customers and employees. The said statement according to him was impulsive reaction as a result of his
emotional stress he had been going through because of his marital problems. He pleaded for leniency such that instead
of termination, he be given a lighter penalty.

However, on February 16, 1993, the bank came out with a memorandum from the Vice-President, Human Resources
Department terminating his services effective March 16, 1993 pursuant to Article 13, Section VI of the Collective
Bargaining Agreement between the union of the rank and file employees of the bank and the company and the banks
Code of Conduct.

The following day, February 17, 1993, the bank sent complainant another memorandum directing him to settle his
outstanding loan amounting to PHP179,834.00, net of a months salary the bank was paying him in lieu of notice not
later than June 16, 1993. The import of the said letter was while the effectivity of the said termination is March 16,
1993, the company opted to pay him in lieu of the notice from February 17, 1993 up to March 16, 1993 his pay without
having to report for work.

Noting that the banks Employee Handbook made any form of dishonesty a cause for termination, the labor
arbiter[3] ruled said ground to be overly broad, and stated that (f)or us to agree that any form of dishonesty committed
by an employee of the bank is a ground for dismissal, is to say the least stretching the import of the aforecited rule too
far. The arbiter instead held that the offenses of dishonesty contemplated by the aforementioned rule which would
warrant termination of services are those involving deceit and resulting in loss of trust and confidence. The arbiter
further found that the private respondents proffered excuse, assuming it to be false, did not result in any damage to the
bank, and therefore the bank had no reason to lose its trust and confidence in the private respondent on account of
such manner of dishonesty. Additionally, the labor arbiter did not find in the record any proof that private respondent
was not really suffering from diarrhea as claimed.

Thus, in her decision dated August 13, 1993, the arbiter declared the termination illegal and ordered petitioner bank to
reinstate private respondent to his former position without loss of seniority rights and with backwages.

On appeal, the respondent Commission sustained the arbiters findings and ruled that --

x x x For while there is a semblance of truth to the charge of respondent (herein petitioner bank) that complainant
(private respondent) had been dishonest as to his whereabouts on February 3, 1993, such act of dishonesty cannot be
considered so serious (as) to warrant complainants outright dismissal. The dishonesty that complainant had committed
cannot be considered depraved. It was a simple kind of dishonesty that was committed not in connection with his job. x
xx

Brushing aside petitioner banks argument about strained relations, the NLRC reasoned that the private respondents
falsehoods were not of such nature as to have actually caused animosity between the private respondent and the
petitioner bank, and even if there was any such strained relations, x x x it was not of so serious a nature or of such a
degree as to justify his termination x x x. Thus, the NLRC ordered petitioner to reinstate complainant to his former
position but without backwages, considering that private respondent was not entirely faultless since he committed a
certain degree of dishonesty in lying.

Now before this Court, petitioner argues[4] that the dismissal is reasonable and valid pursuant to its Employee
Handbook, specifically, Appendix A thereto which provides for serious offenses calling for termination x x x.

The Issue

Petitioner raises the following reason to warrant this review:

Public respondent acted with grave abuse of discretion when it unilaterally curtailed and restricted petitioners inherent
and inalienable prerogative to set and impose reasonable disciplinary rules and regulations.
In short, the issue, as summed up by the Solicitor General, is whether or not the NLRC committed grave abuse of
discretion in ruling that private respondents act of making a false statement as to the real reason for his absence on
February 3, 1993 did not constitute such dishonesty as would warrant his termination from service.

The Courts Ruling

The petition is bereft of merit.

Petitioner insists that private respondent should be dismissed in accordance with rules contained in its employees
handbook titled Working Together, Appendix A[5] of which reads as follows:

Appendix A

Serious Offenses

Calling For

Termination Any form of dishonesty, like but not limited to the following:

fraud

making false or artificial entries in the books or records of the Bank

failing to turn over money entrusted by a client for the Bank within a specified time

theft of bank property

using company funds/assets for any unofficial purpose.

Any violation of the Banks Code of Conduct which has penal consequences under relevant local laws.

Deliberately inflicting or attempting to inflict bodily injury upon a co-employee on Bank premises, or in case it is
committed elsewhere, for reasons which are work-related.

Sabotage or causing damage to work or equipment of the Bank, or any underhanded interference in Bank operations.

Any other serious offense analogous to the above.

While the foregoing text makes any form of dishonesty x x x a serious offense calling for termination, such general
statement must however be understood in the context of the enumeration of offenses, all of which are directly related
to the function of the petitioner as a banking institution. It is unarguable that private respondents false information
concerning his whereabouts on February 3, 1993 is not a fraud, nor a false entry in the books of the bank; neither is it a
failure to turn over clients funds, or theft or use of company assets, or anything analogous as to constitute a serious
offense meriting the extreme penalty of dismissal.

Like petitioner bank, this Court will not countenance nor tolerate ANY form of dishonesty. But at the same time, we
cannot permit the imposition of the maximum penalty authorized by our labor laws for JUST ANY act of dishonesty, in
the same manner that death, which is now reinstated as the supreme sanction under the penal laws of our country, is
not to be imposed for just any killing. The penalty imposed must be commensurate to the depravity of the malfeasance,
violation or crime being punished. A grave injustice is committed in the name of justice when the penalty imposed is
grossly disproportionate to the wrong committed.

In the context of the instant case, dismissal is the most severe penalty that an employer can impose on an employee. It
goes without saying that care must be taken, and due regard given to an employees circumstances, in the application of
such punishment. Moreover, private respondents acts of dishonesty -- his first offense in his seven years of employment,
as noted by the respondent NLRC -- did not show deceit nor constitute fraud and did not result in actual prejudice to
petitioner.Certainly, such peremptory dismissal is far too harsh, too severe, excessive and unreasonable under the
circumstances.

Besides, by ordering private respondents reinstatement without granting backwages, the NLRC effectively penalized him
by disallowing compensation for the three years counted from the time he received notice of his dismissal on February
23, 1993.

Under Art. 282 of the Labor Code, 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 representative; and

(e) Other causes analogous to the foregoing.

None of the above apply in the instant case. To be lawful, the cause for termination must be a serious and grave
malfeasance to justify the deprivation of a means of livelihood. This is merely in keeping with the spirit of our
Constitution and laws which lean over backwards in favor of the working class, and mandate that every doubt must be
resolved in their favor.[6]

Petitioner further contends that the NLRC arbitrarily imposed its value judgment and standard on petitioners disciplinary
rules, thereby unilaterally restricting the Banks power and prerogative to discipline its employees according to
reasonable rules and regulations. We do not agree. Precisely, the employers prerogative and power to discipline and
terminate an employees services may not be exercised in an arbitrary or despotic manner as to erode or render
meaningless the constitutional guarantees of security of tenure and due process.[7]

Our labor laws, both substantive and procedural, require strict compliance before an employee may be
dismissed.[8] Clearly, it is the NLRCs right and duty to review employers exercise of their prerogative to dismiss so as to
prevent abuse and arbitrariness.

Petitioner points to GTE Directories Corporation vs. Sanchez[9] as authority for its contention that, since the disciplinary
rule cited in its Handbook has not been declared illegal or improper by competent authority, the employees ignore or
disobey them at their peril. This is absurd. As pointed out by the Solicitor General:[10]

x x x, the cited GTE case is not applicable to the present case because of an entirely different factual setting. This case
merely involves a simple reportorial requirement which the workers had deliberately and unjustifiably ignored. Besides,
the management imposed the penalty of dismissal only after the workers failed to comply with (the) requirement for
the sixth time and after the workers were already meted out the less severe penalty of suspension.

In the case at bar, it would have been different if private respondent had also been suspended first and despite that, he
still continued to defy the disciplinary rule. Meneses, indeed, was a first offender which is consistent at this point to his
being human, who occasionally commits mistakes just like anybody else.
Indeed, upholding petitioners argument (that the NLRC cannot review petitioners disciplinary rules) would mean
upsetting the entire labor arbitral machinery, for it would result in depriving the labor arbiter and the NLRC of their
jurisdiction to determine the justness of a cause for dismissal as granted by Arts. 217 and 218 of the Labor Code.

This petition is an unwarranted attack against workers right to security of tenure. It must be, as it is hereby, demolished
at first sight.

WHEREFORE, the instant petition is hereby DISMISSED, there being no showing of grave abuse of discretion on the part
of the respondent NLRC.

SO ORDERED.
G.R. No. 73681 June 30, 1988

COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,

vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

PARAS, J.:

Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent Minister of Labor and
Employment (MOLE) directly certifying private respondent as the recognized and duly-authorized collective bargaining
agent for petitioner's sales force and ordering the reinstatement of three employees of petitioner.

Acting on the petition for certiorari with prayer for temporary restraining order, this Court issued a Temporary
Restraining Order enjoining respondents from enforcing and/or carrying out the assailed order.

The antecedent facts are as follows:

On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor Relations (BLR) on ground of
unfair labor practice consisting of alleged refusal to bargain, dismissal of union officers/members; and coercing
employees to retract their membership with the union and restraining non-union members from joining the union.

After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition of petitioner assumed
jurisdiction over the dispute pursuant to Article 264 (g) of the Labor Code, Thereafter the case was captioned AJML-3-
142-85, BLR-3-86-85 "In Re: Assumption of Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines, Inc." In
its position paper, petitioner pointed out that

(a) There is no legal basis for the charge that the company refused to bargain collectively with the union considering that
the alleged union is not the certified agent of the company salesmen;

(b) The union's status as a legitimate labor organization is still under question because on 6 March 1985, a certain
Monchito Rosales informed the BLR that an overwhelming majority of the salesmen are not in favor of the Notice of
Strike allegedly filed by the Union (Annex "C");

(c) Upon verification of the records of the Ministry of Labor and Employment, it appeared that a petition for cancellation
of the registration of the alleged union was filed by Monchito Rosales on behalf of certain salesmen of the company who
are obviously against the formation of the Colgate Palmolive Sales Labor Union which is supposed to represent them;

(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador Reynante and Cornelio Mejia, and their eventual
dismissal from the employ of the company were carried out pursuant to the inherent right and prerogative of
management to discipline erring employees; that based on the preliminary investigation conducted by the company,
there appeared substantial grounds to believe that Sayson, Reynante and Mejia violated company rules and regulations
necessitating their suspension pending further investigation of their respective cases;

(e) It was also ascertained that the company sustained damages resulting from the infractions committed by the three
salesmen, and that the final results of the investigation fully convinced the company of the existence of just causes for
the dismissal of the three salesmen;

(f) The formation of the union and the membership therein of Sayson, Reynante and Mejia were not in any manner
connected with the company's decision to dismiss the three; that the fact that their dismissal came at a time when the
alleged union was being formed was purely coincidental;
(g) The union's charge therefore, that the membership in the union and refusal to retract precipitated their dismissal
was totally false and amounted to a malicious imputation of union busting;

(h) The company never coerced or attempted to coerce employees, much less interferred in the exercise of their right to
self-organization; the company never thwarted nor tried to defeat or frustrate the employees' right to form their union
in pursuit of their collective interest, as long as that right is exercised within the limits prescribed by law; in fact, there
are at present two unions representing the rank and file employees of the company-the factory workers who are
covered by a CBA which expired on 31 October 1985 (which was renewed on May 31, 1985) and are represented by
Colgate Palmolive Employees Union (PAFLU); whereas, the salaried employees are covered by a CBA which will expire on
31 May 1986 represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office Chapter. (pp. 4-6, Rollo)

The respondent Union, on the other hand, in its position paper, reiterated the issue in its Notice to Strike, alleging that it
was duly registered with the Bureau of Labor Relations under Registry No. 10312-LC with a total membership of 87
regular salesmen (nationwide) out of 117 regular salesmen presently employed by the company as of November 30,
1985 and that since the registration of the Union up to the present, more than 2/3 of the total salesmen employed are
already members of the Union, leaving no doubt that the true sentiment of the salesmen was to form and organize the
Colgate-Palmolive Salesmen Union. The Union further alleged that the company is unreasonably delaying the
recognition of the union because when it was informed of the organization of the union, and when presented with a set
of proposals for a collective bargaining agreement, the company took an adversarial stance by secretly distributing a
"survey sheet on union membership" to newly hired salesmen from the Visayas, Mindanao and Metro Manila areas,
purposely avoiding regular salesmen who are now members of the union; that in the accomplishment of the form,
District Sales Managers, and Sales Supervisors coerced salesmen from the Visayas and Mindanao by requiring them to
fill up and/or accomplish said form by checking answers which were adverse to the union; that with a handful of the
survey sheets secured by management through coercion, it now would like to claim that all salesmen are not in favor of
the organization of the union, which acts are clear manifestations of unfair labor practices.

On August 9,1985, respondent Minister rendered a decision which:

(a) found no merit in the Union's Complaint for unfair labor practice allegedly committed by petitioner as regards the
alleged refusal of petitioner to negotiate with the Union, and the secret distribution of survey sheets allegedly intended
to discourage unionism,

(b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio Mejia "not without fault" and that "the
company 1 has grounds to dismiss above named salesmen"

and at the same time respondent Minister directly certified the respondent Union as the collective bargaining agent for
the sales force in petitioner company and ordered the reinstatement of the three salesmen to the company on the
ground that the employees were first offenders.

Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his assailed Order, dated
December 27, 1985. Petitioner now comes to Us with the following:

Assignment of Errors

Respondent Minister committed a grave abuse of discretion when he directly certified the Union solely on the basis of
the latter's self-serving assertion that it enjoys the support of the majority of the sales force in petitioner's company.

II
Respondent Minister committed a grave abuse of discretion when, notwithstanding his very own finding that there was
just cause for the dismissal of the three (3) salesmen, he nevertheless ordered their reinstatement. (pp. 7-8, Rollo)

Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case assumed by him under
Art. 264 (g) of the Labor Code but this power was exceeded when he certified respondent Union as the exclusive
bargaining agent of the company's salesmen since this is not a representation proceeding as described under the Labor
Code. Moreover the Union did not pray for certification but merely for a finding of unfair labor practice imputed to
petitioner-company.

The petition merits our consideration. The procedure for a representation case is outlined in Arts. 257-260 of the Labor
Code, in relation to the provisions on cancellation of a Union registration under Arts. 239-240 thereof, the main purpose
of which is to aid in ascertaining majority representation. The requirements under the law, specifically Secs. 2, 5, and 6
of Rule V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the certified bargaining
representative is the true choice of the employees against all contenders. The Constitutional mandate that the State
shall "assure the rights of the workers to self-organization, collective bargaining, security of tenure and just and humane
conditions of work," should be achieved under a system of law such as the aforementioned provisions of the pertinent
statutes. When an overzealous official by-passes the law on the pretext of retaining a laudable objective, the
intendment or purpose of the law will lose its meaning as the law itself is disregarded. When respondent Minister
directly certified the Union, he in fact disregarded this procedure and its legal requirements. There was therefore failure
to determine with legal certainty whether the Union indeed enjoyed majority representation. Contrary to the
respondent Minister's observation, the holding of a certification election at the proper time is not necessarily a mere
formality as there was a compelling legal reason not to directly and unilaterally certify a union whose legitimacy is
precisely the object of litigation in a pending cancellation case filed by certain "concerned salesmen," who also claim
majority status. Even in a case where a union has filed a petition for certification elections, the mere fact that no
opposition is made does not warrant a direct certification. More so as in the case at bar, when the records of the suit
show that the required proof was not presented in an appropriate proceeding and that the basis of the direct
certification was the Union's mere allegation in its position paper that it has 87 out of 117 regular salesmen. In other
words, respondent Minister merely relied on the self-serving assertion of the respondent Union that it enjoyed the
support of the majority of the salesmen, without subjecting such assertion to the test of competing claims. As pointed
out by petitioner in its petition, what the respondent Minister achieved in rendering the assailed orders was to make a
mockery of the procedure provided under the law for representation cases because:

(a) He has created havoc by impliedly establishing a procedural short-cut to obtaining a direct certification-by merely
filing a notice of strike.

(b) By creating such a short-cut, he has officially encouraged disrespect for the law.

(c) By directly certifying a Union without sufficient proof of majority representation, he has in effect arrogated unto
himself the right, vested naturally in the employees, to choose their collective bargaining representative.

(d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose majority representation
is under serious question. This is highly irregular because while the Union enjoys the blessing of the Minister, it does not
enjoy the blessing of the employees. Petitioner is therefore under threat of being held liable for refusing to negotiate
with a union whose right to bargaining status has not been legally established. (pp. 9-10, Rollo)

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence was
sufficient to warrant the dismissal of the employees the law warrants their dismissal without making any distinction
between a first offender and a habitual delinquent. Under the law, respondent Minister is duly mandated to equally
protect and respect not only the labor or workers' side but also the management and/or employers' side. The law, in
protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. To order the
reinstatement of the erring employees namely, Mejia, Sayson and Reynante would in effect encourage unequal
protection of the laws as a managerial employee of petitioner company involved in the same incident was already
dismissed and was not ordered to be reinstated. As stated by Us in the case of San Miguel Brewery vs. National Labor
Union, 2 "an employer cannot legally be compelled to continue with the employment of a person who admittedly was
guilty of misfeasance or malfeasance towards his employer, and whose continuance in the service of the latter is
patently inimical to his interest."

In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the dismissal of the employees
to the assumption order created a doubt as to whether their dismissal was really for just cause or due to their
activities." 4

This is of no moment for the following reasons:

(a) Respondent Minister has still maintained in his assailed order that a just cause existed to justify the dismissal of the
employees.

(b) Respondent Minister has not made any finding substantiated by evidence that the employees were dismissed
because of their union activities.

WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the respondent Minister, dated
December 27, 1985 for grave abuse of discretion. However, in view of the fact that the dismissed employees are first
offenders, petitioner is hereby ordered to give them separation pay. The temporary restraining order is hereby made
permanent.

SO ORDERED.
G.R. No. L-51353 June 27, 1988

SHELL PHILIPPINES, INC., plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

Picazo, Agcaoile, Santayana, Reyes and Tayao for plaintiff-appellee.

F.E. Evangelista, A.L. Bautista & Juan P. Adcaura and Albamento Bisquera for defendant- appellant.

GUTIERREZ, JR., J.:

This case comes to us on a Court of Appeals resolution certifying the controversy as one which involves a pure question
of law. The resolution states the factual background of the case.

On May 1, 1970, Congress approved the Act imposing a stabilization tax on consignments abroad (RA 6125). Section 1 of
the statute, in part, provided as follows:

Section 1. There shall be imposed, assessed and collected a stabilization tax on the gross F.O.B. peso proceeds, based on
the rate of exchange prevailing at the time of receipt of such proceeds, whether partial or total, of any exportation of
the following schedule:

a. In the case of logs, copra, centrifugal sugar, and copper ore and concentrates;

Ten per centum of the F.O.B. peso proceeds of exports received on or after the date of effectivity of this Act to June
thirty, nineteen hundred seventy-one;

Eight per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred seventy-one to June
thirty, nineteen hundred seventy-two.

xxx xxx xxx

"Any export products the aggregate annual F.O.B. value of which shall exceed five million United States dollars in any
one calendar year during the effectivity of this Act shall likewise be subject to the rates of tax in force during the fiscal
years following its reaching the said aggregate value."

In August, 1970, the Central Bank, through its Circular No. 309 provided that:

The stabilization tax shall begin to apply on January 1st following the calendar year during which such export products
shall have reached the aggregate F.O.B. value of more than US $5 million, and the applicable tax rates shall be the rates
prescribed in Schedule (b) of Section 1 of Republic Act No. 6125 for the fiscal year following the reaching of the said
aggregate value.

During 1971, appellee Shell, Philippines, Inc. exported seria residues, a by-product of petroleum refining, to an extent
reaching $5 million. On January 7, 1972, the Monetary Board issued its Resolution No. 47 "subjecting petroleum pitch
and other petroleum residues" to the stabilization tax effective January 1, 1972. Under the Central Bank Circular No.
309, implemented by Resolution No. 47, appellee had to pay the stabilization tax beginning January 1, 1972, which it did
under protest.

On September 14, 1972, appellee filed suit against the Central Bank before the Court of First Instance of Manila, praying
that Monetary Board Resolution No. 47 be declared null and void, and that Central Bank be ordered to refund the
stabilization tax it paid during the first semester of 1972. Its position was that, pursuant to the provisions of RA 6125, it
had to pay the stabilization tax only from July 1, 1972.

The lower court sustained appellee, and it declared Monetary Board Resolution No. 47 as void and it ordered refund of
the stabilization tax paid by appellee during the period January 1 to June 30, 1972. Central Bank has appealed from the
judgment. (Rollo, pp. 47-49)

The trial court opined:

Note that the law mentions both calendar year and fiscal year. Calendar year refers to one year starting from January to
December. Fiscal year, as it is usually and commonly used, refers to the period covered between July 1 of a year to June
30 of the following year. In using these two terms, it is the considered opinion of this Court that they should be taken in
the meaning where they are commonly and usually understood. So that when an export product reaches an aggregate
F.O.B. value of more than $5,000,000.00 in a calendar year it becomes subject to the rates of tax in force during the
fiscal year following its reaching the said aggregate value.

The statute is clear and free from ambiguity so that an interpretation even becomes unnecessary ... . (Brief for
Defendant-Appellant, pp. 34-35)

The Central Bank appeals from the above cited decision alleging that the trial court erred in regarding the deliberations
of the Senate on the stabilization tax in favor of Shell Philippines, Inc. and in failing to consider the authority granted to
the appellant to promulgate rules and regulations in the implementation of the stabilization tax law.

It should be mentioned, however, that on July 1, 1973, Presidential Decree No. 230 took effect. This law entitled

Amending the Tariff and Customs Code, creating Title III in Book I Export Tariff," expressly repealed Section 1 of
Republic Act No. 6125 and transferred the assessment and collection of the export duty from the Central Bank to the
Bureau of Customs by ordering the Commissioner of Customs to promulgate rules and regulations necessary for the
implementation of the decree, subject to the approval of the Secretary of Finance (Section 2 of the Decree).

Notwithstanding this fact, the issue raised must be resolved on the merits as an affirmative relief was granted to the
appellee.

First, the petitioner's allegation that the trial court gave undue weight to the deliberations of the Senate on the
stabilization tax law is not supported by either the records or the decision itself. It is clear in the decision that the trial
court found no ambiguity in the provision of law governing the dispute and accordingly applied it in its ordinary sense.
The cited Senate deliberations merely corroborated the fact that the tax commences on the following fiscal year after
the aggregate value is reached. However, even if the lower court was influenced by the Senate deliberations, we see
nothing wrong in courts' examining and following the intent of the legislature when an act of Congress has to be
interpreted.

Second, while it is true that under the same law the Central Bank was given the authority to promulgate rules and
regulations to implement the statutory provision in question, we reiterate the principle that this authority is limited only
to carrying into effect what the law being implemented provides.

In People v. Maceren (79 SCRA 450, 458 and 460), this Court ruled that:

Administrative regulations adopted under legislative authority by a particular department must be in harmony with the
provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such
regulations, of course, the law itself cannot be extended. (U.S. v. Tupasi Molina, supra). An administrative agency cannot
amend an act of Congress (Santos v. Estenzo, 109 Phil. 419, 422; Teoxon v. Members of the Board of Administrators, L-
25619, June 30, 1970, 33 SCRA 585; Manuel v. General Auditing Office, L-28952, December 29, 1971,42 SCRA 660;
Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as
it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to
embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. (University of Santo
Tomas v. Board of Tax Appeals, 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see Collector of Internal
Revenue v. Villamor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. 665, 676; Del Mar v. Phil. Veterans Administration, L-
27299, June 27, 1973, 51 SCRA 340, 349).

xxx xxx xxx

... The rule or regulation should be within the scope of the statutory authority granted by the legislature to the
administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victorias Milling Co., Inc. v. Social Security
Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim, 108
Phil. 1091)

Considering the foregoing, we rule that the trial court was correct in declaring that "Monetary Board Resolution No. 47
is void insofar as it imposes the tax mentioned in Republic Act No. 6125 on the export seria residue of (plaintiff) the
aggregate annual F.O.B., value of which reached five million United States dollars in 1971 effective on January 1, 1972."
The said resolution runs counter to the provisions of R.A. 6125 which provides that "(A)ny export product the aggregate
annual F.O.B. value of which shall exceed five million United States dollars in any one calendar year during the effectivity
of this Act shall likewise be subject to the rates of tax in force during the fiscal year following its reaching the said
aggregate value."

We note that under the same provision of law the tax accrues when the aggregate annual F.O.B. value of the export
product has exceeded five million United States dollars during any calendar year. The imposition of the tax is only
deferred until the "fiscal year following its reaching the said aggregate value." It is only then that the rates in force are
ascertained.

In this case, there is no question that in 1971, the appellee exported seria residue with an F.O.B. value of more than five
million US dollars. The appellee's objection lies in the collection of the tax thereon as of January 1972 rather than in July
1972.

It is, therefore, undeniable that the respondent was liable to pay the tax and that the Central Bank merely collected the
said tax prematurely. There is likewise no controversy over the rate of tax in force when payment became due. Thus, the
tax refund granted by the trial court was not proper because the tax paid was in fact, and in law due to the government
at the correct time. We decline to grant to the respondent an amount equivalent to the interest on the prematurely
collected tax because of the well entrenched rule that in the absence of a statutory provision clearly or expressly
directing or authorizing payment of interest on the amount to be refunded to the taxpayer, the Government cannot be
required to pay interest. Likewise, it is the rule that interest may be awarded only when the collection of tax sought to
be refunded was attended with arbitrariness (Atlas Fertilizer Corp. v. Commission on Internal Revenue, 100 SCRA 556).
There is no indication of arbitrariness in the questioned act of the appellant.

WHEREFORE, in view of the foregoing, the assailed decision is hereby AFFIRMED but MODIFIED to the effect that the tax
refund granted by the trial court is ordered retained by or reverted to, as the case may be, the Central Bank.

SO ORDERED.
G.R. No. L-52415 October 23, 1984

INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION (IBAAEU), petitioner,

vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and INSULAR BANK OF ASIA AND
AMERICA, respondents.

Sisenando R. Villaluz, Jr. for petitioner.

Abdulmaid Kiram Muin colloborating counsel for petitioner.

The Solicitor General Caparas, Tabios, Ilagan Alcantara & Gatmaytan Law Office and Sycip, Salazar, Feliciano &
Hernandez Law Office for respondents.

MAKASIAR, J.:+.wph!1

This is a petition for certiorari to set aside the order dated November 10, 1979, of respondent Deputy Minister of Labor,
Amado G. Inciong, in NLRC case No. RB-IV-1561-76 entitled "Insular Bank of Asia and America Employees' Union
(complainant-appellee), vs. Insular Bank of Asia and America" (respondent-appellant), the dispositive portion of which
reads as follows: t.hqw

xxx xxx xxx

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National Labor Relations Commission
dated 20 June 1978 be, as it is hereby, set aside and a new judgment. promulgated dismissing the instant case for lack of
merit (p. 109 rec.).

The antecedent facts culled from the records are as follows:

On June 20, 1975, petitioner filed a complaint against the respondent bank for the payment of holiday pay before the
then Department of Labor, National Labor Relations Commission, Regional Office No. IV in Manila. Conciliation having
failed, and upon the request of both parties, the case was certified for arbitration on July 7, 1975 (p. 18, NLRC rec.

On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the above-entitled case, granting petitioner's
complaint for payment of holiday pay. Pertinent portions of the decision read: t.hqw

xxx xxx xxx

The records disclosed that employees of respondent bank were not paid their wages on unworked regular holidays as
mandated by the Code, particularly Article 208, to wit: t.hqw

Art. 208. Right to holiday pay.

(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments
regularly employing less than 10 workers.

(b) The term "holiday" as used in this chapter, shall include: New Year's Day, Maundy Thursday, Good Friday, the ninth
of April the first of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and the
thirtieth of December and the day designated by law for holding a general election.

xxx xxx xxx

This conclusion is deduced from the fact that the daily rate of pay of the bank employees was computed in the past with
the unworked regular holidays as excluded for purposes of determining the deductible amount for absences
incurred Thus, if the employer uses the factor 303 days as a divisor in determining the daily rate of monthly paid
employee, this gives rise to a presumption that the monthly rate does not include payments for unworked regular
holidays. The use of the factor 303 indicates the number of ordinary working days in a year (which normally has 365
calendar days), excluding the 52 Sundays and the 10 regular holidays. The use of 251 as a factor (365 calendar days less
52 Saturdays, 52 Sundays, and 10 regular holidays) gives rise likewise to the same presumption that the unworked
Saturdays, Sundays and regular holidays are unpaid. This being the case, it is not amiss to state with certainty that the
instant claim for wages on regular unworked holidays is found to be tenable and meritorious.

WHEREFORE, judgment is hereby rendered:

(a) xxx xxxx xxx

(b) Ordering respondent to pay wages to all its employees for all regular h(olidays since November 1, 1974 (pp. 97-99,
rec., underscoring supplied).

Respondent bank did not appeal from the said decision. Instead, it complied with the order of Arbiter Ricarte T. Soriano
by paying their holiday pay up to and including January, 1976.

On December 16, 1975, Presidential Decree No. 850 was promulgated amending, among others, the provisions of the
Labor Code on the right to holiday pay to read as follows: t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wages during regular holidays, except in
retail and service establishments regularly employing less than ten (10) workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation
equivalent to twice his regular rate and

(c) As used in this Article, "holiday" includes New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth and the thirtieth of December,
and the day designated by law for holding a general election.

Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the Department of Labor (now Ministry of
Labor) promulgated the rules and regulations for the implementation of holidays with pay. The controversial section
thereof reads: t.hqw

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the month, irrespective of the
number of working days therein, with a salary of not less than the statutory or established minimum wage shall be
presumed to be paid for all days in the month whether worked or not.

For this purpose, the monthly minimum wage shall not be less than the statutory minimum wage multiplied by 365 days
divided by twelve" (italics supplied).

On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor (now Minister) interpreting the
above-quoted rule, pertinent portions of which read: t.hqw

xxx xxx xxx

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of
monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to
the benefit.
Under the rules implementing P.D. 850, this policy has been fully clarified to eliminate controversies on the entitlement
of monthly paid employees, The new determining rule is this: If the monthly paid employee is receiving not less than
P240, the maximum monthly minimum wage, and his monthly pay is uniform from January to December, he is presumed
to be already paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary on account
of holidays in months where they occur, then he is still entitled to the ten (10) paid legal holidays. ..." (emphasis
supplied).

Respondent bank, by reason of the ruling laid down by the aforecited rule implementing Article 94 of the Labor Code
and by Policy Instruction No. 9, stopped the payment of holiday pay to an its employees.

On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the arbiter's decision of August 25, 1975,
whereby the respondent bank was ordered to pay its employees their daily wage for the unworked regular holidays.

On September 10, 1975, respondent bank filed an opposition to the motion for a writ of execution alleging, among
others, that: (a) its refusal to pay the corresponding unworked holiday pay in accordance with the award of Labor
Arbiter Ricarte T. Soriano dated August 25, 1975, is based on and justified by Policy Instruction No. 9 which interpreted
the rules implementing P. D. 850; and (b) that the said award is already repealed by P.D. 850 which took effect on
December 16, 1975, and by said Policy Instruction No. 9 of the Department of Labor, considering that its monthly paid
employees are not receiving less than P240.00 and their monthly pay is uniform from January to December, and that no
deductions are made from the monthly salaries of its employees on account of holidays in months where they occur (pp.
64-65, NLRC rec.).

On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of execution, issued an order enjoining
the respondent bank to continue paying its employees their regular holiday pay on the following grounds: (a) that the
judgment is already final and the findings which is found in the body of the decision as well as the dispositive portion
thereof is res judicata or is the law of the case between the parties; and (b) that since the decision had been partially
implemented by the respondent bank, appeal from the said decision is no longer available (pp. 100-103, rec.).

On November 17, 1976, respondent bank appealed from the above-cited order of Labor Arbiter Soriano to the National
Labor Relations Commission, reiterating therein its contentions averred in its opposition to the motion for writ of
execution. Respondent bank further alleged for the first time that the questioned order is not supported by evidence
insofar as it finds that respondent bank discontinued payment of holiday pay beginning January, 1976 (p. 84, NLRC rec.).

On June 20, 1978, the National Labor Relations Commission promulgated its resolution en banc dismissing respondent
bank's appeal, the dispositive portion of which reads as follows: t.hqw

In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss, respondent's appeal; to set aside Labor
Arbiter Ricarte T. Soriano's order of 18 October 1976 and, as prayed for by complainant, to order the issuance of the
proper writ of execution (p. 244, NLRC rec.).

Copies of the above resolution were served on the petitioner only on February 9, 1979 or almost eight. (8) months after
it was promulgated, while copies were served on the respondent bank on February 13, 1979.

On February 21, 1979, respondent bank filed with the Office of the Minister of Labor a motion for
reconsideration/appeal with urgent prayer to stay execution, alleging therein the following: (a) that there is prima
facie evidence of grave abuse of discretion, amounting to lack of jurisdiction on the part of the National Labor Relations
Commission, in dismissing the respondent's appeal on pure technicalities without passing upon the merits of the appeal
and (b) that the resolution appealed from is contrary to the law and jurisprudence (pp. 260-274, NLRC rec.).

On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal and alleged the following grounds: (a)
that the office of the Minister of Labor has no jurisdiction to entertain the instant appeal pursuant to the provisions of P.
D. 1391; (b) that the labor arbiter's decision being final, executory and unappealable, execution is a matter of right for
the petitioner; and (c) that the decision of the labor arbiter dated August 25, 1975 is supported by the law and the
evidence in the case (p. 364, NLRC rec.).

On July 30, 1979, petitioner filed a second motion for execution pending appeal, praying that a writ of execution be
issued by the National Labor Relations Commission pending appeal of the case with the Office of the Minister of Labor.
Respondent bank filed its opposition thereto on August 8, 1979.

On August 13, 1979, the National Labor Relations Commission issued an order which states: t.hqw

The Chief, Research and Information Division of this Commission is hereby directed to designate a Socio-Economic
Analyst to compute the holiday pay of the employees of the Insular Bank of Asia and America from April 1976 to the
present, in accordance with the Decision of the Labor Arbiter dated August 25, 1975" (p. 80, rec.).

On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister Amado G. Inciong, issued an order,
the dispositive portion of which states: t.hqw

ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the National Labor Relations Commission
dated 20 June 1978 be, as it is hereby, set aside and a new judgment promulgated dismissing the instant case for lack of
merit (p. 436, NLRC rec.).

Hence, this petition for certiorari charging public respondent Amado G. Inciong with abuse of discretion amounting to
lack or excess of jurisdiction.

The issue in this case is: whether or not the decision of a Labor Arbiter awarding payment of regular holiday pay can still
be set aside on appeal by the Deputy Minister of Labor even though it has already become final and had been partially
executed, the finality of which was affirmed by the National Labor Relations Commission sitting en banc, on the basis of
an Implementing Rule and Policy Instruction promulgated by the Ministry of Labor long after the said decision had
become final and executory.

WE find for the petitioner.

WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void since in the guise of clarifying the Labor Code's
provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion (p. 1 1, rec.).

Article 94 of the Labor Code, as amended by P.D. 850, provides: t.hqw

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in
retail and service establishments regularly employing less than ten (10) workers. ...

The coverage and scope of exclusion of the Labor Code's holiday pay provisions is spelled out under Article 82 thereof
which reads: t.hqw

Art. 82. Coverage. The provision of this Title shall apply to employees in all establishments and undertakings, whether
for profit or not, but not to government employees, managerial employees, field personnel members of the family of the
employer who are dependent on him for support domestic helpers, persons in the personal service of another, and
workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

... (emphasis supplied).

From the above-cited provisions, it is clear that monthly paid employees are not excluded from the benefits of holiday
pay. However, the implementing rules on holiday pay promulgated by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting, under Rule IV, Book Ill of the implementing rules, Section 2, which
provides that: "employees who are uniformly paid by the month, irrespective of the number of working days therein,
with a salary of not less than the statutory or established minimum wage shall be presumed to be paid for all days in the
month whether worked or not. "

Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy Instruction No. 9 were issued to clarify
the policy in the implementation of the ten (10) paid legal holidays. As interpreted, 'unworked' legal holidays are
deemed paid insofar as monthly paid employees are concerned if (a) they are receiving not less than the statutory
minimum wage, (b) their monthly pay is uniform from January to December, and (c) no deduction is made from their
monthly salary on account of holidays in months where they occur. As explained in Policy Instruction No, 9, 'The ten (10)
paid legal holidays law, to start with, is intended to benefit principally daily paid employees. In case of monthly, only
those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit' "
(pp. 340-341, rec.). This contention is untenable.

It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal the law
must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the entitlement to
the benefits of holiday pay are clear and explicit - it provides for both the coverage of and exclusion from the benefits. In
Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is principally
intended for daily paid employees, when the law clearly states that every worker shall be paid their regular holiday pay.
This is a flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that "All doubts in the
implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall
be resolved in favor of labor." Moreover, it shall always be presumed that the legislature intended to enact a valid and
permanent statute which would have the most beneficial effect that its language permits (Orlosky vs. Haskell, 155 A.
112.)

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the Labor Code
authorizing him to promulgate the necessary implementing rules and regulations.

Public respondent vehemently argues that the intent and spirit of the holiday pay law, as expressed by the Secretary of
Labor in the case of Chartered Bank Employees Association v. The Chartered Bank (NLRC Case No. RB-1789-75, March
24, 1976), is to correct the disadvantages inherent in the daily compensation system of employment holiday pay is
primarily intended to benefit the daily paid workers whose employment and income are circumscribed by the principle
of "no work, no pay." This argument may sound meritorious; but, until the provisions of the Labor Code on holiday pay is
amended by another law, monthly paid employees are definitely included in the benefits of regular holiday pay. As
earlier stated, the presumption is always in favor of law, negatively put, the Labor Code is always strictly construed
against management.

While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty is to
enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the instant case, the
same must be declared as null and void. It is the role of the Judiciary to refine and, when necessary, correct
constitutional (and/or statutory) interpretation, in the context of the interactions of the three branches of the
government, almost always in situations where some agency of the State has engaged in action that stems ultimately
from some legitimate area of governmental power (The Supreme Court in Modern Role, C. B. Swisher 1958, p. 36).

Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations Commission (106 SCRA 444, July 31,
1981) where the Secretary of Labor enlarged the scope of exemption from the coverage of a Presidential Decree
granting increase in emergency allowance, this Court ruled that: t.hqw
... the Secretary of Labor has exceeded his authority when he included paragraph (k) in Section 1 of the Rules
implementing P. D. 1 1 23.

xxx xxx xxx

Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the Secretary of Labor, and the same
is therefore void, as ruled by this Court in a long line of cases . . . .. t.hqw

The recognition of the power of administrative officials to promulgate rules in the administration of the statute,
necessarily limited to what is provided for in the legislative enactment, may be found in the early case of United States
vs. Barrios decided in 1908. Then came in a 1914 decision, United States vs. Tupasi Molina (29 Phil. 119) delineation of
the scope of such competence. Thus: "Of course the regulations adopted under legislative authority by a particular
department must be in harmony with the provisions of the law, and for the sole purpose of carrying into effect its
general provisions. By such regulations, of course, the law itself cannot be extended. So long, however, as the
regulations relate solely to carrying into effect the provisions of the law, they are valid." In 1936, in People vs.
Santos, this Court expressed its disapproval of an administrative order that would amount to an excess of the regulatory
power vested in an administrative official We reaffirmed such a doctrine in a 1951 decision, where we again made clear
that where an administrative order betrays inconsistency or repugnancy to the provisions of the Act, 'the mandate of
the Act must prevail and must be followed. Justice Barrera, speaking for the Court in Victorias Milling inc. vs. Social
Security Commission, citing Parker as well as Davis did tersely sum up the matter thus: "A rule is binding on the Courts so
long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the
legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom. ... On the other
hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine chat
the law means."

"It cannot be otherwise as the Constitution limits the authority of the President, in whom all executive power resides, to
take care that the laws be faithfully executed. No lesser administrative executive office or agency then can, contrary to
the express language of the Constitution assert for itself a more extensive prerogative. Necessarily, it is bound to
observe the constitutional mandate. There must be strict compliance with the legislative enactment. Its terms must be
followed the statute requires adherence to, not departure from its provisions. No deviation is allowable. In the terse
language of the present Chief Justice, an administrative agency "cannot amend an act of Congress." Respondents can be
sustained, therefore, only if it could be shown that the rules and regulations promulgated by them were in accordance
with what the Veterans Bill of Rights provides" (Phil. Apparel Workers Union vs. National Labor Relations
Commission, supra, 463, 464, citing Teozon vs. Members of the Board of Administrators, PVA 33 SCRA 585; see also
Santos vs. Hon. Estenzo, et al, 109 Phil. 419; Hilado vs. Collector of Internal Revenue, 100 Phil. 295; Sy Man vs. Jacinto &
Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and Trinidad, 43 Phil. 259).

This ruling of the Court was recently reiterated in the case of American Wire & Cable Workers Union (TUPAS) vs. The
National Labor Relations Commission and American Wire & Cable Co., Inc., G.R. No. 53337, promulgated on June 29,
1984.

In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy instruction No.
9 issued by the then Secretary of Labor must be declared null and void. Accordingly, public respondent Deputy Minister
of Labor Amado G. Inciong had no basis at all to deny the members of petitioner union their regular holiday pay as
directed by the Labor Code.

II

It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August 25, 1975, had already become final,
and was, in fact, partially executed by the respondent bank.
However, public respondent maintains that on the authority of De Luna vs. Kayanan, 61 SCRA 49, November 13, 1974,
he can annul the final decision of Labor Arbiter Soriano since the ensuing promulgation of the integrated implementing
rules of the Labor Code pursuant to P.D. 850 on February 16, 1976, and the issuance of Policy Instruction No. 9 on April
23, 1976 by the then Secretary of Labor are facts and circumstances that transpired subsequent to the promulgation of
the decision of the labor arbiter, which renders the execution of the said decision impossible and unjust on the part of
herein respondent bank (pp. 342-343, rec.).

This contention is untenable.

To start with, unlike the instant case, the case of De Luna relied upon by the public respondent is not a labor case
wherein the express mandate of the Constitution on the protection to labor is applied. Thus Article 4 of the Labor Code
provides that, "All doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor and Article 1702 of the Civil Code provides that, "
In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for
the laborer.

Consequently, contrary to public respondent's allegations, it is patently unjust to deprive the members of petitioner
union of their vested right acquired by virtue of a final judgment on the basis of a labor statute promulgated following
the acquisition of the "right".

On the question of whether or not a law or statute can annul or modify a judicial order issued prior to its promulgation,
this Court, through Associate Justice Claro M. Recto, said: t.hqw

xxx xxx xxx

We are decidedly of the opinion that they did not. Said order, being unappealable, became final on the date of its
issuance and the parties who acquired rights thereunder cannot be deprived thereof by a constitutional provision
enacted or promulgated subsequent thereto. Neither the Constitution nor the statutes, except penal laws favorable to
the accused, have retroactive effect in the sense of annulling or modifying vested rights, or altering contractual
obligations" (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324, emphasis supplied).

In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said: "... when a court renders a decision or
promulgates a resolution or order on the basis of and in accordance with a certain law or rule then in force, the
subsequent amendment or even repeal of said law or rule may not affect the final decision, order, or resolution already
promulgated, in the sense of revoking or rendering it void and of no effect." Thus, the amendatory rule (Rule IV, Book III
of the Rules to Implement the Labor Code) cannot be given retroactive effect as to modify final judgments. Not even a
law can validly annul final decisions (In re: Cunanan, et al., Ibid).

Furthermore, the facts of the case relied upon by the public respondent are not analogous to that of the case at bar. The
case of De Luna speaks of final and executory judgment, while iii the instant case, the final judgment is partially
executed. just as the court is ousted of its jurisdiction to annul or modify a judgment the moment it becomes final, the
court also loses its jurisdiction to annul or modify a writ of execution upon its service or execution; for, otherwise, we
will have a situation wherein a final and executed judgment can still be annulled or modified by the court upon mere
motion of a panty This would certainly result in endless litigations thereby rendering inutile the rule of law.

Respondent bank counters with the argument that its partial compliance was involuntary because it did so under pain of
levy and execution of its assets (p. 138, rec.). WE find no merit in this argument. Respondent bank clearly manifested its
voluntariness in complying with the decision of the labor arbiter by not appealing to the National Labor Relations
Commission as provided for under the Labor Code under Article 223. A party who waives his right to appeal is deemed
to have accepted the judgment, adverse or not, as correct, especially if such party readily acquiesced in the judgment by
starting to execute said judgment even before a writ of execution was issued, as in this case. Under these circumstances,
to permit a party to appeal from the said partially executed final judgment would make a mockery of the doctrine of
finality of judgments long enshrined in this jurisdiction.

Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall issue as a matter of right upon the
expiration of the period to appeal ... or if no appeal has been duly perfected." This rule applies to decisions or orders of
labor arbiters who are exercising quasi-judicial functions since "... the rule of execution of judgments under the rules
should govern all kinds of execution of judgment, unless it is otherwise provided in other laws" Sagucio vs. Bulos 5 SCRA
803) and Article 223 of the Labor Code provides that "... decisions, awards, or orders of the Labor Arbiter or compulsory
arbitrators are final and executory unless appealed to the Commission by any or both of the parties within ten (10) days
from receipt of such awards, orders, or decisions. ..."

Thus, under the aforecited rule, the lapse of the appeal period deprives the courts of jurisdiction to alter the final
judgment and the judgment becomes final ipso jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC, 2 PHILAJUR 436,
440, January 31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and Regala vs. WCC, decided jointly, 77
SCRA 297; Vitug vs. Republic, 75 SCRA 436; Ramos vs. Republic, 69 SCRA 576).

In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31, 1961, where the lower court
modified a final order, this Court ruled thus: t.hqw

xxx xxx xxx

The lower court was thus aware of the fact that it was thereby altering or modifying its order of January 8, 1959.
Regardless of the excellence of the motive for acting as it did, we are constrained to hold however, that the lower court
had no authorities to make said alteration or modification. ...

xxx xxx xxx

The equitable considerations that led the lower court to take the action complained of cannot offset the dem ands of
public policy and public interest which are also responsive to the tenets of equity requiring that an issues passed
upon in decisions or final orders that have become executory, be deemed conclusively disposed of and definitely closed
for, otherwise, there would be no end to litigations, thus setting at naught the main role of courts of justice, which is to
assist in the enforcement of the rule of law and the maintenance of peace and order, by settling justiciable
controversies with finality.

xxx xxx xxx

In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this Court said: t.hqw

xxx xxx xxx

In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is absolute that after a judgment
becomes final by the expiration of the period provided by the rules within which it so becomes, no further amendment
or correction can be made by the court except for clerical errors or mistakes. And such final judgment is conclusive not
only as to every matter which was offered and received to sustain or defeat the claim or demand but as to any other
admissible matter which must have been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case of Contreras
and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it was stated that the rule must be adhered to
regardless of any possible injustice in a particular case for (W)e have to subordinate the equity of a particular situation to
the over-mastering need of certainty and immutability of judicial pronouncements

xxx xxx xxx

III
The despotic manner by which public respondent Amado G. Inciong divested the members of the petitioner union of
their rights acquired by virtue of a final judgment is tantamount to a deprivation of property without due process of law
Public respondent completely ignored the rights of the petitioner union's members in dismissing their complaint since
he knew for a fact that the judgment of the labor arbiter had long become final and was even partially executed by the
respondent bank.

A final judgment vests in the prevailing party a right recognized and protected by law under the due process clause of
the Constitution (China Ins. & Surety Co. vs. Judge of First Instance of Manila, 63 Phil. 324). A final judgment is "a vested
interest which it is right and equitable that the government should recognize and protect, and of which the individual
could no. be deprived arbitrarily without injustice" (Rookledge v. Garwood, 65 N.W. 2d 785, 791).

lt is by this guiding principle that the due process clause is interpreted. Thus, in the pithy language of then Justice, later
Chief Justice, Concepcion "... acts of Congress, as well as those of the Executive, can deny due process only under pain of
nullity, and judicial proceedings suffering from the same flaw are subject to the same sanction, any statutory provision
to the contrary notwithstanding (Vda. de Cuaycong vs. Vda. de Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t
has been likewise established that a violation of a constitutional right divested the court of jurisdiction; and as a
consequence its judgment is null and void and confers no rights" (Phil. Blooming Mills Employees Organization vs. Phil.
Blooming Mills Co., Inc., 51 SCRA 211, June 5, 1973).

Tested by and pitted against this broad concept of the constitutional guarantee of due process, the action of public
respondent Amado G. Inciong is a clear example of deprivation of property without due process of law and constituted
grave abuse of discretion, amounting to lack or excess of jurisdiction in issuing the order dated November 10, 1979.

WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC RESPONDENT IS SET ASIDE, AND THE DECISION
OF LABOR ARBITER RICARTE T. SORIANO DATED AUGUST 25, 1975, IS HEREBY REINSTATED.

COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA

SO ORDERED.1wph1.t
G.R. No. L-48645 January 7, 1987

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO, PROSPERO TABLADA,
ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO
GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN,
LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO
G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT,
FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.

Armando V. Ampil for petitioners.

Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists between petitioners-
members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM) and respondent San Miguel
Corporation, is the main issue in this petition. The disputed decision of public respondent Ronaldo Zamora, Presidential
Assistant for legal Affairs, contains a brief summary of the facts involved:

1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct Court of Industrial Relations,
charging San Miguel Corporation, and the following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo,
Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor practice as set forth in
Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875 and of Legal dismissal. It was alleged that respondents
ordered the individual complainants to disaffiliate from the complainant union; and that management dismissed the
individual complainants when they insisted on their union membership.

On their part, respondents moved for the dismissal of the complaint on the grounds that the complainants are not and
have never been employees of respondent company but employees of the independent contractor; that respondent
company has never had control over the means and methods followed by the independent contractor who enjoyed full
authority to hire and control said employees; and that the individual complainants are barred by estoppel from asserting
that they are employees of respondent company.

While pending with the Court of Industrial Relations CIR pleadings and testimonial and documentary evidences were
duly presented, although the actual hearing was delayed by several postponements. The dispute was taken over by the
National Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the hearing of the case
intransferably commenced on September 8, 1975.

On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred in by the NLRC in a
decision dated June 28, 1976. The amount of backwages awarded, however, was reduced by NLRC to the equivalent of
one (1) year salary.

On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence of an
employer-mployee relationship as borne out by the records of the case. ...

The petitioners strongly argue that there exists an employer-employee relationship between them and the respondent
company and that they were dismissed for unionism, an act constituting unfair labor practice "for which respondents
must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers who have been employed at
the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years of service at the time of their
termination. They worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading, piling or palleting empty
bottles and woosen shells to and from company trucks and warehouses. At times, they accompanied the company
trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate passes signed by
Camahort and were provided by the respondent company with the tools, equipment and paraphernalia used in the
loading, unloading, piling and hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In turn, the
assistant informs the warehousemen and checkers regarding the same. The latter, thereafter, relays said orders to the
capatazes or group leaders who then give orders to the workers as to where, when and what to load, unload, pile, pallet
or clean.

Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles manufactured
to be loaded and unloaded, as well as the business activity of the company. Work did not necessarily mean a full eight
(8) hour day for the petitioners. However, work,at times, exceeded the eight (8) hour day and necessitated work on
Sundays and holidays. For this, they were neither paid overtime nor compensation for work on Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons and wooden
shells they were able to load, unload, or pile. The group leader notes down the number or volume of work that each
individual worker has accomplished. This is then made the basis of a report or statement which is compared with the
notes of the checker and warehousemen as to whether or not they tally. Final approval of report is by officer-in-charge
Camahort. The pay check is given to the group leaders for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the total earnings of the group, the group leader gets a
participation or share of ten (10%) percent plus an additional amount from the earnings of each individual.

The petitioners worked exclusive at the SMC plant, never having been assigned to other companies or departments of
SMC plant, even when the volume of work was at its minimum. When any of the glass furnaces suffered a breakdown,
making a shutdown necessary, the petitioners work was temporarily suspended. Thereafter, the petitioners would
return to work at the glass plant.

Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140) organized and affiliated
themselves with the petitioner union and engaged in union activities. Believing themselves entitled to overtime and
holiday pay, the petitioners pressed management, airing other grievances such as being paid below the minimum wage
law, inhuman treatment, being forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by
withholding their salaries, and salary deductions made without their consent. However, their gripes and grievances were
not heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in connection with
the dismissal of some of its members who were allegedly castigated for their union membership and warned that should
they persist in continuing with their union activities they would be dismissed from their jobs. Several conciliation
conferences were scheduled in order to thresh out their differences, On February 12, 1969, union member Rogelio
Dipad was dismissed from work. At the scheduled conference on February 19, 1969, the complainant union through its
officers headed by National President Artemio Portugal Sr., presented a letter to the respondent company containing
proposals and/or labor demands together with a request for recognition and collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to respondent
company's glass factory despite their regularly reporting for work. A complaint for illegal dismissal and unfair labor
practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had begun.

The question of whether an employer-employee relationship exists in a certain situation continues to bedevil the courts.
Some businessmen try to avoid the bringing about of an employer-employee relationship in their enterprises because
that judicial relation spawns obligations connected with workmen's compensation, social security, medicare, minimum
wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA 139).

In determining the existence of an employer-employee relationship, the elements that are generally considered are the
following: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the means and methods by which the work is to be
accomplished. It. is the called "control test" that is the most important element (Investment Planning Corp. of the Phils.
v. The Social Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra,and Rosario Brothers, Inc. v. Ople, 131
SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-employee relationship
between petitioner workers and respondent San Miguel Corporation. The respondent asserts that the petitioners are
employees of the Guaranteed Labor Contractor, an independent labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally established by the following criteria: "whether or
not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the
term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the
contractor's workers; the control of the premises; the duty to supply the premises tools, appliances, materials and labor;
and the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur.
Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance of a specified piece of work,
the nature and extent of the work and the term and duration of the relationship. The records fail to show that a large
commercial outfit, such as the San Miguel Corporation, entered into mere oral agreements of employment or labor
contracting where the same would involve considerable expenses and dealings with a large number of workers over a
long period of time. Despite respondent company's allegations not an iota of evidence was offered to prove the same or
its particulars. Such failure makes respondent SMC's stand subject to serious doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked continuously and
exclusively for the respondent company's shipping and warehousing department. Considering the length of time that
the petitioners have worked with the respondent company, there is justification to conclude that they were engaged to
perform activities necessary or desirable in the usual business or trade of the respondent, and the petitioners are,
therefore regular employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA
159 and RJL Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission (supra):

... [T]he employer-employee relationship between the parties herein is not coterminous with each loading and
unloading job. As earlier shown, respondents are engaged in the business of fishing. For this purpose, they have a fleet
of fishing vessels. Under this situation, respondents' activity of catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities performed by herein complainants, i.e. unloading the catch of
tuna fish from respondents' vessels and then loading the same to refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the employment of complainants a regular one, in the sense that it
does not depend on any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo).lwphl@it

so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the petitioners,
thereafter, promptly returned to their jobs, never having been replaced, or assigned elsewhere until the present
controversy arose. The term of the petitioners' employment appears indefinite. The continuity and habituality of
petitioners' work bolsters their claim of employee status vis-a-vis respondent company,

Even under the assumption that a contract of employment had indeed been executed between respondent SMC and the
alleged labor contractor, respondent's case will, nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:

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

(1) The contractor carries on an independent business and undertakes the contract work on his own account under his
own responsibility according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results thereof; and

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

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to qualify as an
independent contractor under the law. The premises, tools, equipment and paraphernalia used by the petitioners in
their jobs are admittedly all supplied by respondent company. It is only the manpower or labor force which the alleged
contractors supply, suggesting the existence of a "labor only" contracting scheme prohibited by law (Article 106, 109 of
the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact, even the
alleged contractor's office, which consists of a space at respondent company's warehouse, table, chair, typewriter and
cabinet, are provided for by respondent SMC. It is therefore clear that the alleged contractors have no capital outlay
involved in the conduct of its business, in the maintenance thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the actuality of an employer-employee relationship
whether between respondent company and petitioners or between the alleged independent contractor and petitioners.
It is important to emphasize that in a truly independent contractor-contractee relationship, the fees are paid directly to
the manpower agency in lump sum without indicating or implying that the basis of such lump sum is the salary per
worker multiplied by the number of workers assigned to the company. This is the rule in Social Security System v. Court
of Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries the workers
were entitled to, arrived at by adding the salaries of each worker which depend on the volume of work they. had
accomplished individually. These are based on payrolls, reports or statements prepared by the workers' group leader,
warehousemen and checkers, where they note down the number of cartons, wooden shells and bottles each worker
was able to load, unload, pile or pallet and see whether they tally. The amount paid by respondent company to the
alleged independent contractor considers no business expenses or capital outlay of the latter. Nor is the profit or gain of
the alleged contractor in the conduct of its business provided for as an amount over and above the workers' wages.
Instead, the alleged contractor receives a percentage from the total earnings of all the workers plus an additional
amount corresponding to a percentage of the earnings of each individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have to cite our
rulings in Dy Keh Beng v. International Labor and Marine Union of the Philippines (90 SCRA 161), as follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time . . . and units of work are in establishments like respondent
(sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot
construe payment by the piece where work is done in such an establishment so as to put the worker completely at
liberty to turn him out and take in another at pleasure."

Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit: ... the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.

Firmly establishing respondent SMC's role as employer is the control exercised by it over the petitioners that is, control
in the means and methods/manner by which petitioners are to go about their work, as well as in disciplinary measures
imposed by it.

Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and manner of
performing the same is practically nil. For, how many ways are there to load and unload bottles and wooden shells? The
mere concern of both respondent SMC and the alleged contractor is that the job of having the bottles and wooden shells
brought to and from the warehouse be done. More evident and pronounced is respondent company's right to control in
the discipline of petitioners. Documentary evidence presented by the petitioners establish respondent SMC's right to
impose disciplinary measures for violations or infractions of its rules and regulations as well as its right to recommend
transfers and dismissals of the piece workers. The inter-office memoranda submitted in evidence prove the company's
control over the petitioners. That respondent SMC has the power to recommend penalties or dismissal of the piece
workers, even as to Abner Bungay who is alleged by SMC to be a representative of the alleged labor contractor, is the
strongest indication of respondent company's right of control over the petitioners as direct employer. There is no
evidence to show that the alleged labor contractor had such right of control or much less had been there to supervise or
deal with the petitioners.

The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case of retrenchment due to the closure or cessation of operations of
the establishment or undertaking. But such is not the case here. The respondent's shutdown was merely temporary, one
of its furnaces needing repair. Operations continued after such repairs, but the petitioners had already been refused
entry to the premises and dismissed from respondent's service. New workers manned their positions. It is apparent that
the closure of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then agitating the
respondent company for benefits, reforms and collective bargaining as a union. There is no showing that petitioners had
been remiss in their obligations and inefficient in their jobs to warrant their separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is clear that the
respondent company had an existing collective bargaining agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass plant. There being a recognized bargaining representative
of all employees at the company's glass plant, the petitioners cannot merely form a union and demand bargaining. The
Labor Code provides the proper procedure for the recognition of unions as sole bargaining representatives. This must be
followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is hereby ordered to
REINSTATE petitioners, with three (3) years backwages. However, where reinstatement is no longer possible, the
respondent SMC is ordered to pay the petitioners separation pay equivalent to one (1) month pay for every year of
service. SO ORDERED.
ANGELINA FRANCISCO, G.R. No. 170087

Petitioner,

Present:

Panganiban, C.J. (Chairperson),

- versus - Ynares-Santiago,

Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, KASEI CORPORATION,

SEIICHIRO TAKAHASHI, TIMOTEO

ACEDO, DELFIN LIZA, IRENE

BALLESTEROS, TRINIDAD LIZA Promulgated:

and RAMON ESCUETA,

Respondents.

August 31, 2006

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

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No.
78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate
court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003,[3] in
NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002,[4] in
NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial
operation of the company.[5]

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did
she attend any board meeting nor required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for
the company.[6]

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially with
the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation.[7]

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00
plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign
a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical
Assistant to Seiji Kamura and in charge of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a
total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made
repeated follow-ups with the company cashier but she was advised that the company was not earning well.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that
she is no longer connected with the company.[11]

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal
before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was
hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei
Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would ask her opinion on matters relating to
her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the companys employees.[12]

Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy
may be terminated any time considering that her services were only temporary in nature and dependent on the needs
of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for
the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the
BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also
submitted showing that petitioners latest employer was Seiji Corporation.[13]

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and
severally pay complainant her money claims in accordance with the following computation:

a. Backwages 10/2001 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 09/2001) 22,500.00

c. Housing Allowance (01/2001 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorneys fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional
backwages that would accrue up to actual payment of separation pay.

SO ORDERED.[14]

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of
which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition
to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of
P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorneys fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED.[15]

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated
April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by
private respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED.[16]

The appellate court denied petitioners motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and
the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence.[17]

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not only the end to be achieved but also the
means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence
of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker.There are
instances when, aside from the employers power to control the employee with respect to the means and methods by
which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or
some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity
of the relationship based on the various positions and responsibilities given to the worker over the period of the latters
employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court
of Appeals,[20] where we held that there is an employer-employee relationship when the person for whom the services
are performed reserves the right to control not only the end achieved but also the manner and means used to achieve
that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing between
the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of
economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the
whole economic activity,[22] such as: (1) the extent to which the services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control
exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the
relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer
for his continued employment in that line of business.[23]

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business.[24] In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards Act is dependency.[25] By analogy, the
benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to
be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the
company and performing functions necessary and desirable for the proper operation of the corporation such as securing
business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating
her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000.[26] When petitioner was designated General Manager,
respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and
the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.[27]

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latters line of business.
In Domasig v. National Labor Relations Commission,[28] we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm
that issues it. Together with the cash vouchers covering petitioners salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private
respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that the latter
were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-
employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was
as Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted
with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy
to the preparation of any document for the corporation, although once in a while she was required to sign prepared
documentation for the company.[30]

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case.[31] Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on
any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and
would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous
witnesses.[32] A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is
subject to the test of credibility and should be received with caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved accounting and tax
services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means and methods by which the work is to be
accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.[34]

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v. Florendo-
Flores,[36] we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee
to continue working for her employer. Hence, her severance from the company was not of her own making and
therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or
creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of
employees. This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to
the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year
of service, where a fraction of at least six months shall be considered as one whole year.

SO ORDERED.
G.R. No. 164156 September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN,respondents.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and
the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which
likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno,
Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.

The Antecedents

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of
television and radio stations, whose operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television
operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by
the National Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different
dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station,
with a monthly compensation of P4,000. They were issued ABS-CBN employees identification cards and were required
to work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following
tasks and duties:

a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-
CBN;

b) Coordinate, arrange personalities for air interviews;

c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;

d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;

e) Assist, anchor program interview, etc; and

f) Record, log clerical reports, man based control radio.4

Their respective working hours were as follows:

Name Time No. of Hours

1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7

8:00 A.M.-12:00 noon

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7

3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

9:00 A.M.-6:00 P.M. (WF) 9 hrs.

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo
Lastimosa.

On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining
Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since
petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6

On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1,
2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the
studio technician. Thus, their revised schedule and other assignments would be as follows:

Monday Saturday

4:30 A.M. 8:00 A.M. Marlene Nazareno.

Miss Nazareno will then be assigned at the Research Dept.

From 8:00 A.M. to 12:00

4:30 P.M. 12:00 MN Jennifer Deiparine

Sunday

5:00 A.M. 1:00 P.M. Jennifer Deiparine

1:00 P.M. 10:00 P.M. Joy Sanchez

Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.

On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of
Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages
against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers.
Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez
issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case.
Respondents received a copy of the Order on May 16, 2001.7Instead of re-filing their complaint with the NLRC within 10
days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit
Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June
18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations:

1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of
more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing
of this complaint on November 20, 2000.

Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached as
follows, thus:

I. Jennifer Deiparine:

Exhibit "A" - ABS-CBN Employees Identification Card

Exhibit "B", - ABS-CBN Salary Voucher from Nov.

Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Exhibit "B-2"

Date employed: September 15, 1995

Length of service: 5 years & nine (9) months

II. Merlou Gerzon - ABS-CBN Employees Identification Card

Exhibit "C"

Exhibit "D"

Exhibit "D-1" &

Exhibit "D-2" - ABS-CBN Salary Voucher from March

1999 to January 2001 at P4,000.00

Date employed: September 1, 1995

Length of service: 5 years & 10 months

III. Marlene Nazareno

Exhibit "E" - ABS-CBN Employees Identification Card

Exhibit "E" - ABS-CBN Salary Voucher from Nov.

Exhibit "E-1" & 1999 to December 2000

Exhibit :E-2"

Date employed: April 17, 1996

Length of service: 5 years and one (1) month

IV. Joy Sanchez Lerasan

Exhibit "F" - ABS-CBN Employees Identification Card

Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.

Exhibit "F-2" & 2000 to Jan. 2001

Exhibit "F-3"

Exhibit "F-4" - Certification dated July 6, 2000

Acknowledging regular status of

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative

Officer May Kima Hife

Date employed: April 15, 1998

Length of service: 3 yrs. and one (1) month9

Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific
assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They
prayed that judgment be rendered in their favor, thus:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling
defendants to pay complainants the following:

1. One Hundred Thousand Pesos (P100,000.00) each

and by way of moral damages;

2. Minimum wage differential;

3. Thirteenth month pay differential;

4. Unpaid service incentive leave benefits;

5. Sick leave;

6. Holiday pay;

7. Premium pay;

8. Overtime pay;

9. Night shift differential.

Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as
a condition precedent for their admission into the existing union and collective bargaining unit of respondent company
where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.

Complainants pray for such other reliefs as are just and equitable under the premises.10

For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of
a particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls
from listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a
program or a particular production. They are considered in the industry as "program employees" in that, as
distinguished from regular or station employees, they are basically engaged by the station for a particular or specific
program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent
information sheets which are updated from time to time, and are thus made the basis to determine the programs to
which they shall later be called on to assist. The program assignments of complainants were as follows:

a. Complainant Nazareno assists in the programs:

1) Nagbagang Balita (early morning edition)

2) Infor Hayupan

3) Arangkada (morning edition)

4) Nagbagang Balita (mid-day edition)

b. Complainant Deiparine assists in the programs:

1) Unzanith

2) Serbisyo de Arevalo
3) Arangkada (evening edition)

4) Balitang K (local version)

5) Abante Subu

6) Pangutana Lang

c. Complainant Gerzon assists in the program:

1) On Mondays and Tuesdays:

(a) Unzanith

(b) Serbisyo de Arevalo

(c) Arangkada (evening edition)

(d) Balitang K (local version)

(e) Abante Sugbu

(f) Pangutana Lang

2) On Thursdays

Nagbagang Balita

3) On Saturdays

(a) Nagbagang Balita

(b) Info Hayupan

(c) Arangkada (morning edition)

(d) Nagbagang Balita (mid-day edition)

4) On Sundays:

(a) Siesta Serenata

(b) Sunday Chismisan

(c) Timbangan sa Hustisya

(d) Sayri ang Lungsod

(e) Haranahan11

Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce,
such as drama talents in other productions. As program employees, a PAs engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be
assigned to new programs upon the cancellation of one program and the commencement of another. As such program
employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of
the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially
since respondents were not covered by the bargaining unit.

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular
employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular
employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay
complainants as follows:

I - Merlou A. Gerzon P12,025.00

II - Marlyn Nazareno 12,025.00

III - Jennifer Deiparine 12,025.00

IV - Josephine Sanchez Lerazan 12,025.00

_________

P48,100.00

plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED
TEN (P52,910.00).

Respondent Veneranda C. Sy is absolved from any liability.

SO ORDERED.13

However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction
to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in
Article 261 of the Labor Code.

Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on
August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their
Appeal Memorandum on September 18, 2001.

For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal,
conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the
NLRC, while respondents filed a partial appeal.

In its appeal, petitioner alleged the following:

1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for
more than thirty (30) calendar days;

2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;

3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the
ground that the same is a prohibited pleading;

4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;

5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive
leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees.14

On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the
decision reads:

WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:

1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in
the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:

a. Deiparine, Jennifer - P 716,113.49

b. Gerzon, Merlou - 716,113.49

c. Nazareno, Marlyn - 716,113.49

d. Lerazan, Josephine Sanchez - 413,607.75

Total - P 2,561,948.22

2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing
their rice subsidy in the CBA, broken down as follows:

a. Deiparine, Jennifer - 60 Sacks

b. Gerzon, Merlou - 60 Sacks

c. Nazareno, Marlyn - 60 Sacks

d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.

SO ORDERED.15

The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents motion
to refile the complaint and admit their position paper. Although respondents were not parties to the CBA between
petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents
monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the
Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and
not as members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor
Code. The validity of respondents claim does not depend upon the interpretation of the CBA.

The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees
who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific
Timber & Supply Company v. National Labor Relations Commission.16

Petitioner filed a motion for reconsideration, which the NLRC denied.

Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural
and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint
of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30,
2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without
jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of referring the same to
the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it
awarded monetary benefits to respondents under the CBA although they are not members of the appropriate
bargaining unit.

On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall
be upon the expiration of the last day to appeal by all parties, should there be several parties to a case. Since
respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her
copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal
Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is not a
ground to strike out the paper from the records, much less dismiss a complaint.

Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular
employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its
project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the
1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees.

Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution17 dated June 16,
2004.

Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:

1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE
NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND
RESOLUTION.

2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.

3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA
BENEFITS TO RESPONDENTS.18

Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.

Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of
the NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal
must be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to
counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint
which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such
order of dismissal had already attained finality and can no longer be set aside.

Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely
appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may
still be given due course in the interest of substantial justice as an exception to the general rule that the negligence of a
counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to
strike it out from the records or dismiss the complaint.

We find no merit in the petition.

We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is
not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and
deprives the appellate court or body of the legal authority to alter the final judgment, much less entertain the appeal.
However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if
greater injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly
followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if
only to serve the greater principles of substantial justice and equity.20

In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 22321 of the Labor Code a
liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.22 We have held in a catena of cases that
technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the
workingman.23

Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary
period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of
November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC
can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater
benefit to both parties.24

We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents
position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure,
all in the interest of due process.25 Indeed, as stressed by the appellate court, respondents failure to submit a position
paper on time is not a ground for striking out the paper from the records, much less for dismissing a
complaint.26 Likewise, there is simply no truth to petitioners assertion that it was denied due process when the Labor
Arbiter admitted respondents position paper without requiring it to file a comment before admitting said position
paper. The essence of due process in administrative proceedings is simply an opportunity to explain ones side or an
opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that
would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for
reconsideration of the Labor Arbiters admission of respondents position paper, and even file a Reply thereto. In fact,
petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in
our statute books to hinder the circumvention by unscrupulous employers of the employees right to security of tenure
by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular
employment defined therein.28

We quote with approval the following pronouncement of the NLRC:

The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001
as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while
suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents
impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents
suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same
procedure, thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same
process twice. Respondents suggestion, betrays its notion of prolonging, rather than promoting the early resolution of
the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without
prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:

"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the
arbitration branch of origin."

the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled
because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides:

"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law
or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and
the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively
and without regard to technicalities of law or procedure, all in the interest of due process."

The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were
belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in
the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the
paper from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate
Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).

"In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).

The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had
filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties
are given the opportunities to submit position papers.

"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).

Thus, the respondent was not deprived of its Constitutional right to due process of law.29

We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not
regular employees of the broadcasting company. Petitioners claim that the functions performed by the respondents are
not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record.

Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they
coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees or independent contractors is
essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous effects to the
legions of production assistants working in the Philippine broadcasting industry.

We agree with respondents contention that where a person has rendered at least one year of service, regardless of the
nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular
as long as the activity exists, the reason being that a customary appointment is not indispensable before one may be
formally declared as having attained regular status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.

In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular
employee:

The primary standard, therefore, of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade or business of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can
be determined by considering the nature of work performed and its relation to the scheme of the particular business or
trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered
regular, but only with respect to such activity and while such activity exists.32

As elaborated by this Court in Magsalin v. National Organization of Working Men:33

Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a
"regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment should
be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law
itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact
that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under
which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced
from the normal activities required in carrying on the particular business or trade. But, although the work to be
performed is only for a specific project or seasonal, where a person thus engaged has been performing the job for at
least one year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity to the
business or trade of the employer. The employment of such person is also then deemed to be regular with respect to
such activity and while such activity exists.34

Not considered regular employees are "project employees," the completion or termination of which is more or less
determinable at the time of employment, such as those employed in connection with a particular construction project,
and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any
employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with
respect to the activity performed and while such activity actually exists.

It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent
fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their employment. Respondents cannot be
considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees.
They are regular employees who perform several different duties under the control and direction of ABS-CBN executives
and supervisors.

Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are
necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have
rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are
employed.35

The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation
necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the
will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the
employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities
performed in relation to the particular trade or business taking into account all the circumstances, and in some cases the
length of time of its performance and its continued existence.36 It is obvious that one year after they were employed by
petitioner, respondents became regular employees by operation of law.37

Additionally, respondents cannot be considered as project or program employees because no evidence was presented
to show that the duration and scope of the project were determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a
particular job or undertaking that is within the regular or usual business of the employer, but which is distinct and
separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and
ends at determined or determinable times. Second, the term project may also refer to a particular job or undertaking
that is not within the regular business of the employer. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends
at determined or determinable times.38

The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking,
the duration and scope of which were specified at the time the employees were engaged for that project.39

In this case, it is undisputed that respondents had continuously performed the same activities for an average of five
years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting
need for their services is sufficient evidence of the necessity and indispensability of such services to petitioners business
or trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to
determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are
vital, necessary and indispensable to the usual trade or business of the employer.41 We note further that petitioner did
not report the termination of respondents employment in the particular "project" to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation
from work, using the prescribed form on employees termination/ dismissals/suspensions.42

As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier
pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors.
Program employees, or project employees, are different from independent contractors because in the case of the latter,
no employer-employee relationship exists.

Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that case,
the Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and
not a regular employee:

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents
claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just like any other
employee.

In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.

B. Payment of Wages

ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and
13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship.

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-
CBN agreed to pay SONZA such huge talent fees precisely because of SONZAS unique skills, talent and celebrity status
not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand
and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.

The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.44

In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required
from them because they were merely hired through petitioners personnel department just like any ordinary employee.

Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee
relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent
contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly
dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates
the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the employer and when the
worker, relative to the employer, does not furnish an independent business or professional service, such work is a
regular employment of such employee and not an independent contractor.45 The Court will peruse beyond any such
agreement to examine the facts that typify the parties actual relationship.46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its
rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with approval the ruling of the appellate court, that the reason why
production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as
project employees by petitioner:

x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under
the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not considered as claims involving the
interpretation or implementation of the collective bargaining agreement. The reason why production assistants were
excluded from the said agreement is precisely because they were classified and treated as project employees by
petitioner.

As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee
but the nature of the activities performed by such employee in relation to the particular business or trade of the
employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their
exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project
employees, is therefore not proper. Finding said private respondents as regular employees and not as mere project
employees, they must be accorded the benefits due under the said Collective Bargaining Agreement.

A collective bargaining agreement is a contract entered into by the union representing the employees and the employer.
However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against non-members. A
collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to
the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of
petitioner.48

Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the
respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer."

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. L-80680 January 26, 1989

DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M.
ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO
UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS
COMMISSION, and HON. EMERSON C. TUMANON, respondents.

V.E. Del Rosario & Associates for respondent CMC.

The Solicitor General for public respondent.

Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.

Mildred A. Ramos for respondent Lily Victoria A. Azarcon.

SARMIENTO, J.:

On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission
for reinstatement and payment of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month
pay, and emergency cost of living allowance pay, against the respondent, the California Manufacturing Company. 1

On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a
motion to dismiss as well as a position paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money claims. 2 On motion of the
petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.

It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi),
which subsequently assigned them to work as "promotional merchandisers" 3 for the former firm pursuant to a
manpower supply agreement. Among other things, the agreement provided that California "has no control or
supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias]
obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed as creating
between [California] and [Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby
agreed that it is the sole responsibility of [Livi] to comply with all existing as well as future laws, rules and regulations
pertinent to employment of labor" 6 and that "[California] is free and harmless from any liability arising from such laws
or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for
[California].7

It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual
basis"; that "[c]ost of living allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that
"[p]ayroll for the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8

The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of
which they signed new agreements with the same period, and so on. Unlike regular California employees, who received
not less than P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in
allowance daily.

The petitioners now allege that they had become regular California employees and demand, as a consequence whereof,
similar benefits. They likewise claim that pending further proceedings below, they were notified by California that they
would not be rehired. As a result, they filed an amended complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is
not, to begin with, the petitioners' employer and that the "retrenchment" had been forced by business losses as well as
expiration of contracts.9 It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby"
status. 10

Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are
California's or Livi's employees.

The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee
relation between the petitioners and California ostensibly in the light of the manpower supply contract,supra, and
consequently, against the latter's liability as and for the money claims demanded. In the same breath, however, the
labor arbiter absolved Livi from any obligation because the "retrenchment" in question was allegedly "beyond its control
." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.

We reverse.

The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of
agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically
designated the former as the petitioners' employer and had absolved the latter from any liability as an employer, will
not erase either party's obligations as an employer, if an employer-employee relation otherwise exists between the
workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it,
and the petitioners cannot be made to suffer from its adverse consequences.

This Court has consistently ruled that the determination of whether or not there is an employer-employee relation
depends upon four standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of
payment of wages; (3) the presence or absence of a power of dismissal; and (4) the presence or absence of a power to
control the putative employee's conduct. 14 Of the four, the right-of-control test has been held to be the decisive
factor. 15

On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:

ART. 106. Contractor or sub-contractor. Whenever an employee enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of
the work performed under the contract, in the same manner and extent that he is liable to employees directly employed
by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provisions of this Code.

There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such person are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor
work had been contracted out by a "labor-only" contractor, and the employees, the former has the responsibility,
together with the "labor-only" contractor, for any valid labor claims, 16 by operation of law. The reason, so we held, is
that the "labor-only" contractor is considered "merely an agent of the employer,"17 and liability must be shouldered by
either one or shared by both. 18

There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in
favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the
provision of the contract that it is "an independent contractor." 20 The nature of one's business is not determined by
self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. 21 The bare
fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with
workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to
perform activities 'which are not directly related to the general business of manufacturing," 22 California's purported
"principal operation activity. " 23 The petitioner's had been charged with "merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila including task and occational [sic] price
tagging," 24 an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had
served as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could
not have itself done; Livi, as a placement agency, had simply supplied it with the manpower necessary to carry out its
(California's) merchandising activities, using its (California's) premises and equipment. 25

Neither Livi nor California can therefore escape liability, that is, assuming one exists.

The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing
conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been
imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case
and the decree of law, and not by declarations of parties.

The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we
held in Philippine Bank of Communications v. NLRC, 27 a temporary or casual employee, under Article 218 of the Labor
Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say
that merchandising is a specific project for the obvious reason that it is an activity related to the day-to-day operations
of California.

It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to
perform the latter's merchandising activities. For then, Livi would have been truly the employer of its employees, and
California, its client. The client, in that case, would have been a mere patron, and not an employer. The employees
would not in that event be unlike waiters, who, although at the service of customers, are not the latter's employees, but
of the restaurant. As we pointed out in the Philippine Bank of Communications case:

xxx xxx xxx

... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage
and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which
perform this discrete service, companies with their own personnel who pick up documents and packages from the
offices of a client or customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the
addressees. In the present case, the undertaking of CESI was to provide its client the bank with a certain number of
persons able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite
number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and office
equipment of the bank and not those of CESI. Messengerial work the delivery of documents to designated persons
whether within or without the bank premises-is of course directly related to the day-to-day operations of the bank.
Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of
items as a distinct and separate line of business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation
placing bodies, as it were, in different client companies for longer or shorter periods of time, ... 28

In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client.
" 29 When it thus provided California with manpower, it supplied California with personnel, as if such personnel had been
directly hired by California. Hence, Article 106 of the Code applies.

The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis
the four barometers referred to earlier, since by fiction of law, either or both shoulder responsibility.

It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it
illegal. Under the Labor Code, genuine job contracts are permissible, provided they are genuine job contracts. But, as we
held in Philippine Bank of Communications, supra, when such arrangements are resorted to "in anticipation of, and for
the very purpose of making possible, the secondment" 30 of the employees from the true employer, the Court will be
justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to
security of tenure.

This brings us to the question: What is the liability of either Livi or California?

The records show that the petitioners bad been given an initial six-month contract, renewed for another six months.
Accordingly, under Article 281 of the Code, they had become regular employees-of-California-and had acquired a secure
tenure. Hence, they cannot be separated without due process of law.

California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and
second, by reason of financial distress brought about by "unfavorable political and economic atmosphere" 31"coupled by
the February Revolution." 32 As to the first objection, we reiterate that the petitioners are its employees and who, by
virtue of the required one-year length-of-service, have acquired a regular status. As to the second, we are not convinced
that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business
reverses as a result alone of the prevailing political and economic climate. We further find the attribution to the
February Revolution as a cause for its alleged losses to be gratuitous and without basis in fact.

California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only
on the State's initiatives to maintain a stable employment record for the country, but more so, on the workingman
himself, amid an environment that is desperately scarce in jobs. And, the National Labor Relations Commission should
have known better than to fall for such unwarranted excuses and nebulous claims.

WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20,
1987, and the resolution, dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company,
to REINSTATE the petitioners with full status and rights of regular employees; and (3) ORDERING the respondent, the
California Manufacturing Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to
PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they
had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3)
years, and (b) all such other and further benefits as may be provided by existing collective bargaining agreement(s) or
other relations, or by law, beginning such time; and (4) ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in addition to those money claims.
The private respondents are likewise ORDERED to PAY the costs of this suit.

IT IS SO ORDERED.
.R. No. 155731 September 3, 2007

LOLITA LOPEZ, petitioner,

vs.
BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES C. TORRES-YAP, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 18, 2002
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 66861, dismissing the petition for certiorari filed before it and
affirming the Decision of the National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 00-03-01729-95; and its
Resolution dated October 16, 2002,2 denying petitioner's Motion for Reconsideration. The NLRC Decision set aside the
Decision of the Labor Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega City and/or Andres
C. Torres-Yap (respondents).

Respondent Bodega City (Bodega City) is a corporation duly registered and existing under and by virtue of the laws of
the Republic of the Philippines, while respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the
"lady keeper" of Bodega City tasked with manning its ladies' comfort room.

In a letter signed by Yap dated February 10, 1995, petitioner was made to explain why the concessionaire agreement
between her and respondents should not be terminated or suspended in view of an incident that happened on February
3, 1995, wherein petitioner was seen to have acted in a hostile manner against a lady customer of Bodega City who
informed the management that she saw petitioner sleeping while on duty.

In a subsequent letter dated February 25, 1995, Yap informed petitioner that because of the incident that happened on
February 3, 1995, respondents had decided to terminate the concessionaire agreement between them.

On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Capital Region, Quezon City, a
complaint for illegal dismissal against respondents contending that she was dismissed from her employment without
cause and due process.

In their answer, respondents contended that no employer-employee relationship ever existed between them and
petitioner; that the latter's services rendered within the premises of Bodega City was by virtue of a concessionaire
agreement she entered into with respondents.

The complaint was dismissed by the Labor Arbiter for lack of merit. However, on appeal, the NLRC set aside the order of
dismissal and remanded the case for further proceedings. Upon remand, the case was assigned to a different Labor
Arbiter. Thereafter, hearings were conducted and the parties were required to submit memoranda and other supporting
documents.

On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner was an employee of respondents
and that the latter illegally dismissed her.3

Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a Resolution, the dispositive portion of
which reads as follows:

WHEREFORE, premises duly considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED, and in
its stead, a new one entered DISMISSING the above-entitled case for lack of merit.4

Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution, but the NLRC denied the same.
Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the CA promulgated the presently
assailed Decision dismissing her special civil action for certiorari. Petitioner moved for reconsideration but her motion
was denied.

Hence, herein petition based on the following grounds:

1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION
DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE LABOR ARBITER FINDING
PETITIONER TO HAVE BEEN ILLEGALLY DISMISSED BY PRIVATE RESPONDENTS.

2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF
PRIVATE RESPONDENTS.5

Petitioner contends that it was wrong for the CA to conclude that even if she did not sign the document evidencing the
concessionaire agreement, she impliedly accepted and thus bound herself to the terms and conditions contained in the
said agreement when she continued to perform the task which was allegedly specified therein for a considerable length
of time. Petitioner claims that the concessionaire agreement was only offered to her during her tenth year of service and
after she organized a union and filed a complaint against respondents. Prior to all these, petitioner asserts that her job
as a "lady keeper" was a task assigned to her as an employee of respondents.

Petitioner further argues that her receipt of a special allowance from respondents is a clear evidence that she was an
employee of the latter, as the amount she received was equivalent to the minimum wage at that time.

Petitioner also contends that her identification card clearly shows that she was not a concessionaire but an employee of
respondents; that if respondents really intended the ID card issued to her to be used simply for having access to the
premises of Bodega City, then respondents could have clearly indicated such intent on the said ID card.

Moreover, petitioner submits that the fact that she was required to follow rules and regulations prescribing appropriate
conduct while she was in the premises of Bodega City is clear evidence of the existence of an employer-employee
relationship between her and petitioners.

On the other hand, respondents contend that the present petition was filed for the sole purpose of delaying the
proceedings of the case; the grounds relied upon in the instant petition are matters that have been exhaustively
discussed by the NLRC and the CA; the present petition raises questions of fact which are not proper in a petition for
review on certiorari under Rule 45 of the Rules of Court; the respective decisions of the NLRC and the CA are based on
evidence presented by both parties; petitioner's compliance with the terms and conditions of the proposed
concessionaire contract for a period of three years is evidence of her implied acceptance of such proposal; petitioner
failed to present evidence to prove her allegation that the subject concessionaire agreement was only proposed to her
in her 10th year of employment with respondent company and after she organized a union and filed a labor complaint
against respondents; petitioner failed to present competent documentary and testimonial evidence to prove her
contention that she was an employee of respondents since 1985.

The main issue to be resolved in the present case is whether or not petitioner is an employee of respondents.

The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.6

While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorariof
CA decisions,7 there are well-recognized exceptions to this rule, as in this case, when the factual findings of the NLRC as
affirmed by the CA contradict those of the Labor Arbiter.8 In that event, it is this Court's task, in the exercise of its equity
jurisdiction, to re-evaluate and review the factual issues by looking into the records of the case and re-examining the
questioned findings.9

It is a basic rule of evidence that each party must prove his affirmative allegation.10 If he claims a right granted by law, he
must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of
that of his opponent.11

The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be
successful if no evidence of such matters were given.12

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a
valid cause.13 However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be
established.14

In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee of
respondent, it is incumbent upon petitioner to prove the employee-employer relationship by substantial evidence.15

The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no cogent reason to
depart from their findings.

The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp.,16 to wit:

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test,
namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the
power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most
important. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship
exists where the person for whom the services areperformed reserves the right to control not only the end achieved,
but also the manner and means to be used in reaching that end.17

To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an
allowance for five (5) days.18 The CA did not err when it held that a solitary petty cash voucher did not prove that
petitioner had been receiving salary from respondents or that she had been respondents' employee for 10 years.

Indeed, if petitioner was really an employee of respondents for that length of time, she should have been able to
present salary vouchers or pay slips and not just a single petty cash voucher. The Court agrees with respondents that
petitioner could have easily shown other pieces of evidence such as a contract of employment, SSS or Medicare forms,
or certificates of withholding tax on compensation income; or she could have presented witnesses to prove her
contention that she was an employee of respondents. Petitioner failed to do so.

Anent the element of control, petitioner's contention that she was an employee of respondents because she was subject
to their control does not hold water.

Petitioner failed to cite a single instance to prove that she was subject to the control of respondents insofar as the
manner in which she should perform her job as a "lady keeper" was concerned.

It is true that petitioner was required to follow rules and regulations prescribing appropriate conduct while within the
premises of Bodega City. However, this was imposed upon petitioner as part of the terms and conditions in the
concessionaire agreement embodied in a 1992 letter of Yap addressed to petitioner, to wit:

January 6, 1992
Dear Ms. Lolita Lopez,

The new owners of Bodega City, 1121 Food Service Corporation offers to your goodself the concessionaire/contract to
provide independently, customer comfort services to assist users of the ladies comfort room of the Club to further
enhance its business, under the following terms and conditions:

1. You will provide at your own expense, all toilet supplies, useful for the purpose, such as toilet papers, soap, hair pins,
safety pins and other related items or things which in your opinion is beneficial to the services you will undertake;

2. For the entire duration of this concessionaire contract, and during the Club's operating hours, you shall maintain the
cleanliness of the ladies comfort room. Provided, that general cleanliness, sanitation and physical maintenance of said
comfort rooms shall be undertaken by the owners of Bodega City;

3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking. More importantly,
you shall always observe utmost courtesy in dealing with the persons/individuals using said comfort room and shall
refrain from doing acts that may adversely affect the goodwill and business standing of Bodega City;

4. All remunerations, tips, donations given to you by individuals/persons utilizing said comfort rooms and/or guests of
Bodega City shall be waived by the latter to your benefit provided however, that if concessionaire receives tips or
donations per day in an amount exceeding 200% the prevailing minimum wage, then, she shall remit fifty percent (50%)
of said amount to Bodega City by way of royalty or concession fees;

5. This contract shall be for a period of one year and shall be automatically renewed on a yearly basis unless notice of
termination is given thirty (30) days prior to expiration. Any violation of the terms and conditions of this contract shall be
a ground for its immediate revocation and/or termination.

6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or 1121 FoodService
Corporation and your goodself, as you are an independent contractor who has represented to us that you possess the
necessary qualification as such including manpower compliment, equipment, facilities, etc. and that any person you may
engage or employ to work with or assist you in the discharge of your undertaking shall be solely your own employees
and/or agents.

1121 FoodService Corporation Bodega City

By:
(Sgd.) ANDRES C. TORRES-YAP

Conforme:

_______________
LOLITA LOPEZ19

Petitioner does not dispute the existence of the letter; neither does she deny that respondents offered her the subject
concessionaire agreement. However, she contends that she could not have entered into the said agreement with
respondents because she did not sign the document evidencing the same.

Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made
by the offeror.20 For a contract, to arise, the acceptance must be made known to the offeror.21 Moreover, the
acceptance of the thing and the cause, which are to constitute a contract, may be express or implied as can be inferred
from the contemporaneous and subsequent acts of the contracting parties.22 A contract will be upheld as long as there is
proof of consent, subject matter and cause; it is generally obligatory in whatever form it may have been entered into.23
In the present case, the Court finds no cogent reason to disregard the findings of both the CA and the NLRC that while
petitioner did not affix her signature to the document evidencing the subject concessionaire agreement, the fact that
she performed the tasks indicated in the said agreement for a period of three years without any complaint or question
only goes to show that she has given her implied acceptance of or consent to the said agreement.

Petitioner is likewise estopped from denying the existence of the subject concessionaire agreement. She should not,
after enjoying the benefits of the concessionaire agreement with respondents, be allowed to later disown the same
through her allegation that she was an employee of the respondents when the said agreement was terminated by
reason of her violation of the terms and conditions thereof.

The principle of estoppel in pais applies wherein -- by one's acts, representations or admissions, or silence when one
ought to speak out -- intentionally or through culpable negligence, induces another to believe certain facts to exist and
to rightfully rely and act on such belief, so as to be prejudiced if the former is permitted to deny the existence of those
facts.24

Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the testimony26 of Felimon Habitan
(Habitan), the concessionaire of the men's comfort room of Bodega City, that he had personal knowledge of the fact that
petitioner was the concessionaire of the ladies' comfort room of Bodega City.

Petitioner also claims that the concessionaire agreement was offered to her only in her 10th year of service, after she
organized a union and filed a complaint against respondents. However, petitioner's claim remains to be an allegation
which is not supported by any evidence. It is a basic rule in evidence that each party must prove his affirmative
allegation,27 that mere allegation is not evidence.28

The Court is not persuaded by petitioner's contention that the Labor Arbiter was correct in concluding that there existed
an employer-employee relationship between respondents and petitioner. A perusal of the Decision29 of the Labor
Arbiter shows that his only basis for arriving at such a conclusion are the bare assertions of petitioner and the fact that
the latter did not sign the letter of Yap containing the proposed concessionaire agreement. However, as earlier
discussed, this Court finds no error in the findings of the NLRC and the CA that petitioner is deemed as having given her
consent to the said proposal when she continuously performed the tasks indicated therein for a considerable length of
time. For all intents and purposes, the concessionaire agreement had been perfected.

Petitioner insists that her ID card is sufficient proof of her employment. In Domasig v. National Labor Relations
Commission,30 this Court held that the complainant's ID card and the cash vouchers covering his salaries for the months
indicated therein were substantial evidence that he was an employee of respondents, especially in light of the fact that
the latter failed to deny said evidence. This is not the situation in the present case. The only evidence presented by
petitioner as proof of her alleged employment are her ID card and one petty cash voucher for a five-day allowance
which were disputed by respondents.

As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed below petitioner's name.31However, she
failed to dispute respondents' evidence consisting of Habitan's testimony,32 that he and the other "contractors" of
Bodega City such as the singers and band performers, were also issued the same ID cards for the purpose of enabling
them to enter the premises of Bodega City.

The Court quotes, with approval, the ruling of the CA on this matter, to wit:

Nor can petitioners identification card improve her cause any better. It is undisputed that non-employees, such as
Felimon Habitan, an admitted concessionaire, musicians, singers and the like at Bodega City are also issued identification
cards. Given this premise, it appears clear to Us that petitioner's I.D. Card is incompetent proof of an alleged employer-
employee relationship between the herein parties. Viewed in the context of this case, the card is at best a "passport"
from management assuring the holder thereof of his unmolested access to the premises of Bodega City.33
With respect to the petty cash voucher, petitioner failed to refute respondent's claim that it was not given to her for
services rendered or on a regular basis, but simply granted as financial assistance to help her temporarily meet her
family's needs.

Hence, going back to the element of control, the concessionaire agreement merely stated that petitioner shall maintain
the cleanliness of the ladies' comfort room and observe courtesy guidelines that would help her obtain the results they
wanted to achieve. There is nothing in the agreement which specifies the methods by which petitioner should achieve
these results. Respondents did not indicate the manner in which she should go about in maintaining the cleanliness of
the ladies' comfort room. Neither did respondents determine the means and methods by which petitioner could ensure
the satisfaction of respondent company's customers. In other words, petitioner was given a free hand as to how she
would perform her job as a "lady keeper." In fact, the last paragraph of the concessionaire agreement even allowed
petitioner to engage persons to work with or assist her in the discharge of her functions.34

Moreover, petitioner was not subjected to definite hours or conditions of work. The fact that she was expected to
maintain the cleanliness of respondent company's ladies' comfort room during Bodega City's operating hours does not
indicate that her performance of her job was subject to the control of respondents as to make her an employee of the
latter. Instead, the requirement that she had to render her services while Bodega City was open for business was
dictated simply by the very nature of her undertaking, which was to give assistance to the users of the ladies' comfort
room.

In Consulta v. Court of Appeals,35 this Court held:

It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct
of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the
recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it
would be a rare contract of service that gives untrammeled freedom to the party hired and eschews any intervention
whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the means
used to achieve it.36

Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present
in the instant case.

It has been established that there has been no employer-employee relationship between respondents and petitioner.
Their contractual relationship was governed by the concessionaire agreement embodied in the 1992 letter. Thus,
petitioner was not dismissed by respondents. Instead, as shown by the letter of Yap to her dated February 15,
1995,37 their contractual relationship was terminated by reason of respondents' termination of the subject
concessionaire agreement, which was in accordance with the provisions of the agreement in case of violation of its
terms and conditions.

In fine, the CA did not err in dismissing the petition for certiorari filed before it by petitioner.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals areAFFIRMED.
Costs against petitioner.

SO ORDERED.
G.R. No. 164820 March 28, 2007

VICTORY LINER, INC., Petitioner,

vs.
PABLO M. RACE, Respondent.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court,1 petitioner Victory Liner Inc. seeks to set
aside the Decision of the Court of Appeals dated 26 April 2004 in CA-G.R. SP No. 74010,2 affirming the Decision and
Resolution of the National Labor Relations Commission (NLRC) dated 30 July 2002 and 30 August 2002, respectively, in
NLRC-CA-029327-01.3 In its Decision and Resolution, the NLRC vacated the Decision4 of Labor Arbiter Salimathar V.
Nambi (Labor Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-08922-99 and ordered the petitioner to reinstate
respondent Pablo M. Race to his former position as a bus driver without loss of seniority rights and other privileges and
benefits with full backwages computed from the time of his illegal dismissal in January 1998 up to his actual
reinstatement.

Culled from the records are the following facts:

In June 1993, respondent was employed by the petitioner as a bus driver. As a requisite for his hiring, the respondent
deposited a cash bond in the amount of 10,000.00 to the petitioner. Respondent was assigned to the Alaminos,
Pangasinan - Cubao, Quezon City, route on the evening schedule.5

On the night of 24 August 1994, respondent drove his assigned bus from Alaminos, Pangasinan, destined to Cubao,
Quezon City. While traversing Moncada, Tarlac, the bus he was driving was bumped by a Dagupan-bound bus. As a
consequence thereof, respondent suffered a fractured left leg and was rushed to the Country Medical and Trauma
Center in Tarlac City where he was operated on and confined from 24 August 1994 up to 10 October 1994. One month
after his release from the said hospital, the respondent was confined again for further treatment of his fractured left leg
at the Specialist Group Hospital in Dagupan City. His confinement therein lasted a month. Petitioner shouldered the
doctors professional fee and the operation, medication and hospital expenses of the respondent in the aforestated
hospitals.6

In January 1998, the respondent, still limping heavily, went to the petitioners office to report for work. He was,
however, informed by the petitioner that he was considered resigned from his job. Respondent refused to accede and
insisted on having a dialogue with the petitioners officer named Yolanda Montes (Montes). During their meeting,
Montes told him that he was deemed to have resigned from his work and to accept a consideration of 50,000.00.
Respondent rejected the explanation and offer. Thereafter, before Christmas of 1998, he again conversed with Montes
who reiterated to him that he was regarded as resigned but raised the consideration therein to 100,000.00.
Respondent rebuffed the increased offer.7

On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner demanding employment-related
money claims. There being no response from the petitioner, the respondent filed before the Labor Arbiter on 1
September 1999 a complaint for (1) unfair labor practice; (2) illegal dismissal; (3) underpayment of wages; (4)
nonpayment of overtime and holiday premium, service incentive leave pay, vacation and sick leave benefits, 13th month
pay; (5) excessive deduction of withholding tax and SSS premium; and (6) moral and exemplary damages and attorneys
fees. This was docketed as NLRC-NCR-00-09-08922-99.8

In its Position Paper dated 27 March 2000, petitioner claimed that respondent was paid strictly on commission basis;
that respondent was a mere field personnel who performed his duties and functions outside the petitioners premises
and whose time of work cannot be determined with reasonable certainty; that petitioner, therefore, was exempted
from paying the respondent overtime compensation, night shift differential, holiday pay and service incentive leave; that
notwithstanding the specific exemptions provided for in the Labor Code, the petitioner gave the respondent benefits
better than those received by the other bus drivers of the petitioner; that during his employment, respondent was
charged with and found guilty of numerous offenses which were sufficient bases for his dismissal; that the prescriptive
period for the filing of an action or claim for reinstatement and payment of labor standard benefits is four years from
the time the cause of action accrued; and that the respondents cause of action against petitioner had already
prescribed because when the former instituted the aforesaid complaint on 1 September 1999, more than five years had
already lapsed from the accrual of his cause of action on 24 August 1994.9

In his Reply dated 30 June 2000, respondent explained that when he stated in his complaint that he was illegally
dismissed on 24 August 1994, what he meant and referred to was the date when he was no longer in a position to drive
since he was hospitalized from 24 August 1994 up to 10 October 1994. Respondent also admitted that it was only in
January 1998 that he informed the petitioner of his intent to report back for work.10

On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint of respondent for lack of merit. He
stated that the prescriptive period for filing an illegal dismissal case is four years from the dismissal of the employee
concerned. Since the respondent stated in his complaint that he was dismissed from work on 24 August 1994 and he
filed the complaint only on 1 September 1999, Labor Arbiter Nambi concluded that respondents cause of action against
petitioner had already prescribed. He also noted that respondent committed several labor-related offenses against the
petitioner which may be considered as just causes for the termination of his employment under Article 282 of the Labor
Code.

Further, Labor Arbiter Nambi opined that respondent was not a regular employee but a mere field personnel and,
therefore, not entitled to service incentive leave, holiday pay, overtime pay and 13th month pay. He also ruled that
respondent failed to present evidence showing that the latter was entitled to the abovestated money claims. The fallo of
the said decision reads:

WHEREFORE, considering that the causes of action in this case rooted from the purported illegal dismissal of Pablo M.
Race on August 24, 1994 when he figured in a vehicular accident, or on October 10, 1994 when he was released from
the hospital, and he filed his complaint only on September 1, 1999 after a lapse of more than five (5) years, the action
has long prescribed, aside from the fact that there is absolutely no evidence that respondent Victory Liner, Inc. is guilty
of unfair labor practice and unjust dismissal, in addition to its specific exemptions from the letters of Article 82 of the
Labor Code, as amended, the complaint and money claims are hereby DISMISSED by reason of prescription and for utter
lack of merit and total absence of legal and factual basis in support thereof.11

Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its Decision reversing the decision of Labor
Arbiter Nambi. It ordered the reinstatement of the respondent to his former position without loss of seniority rights and
other privileges and benefits with full back-wages computed from the time of his illegal dismissal in January 1998 up to
his actual reinstatement. It held that the respondents cause of action accrued, not on 24 August 1994, but in January
1998, when the respondent reported for work but was rejected by the petitioner. Thus, the respondents filing of
complaint on 1 September 1999 was well-within the four-year prescriptive period. It also ruled that respondent was
illegally dismissed by the petitioner as the latter failed to accord him due process. It found that the petitioner did not
give the respondent a written notice apprising him of acts or omissions being complained of and a written notice
informing him of the termination of his employment. In conclusion, the NLRC stated:

WHEREFORE, in view of all the foregoing, respondent-appellees company is hereby ordered to reinstate complainant-
appellant to his former position without loss of seniority rights and other privileges and benefits with full backwages
computed from the time of his illegal dismissal on (sic) January 1988 up to his actual reinstatement. Except for this
modification, the appealed decision is hereby AFFIRMED.12

Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among other things, that the award of
backwages to the respondent computed from January 1988 up to the promulgation of the NLRC Decision on 30 July
2002 was unlawful and unjust considering that respondent was employed only in June 1993. The NLRC, however, denied
the same for lack of merit in its Resolution dated 30 August 2002.

Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30 August 2002, respectively, via a Petition
for Certiorari to the Court of Appeals. On 26 April 2004, the Court of Appeals dismissed the Petition, and found no grave
abuse of discretion on the part of the NLRC. It ruled that the NLRC committed a simple typographical error when it
stated in the fallo that the backwages of respondent shall be computed from January 1988 instead of January
1998 because in the paragraph prior to the dispositive portion, the NLRC categorically declared that the full backwages
of the respondent was to be computed from January1998. In addition, the NLRC has indicated in its Statement of Facts
that respondent was hired by the petitioner sometime in June 1993. It also held that the respondents filing of complaint
on 1 September 1999 was within the four-year prescriptive period since the cause of action accrued when the
respondent reported for work in January 1998 and was informed that he was considered resigned. It ratiocinated that
respondent did not abandon his work and, instead, continued to be an employee of petitioner after he was discharged
from the hospital, viz:

Race did not abandon his work and continued to be an employee of Victory Liner, and their contemporaneous conduct
show this. He has his pay slip covering the period of August 1-15, 1998 (p. 114, record), he was consulting the company
physician who issued him receipts dated October 28, 1996 and July 21 1997 (p. 115, record), and he wrote a letter dated
March 18, 1996 addressed to Gerarda Villa, Vice-President for Victory Liner, signifying his intention to be a dispatcher or
conductor due to his injured leg (p. 116, Record). Further, annexed to Victory Liners Consolidated Supplemental
Position Paper and Formal Offer of Evidence with Erratum is Exhibit "6-A-Race" (p. 56, record) submitted before the
Labor Arbiter, where Race stated before the investigator that after his release from the hospital he reported to Victory
Liner twice a month. He also said that he filed for a sick leave which was approved for the maximum of 120 days. After
his sick leave, he filed for disability leave, and this was also approved and ran until sometime in May 1997.13

It also found that the petitioner failed to comply with the requirements of due process in terminating the employment
of respondent. The decretal portion of the said decision reads:

WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14

Petitioner filed the instant petition on the following grounds:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND JURISPRUDENCE WHEN IT HELD IN
THE ASSAILED DECISION THAT:

A.

THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET PRESCRIBED DESPITE HAVING BEEN FILED
AFTER FOUR (4) YEARS AND NINE (9) MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG;

B.

RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND OTHER BENEFITS CONSIDERING THAT THE
TERMINATION OF HIS EMPLOYMENT BY PETITIONER WAS LEGAL AND JUSTIFIED.15

Anent the first issue, petitioner insisted that respondent had already abandoned his work and ceased to be its employee
since November 1994; that the alleged "pay slip" for the period August 1-15, 1998 was not actually a pay slip but a mere
cash advance/monetary aid extended to the respondent as the large amount of 65,000.00 stated therein was clearly
inconsistent and disproportionate to the respondents low salary of 192.00 a day; that the petitioner merely
accommodated the respondent as its former employee when the latter consulted the petitioners physician on 28
October 1996 and 21 July 1997; that the respondents letter dated 18 March 1996 to the petitioners Vice-President
Gerarda Villa was only an application for the position of dispatcher or conductor and that such application was not
granted; and that the foregoing circumstances cannot be considered as an indication of employer-employee relationship
between the petitioner and respondent.16

Moreover, petitioner asserted that although the respondent reported for work twice a month after he was discharged
from the hospital, it does not imply that the respondent was still considered as an employee at that time by the
petitioner; that it allowed the respondent to have a 120-day sick leave because the latter was a former employee; and
that it granted disability leave to the respondent since the latter was a former employee and that respondents
application for disability leave implied an admission on the part of the respondent that he was no longer fit to work as a
bus driver.17

Petitioner also asseverated that, based on the four-fold tests in determining the employer-employee relationship which
includes the payment of wages and power to control the conduct of the employees, the respondent was no longer its
employee upon the latters discharge from the hospital in November 1994 because at such time, the respondent was no
longer fit to work as a bus driver and respondent did not render services to the petitioner. Thus, petitioner reasoned
that it had no more power to control the conduct of, and it no longer paid any wages to, the respondent.18

Petitioner also argued that the cause of action of respondent had accrued on 10 November 1994; that from 10
November 1994 up to November 1998, the respondent did not render any services to nor filed a case or action against
the petitioner; that the respondents filing of a complaint against petitioner on 1 September 1999 was clearly beyond
the four-year prescriptive period allowed by law; that if the reckoning period of the accrual of a cause of action would be
the time when the written demand was made by the respondent on the petitioner, then the four-year prescriptive
period would be interminable as it could be extended to one or more years; that this is not the spirit or intent of the law;
that otherwise there is no more need to provide the four-year prescriptive period as any complainant may simply allow
the lapse of four years and file the action thereafter and that it would be considered as a compliance by simply making a
purported demand for reinstatement after more than four years.19

These contentions are devoid of merit.

It should be emphasized at the outset that as a rule, this Court is not a trier of facts and this applies with greater force in
labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with those of
the Labor Arbiter and if supported by substantial evidence, are accorded respect and even finality by this Court. But
where the findings of the NLRC and the Labor Arbiter are contradictory, as in the present case, this Court may delve into
the records and examine for itself the questioned findings.20

In illegal dismissal cases, the employee concerned is given a period of four years from the time of his dismissal within
which to institute a complaint. This is based on Article 1146 of the New Civil Code which states that actions based upon
an injury to the rights of the plaintiff must be brought within four years. We explained the rationale in the case of
Callanta v. Carnation Philippines, Inc.,21 thus:

[O]nes employment, profession, trade or calling is a "property right," and the wrongful interference therewith is an
actionable wrong. The right is considered to be property within the protection of a constitutional guaranty of due
process of law. Clearly then, when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of ones dismissal from employment constitutes, in essence, an action predicated "upon
an injury to the rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which must be brought
within four years.
The four-year prescriptive period shall commence to run only upon the accrual of a cause of action of the worker. It is
settled that in illegal dismissal cases, the cause of action accrues from the time the employment of the worker was
unjustly terminated.22 Thus, the four-year prescriptive period shall be counted and computed from the date of the
employees dismissal up to the date of the filing of complaint for unlawful termination of employment.23

Proceeding therefrom, we shall now discuss and determine when the respondents cause of action accrued in order to
ascertain whether the same had already prescribed.

It is error to conclude that the employment of the respondent was unjustly terminated on 10 November 1994 because
he was, at that time, still confined at the Specialist Group Hospital, Dagupan City, for further treatment of his fractured
left leg. He must be considered as merely on sick leave at such time. Likewise, the respondent cannot also be deemed as
illegally dismissed from work upon his release from the said hospital in December 1994 up to December 1997 since the
records show that the respondent still reported for work to the petitioner and was granted sick and disability leave by
the petitioner during the same period.24

The respondent must be considered as unjustly terminated from work in January 1998 since this was the first time he
was informed by the petitioner that he was deemed resigned from his work. During that same occasion, the petitioner,
in fact, tried to convince the respondent to accept an amount of 50,000.00 as a consolation for his dismissal but the
latter rejected it.25 Thus, it was only at this time that the respondents cause of action accrued. Consequently, the
respondents filing of complaint for illegal dismissal on 1 September 1999 was well within the four-year prescriptive
period.

It is also significant to note that from 10 November 1994 up to December 1997, the petitioner never formally informed
the respondent of the fact of his dismissal either through a written notice or hearing. Indeed, it cannot be gainfully said
that respondent was unlawfully dismissed on 10 November 1994 and that the cause of action accrued on that date.

As to the alleged abandonment of work by the respondent on 10 November 1994, it should be emphasized that two
factors must be present in order to constitute an abandonment: (a) the failure to report for work or absence without
valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship. The second factor is the
more determinative factor and is manifested by overt acts from which it may be deduced that the employee has no
more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate
and unjustified. Mere absence from work does not imply abandonment.26

It is apparent that respondent did not abandon his work. His absence from work for a long period of time was obviously
due to the fact that he was still recuperating from two operations on his fractured leg. Petitioner knew this very well. In
fact, petitioner shouldered the respondents medication and hospital expenses during the latters confinement and
operation in two hospitals.27 Moreover, when the respondent was able to walk, although limping heavily, he still
reported for work to the petitioner and was granted sick and disability leave.28 Clearly then, respondent did not abandon
his job on 10 November 1994.

In the same vein, the employer-employee relationship between the petitioner and respondent cannot be deemed to
have been extinguished on 10 November 1994. It should be borne in mind that there are four tests in determining the
existence of employer-employee relationship: (1) the manner of selection and engagement; (2) the payment of wages;
(3) the presence or absence of the power of dismissal; and (4) the presence or absence of the power of control. The so-
called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence
of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end.29
Applying the aforecited tests, the employer-employee relationship between petitioner and respondent continued even
after the latters discharge from the hospital in December 1994 up to 1997. Respondent had reported for work to the
petitioner after his release from the hospital in December 1994. Subsequently, respondent was also granted a 120-day
sick leave and disability leave by the petitioner.30 Respondent also availed himself of the services of the petitioners
physician on two occasions after his release from the hospital in December 1994.31

On the other hand, the petitioner failed to establish the fact that the respondent ceased to be its employee on 10
November 1994. Except for its flimsy reason that the sick leave, disability leave and physician consultations were given
to the respondent as mere accommodations for a former employee, the petitioner did not present any evidence
showing that its employer-employee relationship with the respondent was extinguished on 10 November 1994.

Evidently, these circumstances clearly manifest that petitioner exercised control over the respondent and that the latter
was still under the employment of the petitioner even after December 1994.

Given the foregoing considerations, petitioners assertion that the respondents cause of action accrued on 10
November 1994 must fail.

Apropos the second issue, petitioner contended that the order for the reinstatement of the respondent as bus driver
was unconstitutional for being tantamount to involuntary servitude; that when the respondent filed his complaint for
illegal dismissal, the latter no longer desired to be reinstated to his former position as bus driver; that the respondents
unwillingness to be reinstated as bus driver was also evident from his letter to the petitioner where the respondent
manifested his intention to be hired as a dispatcher or conductor; and that to reinstate the respondent as bus driver
despite the fact that it is against his will is involuntary servitude.32

Petitioner also argued that the order for the reinstatement was contrary to law; that as a common carrier, it is obliged
under the law to observe extra-ordinary diligence in the conduct of its business; that it will violate such obligation if it
will reinstate the respondent as bus driver; that to allow the respondent to drive a bus, despite the fact that the latter
sustained a fractured left leg and was still limping, would imperil the lives of the passengers and the property of the
petitioner; and that the award of backwages to the respondent was unjustified.33

The Labor Code mandates that before an employer may legally dismiss an employee from the service, the requirement
of substantial and procedural due process must be complied with. Under the requirement of substantial due process,
the grounds for termination of employment must be based on just or authorized causes. The following are just causes
for the termination of employment under Article 282 of the Labor Code:

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

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

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

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

(e) Other causes analogous to the foregoing.

Abandonment of work, or the deliberate and unjustified refusal of an employee to resume his employment, may be a
just cause for the termination of employment under paragraph (b) of Article 282 of the Labor Code since it is a form of
neglect of duty.
As earlier discussed, the petitioner insisted that respondent had already abandoned his work on 10 November 1994 and,
thus, the latters employment was deemed terminated as of such date. We, however, found that there was no
abandonment of work on the part of the respondent. Petitioner also alleged that respondent was guilty of
insubordination as well as gross and habitual neglect in the performance of his duties for reckless driving and for being
involved in several vehicular accidents.34 The records, nonetheless, failed to show that the said charges were proven and
that respondent was duly informed and heard with regard to the accusations. Since the petitioner, as an employer, is
burdened to prove just cause for terminating the employment of respondent with clear and convincing evidence, and
that petitioner failed to discharge this burden, we hold that respondent was dismissed without just cause by the
petitioner.

It has been established that petitioners failed to comply with the requirement of substantial due process in terminating
the employment of respondent. We will now determine whether the petitioner had complied with the procedural
aspect of a lawful dismissal.

In the termination of employment, the employer must (a) give the employee a written notice specifying the ground or
grounds of termination, giving to said employee reasonable opportunity within which to explain his side; (b) conduct a
hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires,
is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him;
and (c) give the employee a written notice of termination indicating that upon due consideration of all circumstances,
grounds have been established to justify his termination.35

Petitioner miserably failed to comply with the foregoing requirements. There was nothing in the records which evinces
that petitioner had sent a written notice to the respondent informing him of the ground or grounds of his termination or
the reason why he was deemed resigned. It does not also appear that the petitioner held a hearing or conference where
the respondent was given the opportunity to answer the charges of abandonment, insubordination and habitual neglect
of duty against him. Neither did the petitioner send a written notice to the respondent informing the latter that his
service is terminated after considering all the circumstances.

In view of the fact that the petitioner neglected to observe the substantial and procedural due process in terminating
the employment of respondent, we rule that the latter was illegally dismissed from work by the petitioner.

Consequently, the respondent is entitled to reinstatement without loss of seniority rights, full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement as provided for under Article 279 of the Labor Code.

It appears, however, that respondent was not seeking reinstatement. In his complaint for illegal dismissal against
petitioner, respondent stated:

RELIEF

Complainant/s pray/s for the following:

Reinstatement: No More.36

Respondent also sent to the petitioner a letter applying for the position of a dispatcher or conductor.37 In the said letter,
the respondent explained that since he cannot drive anymore due to his leg injury, he was willing to be hired as a
dispatcher or conductor. The abovestated facts obviously show that respondent was unwilling to be reinstated as a bus
driver.

Even assuming that respondent is willing to be reinstated as petitioners bus driver, the reinstatement is still
unwarranted. There is a serious doubt as to whether the respondent is physically capable of driving a bus based on the
following undisputed facts: (1) respondent was operated on and confined twice in two different hospitals for a fractured
left leg; (2) steel plates were attached to his fractured leg;38 (3) each confinement lasted for a month; (4) after his
discharge from the second confinement, respondent was still limping heavily; (5) when respondent had reported for
work to the petitioner in January 1998, he was also limping;39 and (6) respondent does not have a medical certificate
which guarantees that his leg injury has already healed and that he is now physically capable of driving a bus.

It should be stressed that petitioner is a common carrier and, as such, is obliged to exercise extra-ordinary diligence in
transporting its passengers safely.40 To allow the respondent to drive the petitioners bus under such uncertain condition
would, undoubtedly, expose to danger the lives of the passengers and the property of the petitioner. This would place
the petitioner in jeopardy of violating its extra-ordinary diligence obligation and, thus, may be subjected to numerous
complaints and court suits. It is clear therefore that the reinstatement of respondent not only would be deleterious to
the riding public but would also put unreasonable burden on the business and interest of the petitioner. In this regard, it
should be remembered that an employer may not be compelled to continue to employ such persons whose continuance
in the service will patently be inimical to his interests.41

Based on the foregoing facts and circumstances, the reinstatement of the respondent is no longer feasible. Thus, in lieu
of reinstatement, payment to respondent of separation pay equivalent to one month pay for every year of service is in
order.42

WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the non-reinstatement of respondent. The Decision
of the Court of Appeals dated 26 April 2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following
MODIFICATIONS: Petitioner is ordered to pay the respondent, in lieu of reinstatement, separation pay of ONE (1)
MONTH PAY for every year of service, and full backwages inclusive of allowances and other benefits or their monetary
equivalent from 1 January 1998 up to the finality of this Decision. No costs.

SO ORDERED.
 BIENVENIDO D. GOMA, G.R. No. 160905

Petitioner,

Present:

YNARES-SANTIAGO, J.,

Chairperson,

- versus - AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

REYES, JJ.

PAMPLONA PLANTATIONINCORPORATED, Promulgated:

Respondent.

July 4, 2008

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

DECISION

NACHURA, J.:

For review is the Decision[1] of the Court of Appeals (CA) dated August 27, 2003 granting respondent Pamplona
Plantation, Inc.s petition for certiorari and its Resolution[2] dated November 11, 2003 denying petitioner Bienvenido
Gomas motion for reconsideration, in CA-G.R. SP No. 74892.
Petitioner commenced[3] the instant suit by filing a complaint for illegal dismissal, underpayment of wages, non-payment
of premium pay for holiday and rest day, five (5) days incentive leave pay, damages and attorneys fees, against the
respondent. The case was filed with the Sub-Regional Arbitration Branch No. VII of Dumaguete City. Petitioner claimed
that he worked as a carpenter at the Hacienda Pamplona since 1995; that he worked from 7:30 a.m. to12:00 noon and
from 1:00 p.m. to 5:00 p.m. daily with a salary rate of P90.00 a day paid weekly; and that he worked continuously until
1997 when he was not given any work assignment.[4] On a claim that he was a regular employee, petitioner alleged to
have been illegally dismissed when the respondent refused without just cause to give him work assignment. Thus, he
prayed for backwages, salary differential, service incentive leave pay, damages and attorneys fees.[5]

On the other hand, respondent denied having hired the petitioner as its regular employee. It instead argued that
petitioner was hired by a certain Antoy Caaveral, the manager of the hacienda at the time it was owned by Mr. Bower
and leased by Manuel Gonzales, a jai-alai pelotari known as Ybarra.[6] Respondent added that it was not obliged to
absorb the employees of the former owner.

In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created for the operation of tourist resorts, hotels and
bars. Petitioner, thus, rendered service in the construction of the facilities of PPLC. If at all, petitioner was a project but
not a regular employee.[7]

On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed the case for lack of merit.[8] The Labor Arbiter
concluded that petitioner was hired by the former owner, hence, was not an employee of the respondent.Consequently,
his money claims were denied.[9]

On appeal to the National Labor Relations Commission (NLRC), the petitioner obtained favorable judgment when the
tribunal reversed and set aside the Labor Arbiters decision. The dispositive portion of the NLRC decision reads:

WHEREFORE, the Decision of the Labor Arbiter is hereby SET ASIDE and a new one is hereby issued ORDERING the
respondent, Pamplona Plantation Incorporated, the following:

1) to reinstate the complainant, BIENVENIDO D. GOMA to his former position immediately without loss of seniority
rights and other privileges;

2) to pay the same complainant TWELVE THOUSAND THREE HUNDRED FIFTY-NINE PESOS (P12,359.00) in salary
differentials;

3) to pay to the same complainant ONE HUNDRED ONE THOUSAND SIX HUNDRED SIXTY PESOS (P101,660.00) in
backwages to be updated until actual reinstatement; and
4) to pay attorneys fee in the amount of ELEVEN THOUSAND FOUR HUNDRED TWO PESOS (P11,402.00) which is
equivalent to ten percent (10%) of the total judgment award.

The respondent is further ordered to pay the aggregate amount of ONE HUNDRED FOURTEEN THOUSAND AND
NINETEEN PESOS (P114,019.00) to the complainant through the cashier of this Commission within ten (10) days from
receipt hereof.

SO ORDERED.[10]

Respondents motion for reconsideration was denied by the NLRC on September 9, 2002.[11]

The NLRC upheld the existence of an employer-employee relationship, ratiocinating that it was difficult to believe that a
simple carpenter from far away Pamplona would go to Dumaguete City to hire a competent lawyer to help him secure
justice if he did not believe that his right as a laborer had been violated.[12] It added that the creation of the PPLC
required the tremendous task of constructing hotels, inns, restaurants, bars, boutiques and service shops, thus involving
extensive carpentry work. As an old carpentry hand in the old corporation, the possibility of petitioners employment
was great.[13] The NLRC likewise held that the respondent should have presented its employment records if only to show
that petitioner was not included in its list of employees; its failure to do so was fatal.[14] Considering that petitioner
worked for the respondent for a period of two years, he was a regular employee.[15]

Aggrieved, respondent instituted a special civil action for certiorari under Rule 65 before the Court of Appeals which
granted the same; and consequently annulled and set aside the NLRC decision. The CA disposed, as follows:

WHEREFORE, premises considered, the instant petition is GRANTED. The assailed decision of the NLRC dated October
24, 2000, as well as the Resolution dated September 9, 2002 in NLRC Case No. V-000882-99, RAB VII-0088-98-D are
herebyANNULLED and SET ASIDE. The complaint is ordered DISMISSED.

SO ORDERED.[16]

Contrary to the NLRCs finding, the CA concluded that there was no employer-employee relationship. The CA stressed
that petitioner having raised a positive averment, had the burden of proving the existence of an employer-employee
relationship. Respondent, therefore, had no obligation to prove its negative averment.[17] The appellate court further
held that while the respondents business required the performance of occasional repairs and carpentry work, the
retention of a carpenter in its payroll was not necessary or desirable in the conduct of its usual business.[18] Lastly,
although the petitioner was an employee of the former owner of the hacienda, the respondent was not required to
absorb such employees because employment contracts are in personam and binding only between the parties.[19]
Petitioner now comes before this Court raising the sole issue:

WHETHER OR NOT THE DECISION OF [THE] COURT OF APPEALS DATED AUGUST 27, 2003, REVERSING AND SETTING
ASIDE THE NLRC (Fourth Division, Cebu City) RULING THAT THE PETITIONER WAS NOT ILLEGALLY DISMISSED AS HE WAS
NOT AN EMPLOYEE OF RESPONDENT, IS CONTRARY TO LAW AND JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT
IN CONSONANCE WITH THE EVIDENCE ON RECORD.[20]

The disposition of this petition rests on the resolution of the following questions: 1) Is the petitioner a regular employee
of the respondent? 2) If so, was he illegally dismissed from employment? and 3) Is he entitled to his monetary claims?

Petitioner insists that he was a regular employee of the respondent corporation. The respondent, on the other hand,
counters that it did not hire the petitioner, hence, he was never an employee, much less a regular one.

Both the Labor Arbiter and the CA concluded that there was no employer-employee relationship between the petitioner
and respondent. They based their conclusion on the alleged admission of the petitioner that he was previously hired by
the former owner of the hacienda. Thus, they rationalized that since the respondent was not obliged to absorb all the
employees of the former owner, petitioners claim of employment could not be sustained. The NLRC, on the other hand,
upheld petitioners claim of regular employment because of the respondents failure to present its employment records.

The existence of an employer-employee relationship involves a question of fact which is well within the province of the
CA to determine. Nonetheless, given the reality that the CAs findings are at odds with those of the NLRC, the Court is
constrained to probe into the attendant circumstances as appearing on record.[21]

A thorough examination of the records compels this Court to reach a conclusion different from that of the CA. It is true
that petitioner admitted having been employed by the former owner prior to 1993 or before the respondent took over
the ownership and management of the plantation, however, he likewise alleged having been hired by the respondent as
a carpenter in 1995 and having worked as such for two years until 1997. Notably, at the outset, respondent categorically
denied that it hired the petitioner. Yet, in its petition filed before the CA, respondent made this admission:

Private respondent [petitioner herein] cannot be considered a regular employee since the nature of his work is merely
project in character in relation to the construction of the facilities of the Pamplona Plantation Leisure Corporation.

He is a project employee as he was hired 1) for a specific project or undertaking, and 2) the completion or termination of
such project or undertaking has been determined at the time of engagement of the employee. x x x.
xxxx

In other words, as regards those workers who worked in 1995 specifically in connection with the construction of the
facilities of Pamplona Plantation Leisure Corporation, their employment was definitely temporary in character and not
regular employment. Their employment was deemed terminated by operation of law the moment they had finished the
job or activity under which they were employed.[22]

Thus, departing from its initial stand that it never hired petitioner, the respondent eventually admitted the existence of
employer-employee relationship before the CA. It, however, qualified such admission by claiming that it was PPLC that
hired the petitioner and that the nature of his employment therein was that of a project and not regular employee.

Parenthetically, this Court in Pamplona Plantation Company, Inc. v. Tinghil[23] and Pamplona Plantation Company v.
Acosta[24] had pierced the veil of corporate fiction and declared that the two corporations,[25] PPLC and the herein
respondent, are one and the same.

By setting forth these defenses, respondent, in effect, admitted that petitioner worked for it, albeit in a different
capacity. Such an allegation is in the nature of a negative pregnant, a denial pregnant with the admission of the
substantial facts in the pleadings responded to which are not squarely denied, and amounts to an acknowledgment that
petitioner was indeed employed by respondent.[26]

The employment relationship having been established, the next question we must answer is: Is the petitioner a regular
or project employee?

We find the petitioner to be a regular employee.

Article 280 of the Labor Code, as amended, provides:

ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or service
to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.

As can be gleaned from this provision, there are two kinds of regular employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to
the activity in which they are employed.[27] Simply stated, regular employees are classified into: regular employees by
nature of work; and regular employees by years of service. The former refers to those employees who perform a
particular activity which is necessary or desirable in the usual business or trade of the employer, regardless of their
length of service; while the latter refers to those employees who have been performing the job, regardless of the nature
thereof, for at least a year.[28] If the employee has been performing the job for at least one year, even if the performance
is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as
sufficient evidence of the necessity, if not indispensability, of that activity to the business.[29]

Respondent is engaged in the management of the Pamplona Plantation as well as in the operation of tourist resorts,
hotels, inns, restaurants, etc. Petitioner, on the other hand, was engaged to perform carpentry work. His services were
needed for a period of two years until such time that the respondent decided not to give him work assignment
anymore. Owing to his length of service, petitioner became a regular employee, by operation of law.
Respondent argues that, even assuming that petitioner can be considered an employee, he cannot be classified as a
regular employee, but merely as a project employee whose services were hired only with respect to a specific job and
only while that specific job existed.

A project employee is assigned to carry out a specific project or undertaking the duration and scope of which are
specified at the time the employee is engaged in the project. A project is a job or undertaking which is distinct, separate
and identifiable from the usual or regular undertakings of the company. A project employee is assigned to a project
which begins and ends at determined or determinable times.[30]

The principal test used to determine whether employees are project employees as distinguished from regular
employees, is whether or not the employees were assigned to carry out a specific project or undertaking, the duration
or scope of which was specified at the time the employees were engaged for that project.[31] In this case, apart from
respondents bare allegation that petitioner was a project employee, it had not shown that petitioner was informed that
he would be assigned to a specific project or undertaking. Neither was it established that he was informed of the
duration and scope of such project or undertaking at the time of his engagement.

Most important of all, based on the records, respondent did not report the termination of petitioners supposed project
employment to the Department of Labor and Employment (DOLE). Department Order No. 19 (as well as the old Policy
Instructions No. 20) requires employers to submit a report of an employees termination to the nearest public
employment
office every time the employment is terminated due to a completion of a project. Respondents failure to file termination
reports, particularly on the cessation of petitioners employment, was an indication that the petitioner was not a project
but a regular employee.[32]

We stress herein that the law overrides such conditions which are prejudicial to the interest of the worker whose weak
bargaining position necessitates the succor of the State. What determines whether a certain employment is regular or
otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces. Neither is it the
procedure of hiring the employee nor the manner of paying the salary or the actual time spent at work. It is the
character of the activities performed by the employer in relation to the particular trade or business of the employer,
taking into account all the circumstances, including the length of time of its performance and its continued
existence. Given the attendant circumstances in the case at bar, it is obvious that one year after he was employed by the
respondent, petitioner became a regular employee by operation of law.[33]

As to the question of whether petitioner was illegally dismissed, we answer in the affirmative.

Well-established is the rule that regular employees enjoy security of tenure and they can only be dismissed for just
cause and with due process, i.e., after notice and hearing. In cases involving an employees dismissal, the burden is on
the employer to prove that the dismissal was legal. This burden was not amply discharged by the respondent in this
case.

Obviously, petitioners dismissal was not based on any of the just or authorized causes enumerated under Articles
282,[34] 283[35] and 284[36] of the Labor Code, as amended. After working for the respondent for a period of two years,
petitioner was shocked to find out that he was not given any work assignment anymore. Hence, the requirement of
substantive due process was not complied with.

Apart from the requirement that the dismissal of an employee be based on any of the just or authorized causes, the
procedure laid down in Book VI, Rule I, Section 2 (d) of the Omnibus Rules Implementing the Labor Code, must be
followed.[37] Failure to observe the rules is a violation of the employees right to procedural due process.

In view of the non-observance of both substantive and procedural due process, in accordance with the guidelines
outlined by this Court in Agabon v. National Labor Relations Commission,[38] we declare that petitioners dismissal from
employment is illegal.[39]

Having shown that petitioner is a regular employee and that his dismissal was illegal, we now discuss the propriety of
the monetary claims of the petitioner. An illegally dismissed employee is entitled to: (1) either reinstatement, if viable,
or separation pay if reinstatement is no longer viable, and (2) backwages.[40]

In the instant case, we are prepared to concede the impossibility of the reinstatement of petitioner considering that his
position or any equivalent position may no longer be available in view of the length of time that this case has been
pending. Moreover, the protracted litigation may have seriously abraded the relationship of the parties so as to render
reinstatement impractical. Accordingly, petitioner may be awarded separation pay in lieu of reinstatement.[41]
Petitioners separation pay is pegged at the amount equivalent to petitioners one (1) month pay, or one-half (1/2) month
pay for every year of service, whichever is higher, reckoned from his first day of employment up to finality of this
decision. Full backwages, on the other hand, should be computed from the date of his illegal dismissal until the finality
of this decision.

On petitioners entitlement to attorneys fees, we must take into account the fact that petitioner was illegally dismissed
from his employment and that his wages and other benefits were withheld from him without any valid and legal
basis. As a consequence, he was compelled to file an action for the recovery of his lawful wages and other benefits and,
in the process, incurred expenses. On these bases, the Court finds that he is entitled to attorneys fees equivalent to ten
percent (10%) of the monetary award.[42]

Lastly, we affirm the NLRCs award of salary differential. In light of our foregoing disquisition on the illegality of
petitioners dismissal, and our adoption of the NLRCs findings, suffice it to state that such issue is a question of fact, and
we find no cogent reason to disturb the findings of the labor tribunal.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals dated August 27,
2003 and its Resolution dated November 11, 2003 in CA-G.R. SP No. 74892 are REVERSED and SET ASIDE. Petitioner is
found to have been illegally dismissed from employment and thus, is ENTITLED to: 1) Salary Differential embodied in the
NLRC decision dated October 24, 2000 in NLRC Case No. V-000882-99; 2) Separation Pay; 3) Backwages; and 4) Attorneys
fees equivalent to ten percent (10%) of the monetary awards. Upon finality of this judgment, let the records of the case
be remanded to the NLRC for the computation of the exact amounts due the petitioner.

SO ORDERED.
G.R. No. 100947 May 31, 1993

PNOC ENERGY DEVELOPMENT CORPORATION and MARCELINO TONGCO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MANUEL S. PINEDA, respondents.

Alikpala, Gomez & Associates Law Office for petitioners.

Filomeno A. Zieta for private respondent.

NARVASA, C.J.:

The applicability to private respondent Manuel S. Pineda of Section 66 of the Election Code is what is chiefly involved in
the case at bar. Said section reads as follows:

Sec. 66. Candidates holding appointive office or position. Any person holding a public appointive office or position,
including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or
controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of
candidacy.

Manuel S. Pineda was employed with the Philippine National Oil Co.-Energy Development Corp. (PNOC-EDC), as
subsidiary of the Philippine National Oil Co., from September 17, 1981, when he was hired as clerk, to January 26, 1989,
when his employment was terminated. The events leading to his dismissal from his job are not disputed.

In November, 1987, while holding the position of Geothermal Construction Secretary, Engineering and Construction
Department, at Tongonan Geothermal Project, Ormoc City, Pineda decided to run for councilor of the Municipality of
Kananga, Leyte, in the local elections scheduled in January, 1988, and filed the corresponding certificate of candidacy for
the position. Objection to Pineda's being a candidate while retaining his job in the PNOC-EDC was shortly thereafter
registered by Mayor Arturo Cornejos of Kananga, Leyte. The mayor communicated with the PNOC-EDC thru Engr.
Ernesto Patanao, Resident Manager, Tongonan Geothermal Project to express the view that Pineda could not actively
participate in politics unless he officially resigned from PNOC-EDC.1 Nothing seems to have resulted from this protest.

The local elections in Leyte, scheduled for January, 1988, were reset to and held on February 1, 1988. Pineda was among
the official candidates voted for, and eventually proclaimed elected to, the office of councilor. Some vacillation appears
to have been evinced by Pineda at about this time. On February 8, 1988, he wrote to the COMELEC Chairman, expressing
his desire to withdraw from the political contest on account of what he considered to be election irregularities;2 and on
March 19, 1988, he wrote to the Secretary of Justice seeking legal opinion on the question, among others, of whether or
not he was "considered automatically resigned upon . . . filing of . . . (his) certificate of candidacy," and whether or not,
in case he was elected, he could "remain appointed to any corporate offspring of a government-owned or controlled
corporation."3 Nevertheless, Pineda took his oath of office in June, 1988 as councilor-elect of the Municipality of
Kananga, Leyte.4 And despite so qualifying as councilor, and assuming his duties as such, he continued working for
PNOC-EDC as the latter's Geothermal Construction Secretary, Engineering and Construction Department, at Tongonan
Geothermal Project, Ormoc City.

On June 7, 1988, Marcelino M. Tongco, Department Manager of the Engineering and Construction Department, PNOC-
EDC, addressed an inquiry to the latter's Legal Department regarding the status of Manuel S. Pineda as employee in view
of his candidacy for the office of municipal councilor.5 In response, the Legal Department rendered an opinion to the
effect that Manuel S. Pineda should be considered ipso facto resigned upon the filing of his Certificate of Candidacy in
November, 1987, in accordance with Section 66 of the Omnibus Election Code.6
Pineda appealed the PNOC-EDC Legal Department's ruling to N.C. Vasquez, the Vice-President of PNOC-EDC, on July 14,
1988. In his letter of appeal,7 he invoked a "court ruling in the case of Caagusan and Donato vs. PNOC-Exploration Corp. .
. . (to the effect that) while the government-owned or controlled corporations are covered by the Civil Service Law (as is
taken to mean in Sec. 66 of the Omnibus Election Code of 1985) (sic), the subsidiaries or corporate offsprings are not." In
the same letter he declared his wish to continue resign from his position as councilor/member of the Sangguniang
Bayan.

He also wrote a letter dated October 1, 1988 to the Department of Local Government inquiring about the status of his
employment with PNOC-EDC in relation to his election as member of the Sangguniang Bayan. He was advised by DLG
Undersecretary Jacinto T. Rubillo, Jr., by letter dated March 31, 1989, that there was no legal impediment to his
continuing in his employment with PNOC-EDC while holding at the same time the elective position of municipal
councilor. Cited as basis by Undersecretary Rubillo was Section 2(1) Article IX-B of the 1987 Constitution and this Court's
ruling in NASECO vs. NLRC, 168 SCRA 122. Undersecretary Rubillo went on to say that Pineda could receive his per
diems as municipal councilor as well as the corresponding representation and transportation allowance [RATA]
"provided the PNOC-EDC charter does not provide otherwise and public shall not be prejudiced."8

The PNOC-EDC did not, however, share the Undersecretary's views. On January 26, 1989, the PNOC-EDC, through
Marcelino Tongco (Manager, Engineering and Construction Department), notified Manuel S. Pineda in writing (1) that
after having given him "ample time" to make some major adjustments before . . . separation from the company," his
employment was being terminated pursuant to Section 66 of the Omnibus Election Code, effective upon receipt of
notice, and (2) that he was entitled to "proper compensation" for the services rendered by him from the time he filed his
certificate of candidacy until his actual separation from the service.9

On October 16, 1989, Pineda lodged a complaint for illegal dismissal in the Regional Arbitration Branch No. VIII, NLRC,
Tacloban City. Impleaded as respondents were the PNOC-EDC and the Manager of its Engineering and Construction
Department, Marcelino M. Tongco.10

After due proceedings, Labor Arbiter Araceli H. Maraya, to whom the case was assigned, rendered a decision on
December 28, 1990,11 declaring Manuel S. Pineda's dismissal from the service illegal, and ordering his reinstatement to
his former position without loss of seniority rights and payment of full back wages corresponding to the period from his
illegal dismissal up to the time of actual reinstatement. The Arbiter pointed out that the ruling relied upon by PNOC-EDC
to justify Pineda's dismissal from the service, i.e., NHA v. Juco,12 had already been abandoned; and that "as early as
November 29, 1988," the governing principle laid down by case law in light of Section 2 (1), Article IX-B of the 1987
Constitution13 has been that government-owned or controlled corporations incorporated under the Corporation
Code, the general law as distinguished from those created by special charter are not deemed to be within the
coverage of the Civil Service Law, and consequently their employees, like those of the PNOC-EDC, are subject to the
provisions of the Labor Code rather than the Civil Service Law.14

The PNOC-EDC filed an appeal with the National Labor Relations Commission. The latter dismissed the appeal for lack of
merit in a decision dated April 24, 1991. 15 PNOC-EDC sought reconsideration;16 its motion was denied by the
Commission in a Resolution dated June 21, 1991.17

It is this decision of April 24, 1991 and the Resolution of June 21, 1991 that the PNOC-EDC seeks to be annulled and set
aside in the special civil action for certiorari at bar. It contends that the respondent Commission gravely abused its
discretion:

1) when it ruled that Manuel S. Pineda was not covered by the Civil Service Rules when he filed his candidacy for the
1988 local government elections in November 1987;
2) when it ruled that Pineda was not covered by the Omnibus Election Code at the time he filed his certificate of
candidacy for the 1988 local elections;

3) when it ruled that Pineda was illegally dismissed despite the fact that he was considered automatically resigned
pursuant to Section 66 of the Omnibus Election Code; and

4) when it ruled that Pineda could occupy a local government position and be simultaneously employed in a
government-owned or controlled corporation, a situation patently violative of the constitutional prohibition on
additional compensation.

Acting on the petition, this Court issued a temporary restraining order enjoining the respondent NLRC from
implementing or enforcing its decision and resolution dated April 24, 1991 and June 21, 1991, respectively.

In the comment required of him by the Court, the Solicitor General expressed agreement with the respondent
Commission's holding that Manuel Pineda had indeed been illegally separated from his employment in the PNOC-EDC; in
other words, that his running for public office and his election thereto had no effect on his employment with the PNOC-
EDC, a corporation not embraced within the Civil Service.

Petitioner PNOC-EDC argues that at the time that Pineda filed his certificate of candidacy for municipal councilor in
November, 1987, the case law "applicable as far as coverage of government-owned or controlled corporations are
concerned . . . ( was to the following effect):18

As correctly pointed out by the Solicitor General, the issue of jurisdiction had been resolved in a string of cases starting
with the National Housing Authority vs. Juco (134 SCRA 172) followed byMetropolitan Waterworks and Sewerage System
vs. Hernandez (143 SCRA 602) and the comparatively recent case of Quimpo vs. Sandiganbayan (G.R. No. 72553, Dec. 2,
1986) in which this Court squarely ruled that PNOC subsidiaries, whether or not originally created as government-owned
or controlled corporations are governed by the Civil Service Law.

This doctrine, petitioner further argues, was not "automatically reversed" by the 1987 Constitution because not
"amended or repealed by the Supreme Court or the Congress;"19 and this Court's decision in November, 1988,
inNational Service Corporation vs. NLRC, supra20 abandoning the Juco ruling "cannot be given retroactive effect . . .
(in view of ) the time-honored principle . . . that laws (judicial decisions included) shall have no retroactive effect, unless
the contrary is provided (Articles 4 and 8 of the New Civil Code of the Philippines)."

Section 2 (1), Article IX of the 1987 Constitution provides as follows:

The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters.

Implicit in the provision is that government-owned or controlled corporations without original charters i.e., organized
under the general law, the Corporation Code are not comprehended within the Civil Service Law. So has this Court
construed the provision.21

In National Service Corporation (NASECO), et al. v. NLRC, et al., etc.,22 decided on November 29, 1988, it was ruled that
the 1987 Constitution "starkly varies" from the 1973 charter upon which the Juco doctrine rested in that unlike the
latter, the present constitution qualifies the term, "government-owned or controlled corporations," by the phrase, "with
original charter;" hence, the clear implication is that the Civil Service no longer includes government-owned or
controlled corporations without original charters, i.e., those organized under the general corporation law.23 NASECO
further ruled that the Juco ruling should not apply retroactively, considering that prior to its promulgation on January 17,
1985, this Court had expressly recognized the applicability of the Labor Code to government-owned or controlled
corporations.24
Lumanta, et al. v. NLRC, et al.,25 decided on February 8, 1989, made the same pronouncement: that Juco had been
superseded by the 1987 Constitution for implicit in the language of Section 2 (1), Article IX thereof, is the proposition
that government-owned or controlled corporations without original charter do not fall under the Civil Service Law but
under the Labor Code.

And in PNOC-EDC v. Leogardo, etc., et al.,26 promulgated on July 5, 1989, this Court ruled that conformably with the
apparent intendment of the NASECO case, supra, since the PNOC-EDC, a government-owned or controlled company had
been incorporated under the general Corporation Law, its employees are subject to the provisions of the Labor Code.

It is thus clear that the Juco doctrine prevailing at the time of the effectivity of the fundamental charter in 1987 i.e.,
that government-owned or controlled corporations were part of the Civil Service and its employees subject to Civil
Service laws and regulations,27 regardless of the manner of the mode of their organization or incorporation is no
longer good law, being at "stark variance," to paraphrase NASECO, with the 1987 Constitution. In other words, and
contrary to the petitioner's view, as of the effectivity of the 1987 Constitution, government-owned or controlled
corporations without original charters, or, as Mr. Justice Cruz insists in his concurring opinion in NASECO v. NLRC,28a
legislative charter (i.e., those organized under the Corporation Code), ceased to pertain to the Civil Service and its
employees could no longer be considered as subject to Civil Service Laws, rules or regulations.

The basic question is whether an employee in a government-owned or controlled corporations without an original
charter (and therefore not covered by Civil Service Law) nevertheless falls within the scope of Section 66 of the Omnibus
Election Code, viz.:

Sec. 66. Candidates holding appointive office or position. Any person holding a public appointive office or position,
including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or
controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of
candidacy.

When the Congress of the Philippines reviewed the Omnibus Election Code of 1985, in connection with its deliberations
on and subsequent enactment of related and repealing legislation i.e., Republic Acts Numbered 7166: "An Act
Providing for Synchronized National and Local Elections and for Electoral Reforms, Authorizing Appropriations Therefor,
and for Other Purposes" (effective November 26, 1991), 6646: "An Act Introducing Additional Reforms in the Electoral
System and for Other Purposes" (effective January 5, 1988) and 6636: "An Act Resetting the Local Elections, etc.,
(effective November 6, 1987), it was no doubt aware that in light of Section 2 (1), Article IX of the 1987 Constitution: (a)
government-owned or controlled corporations were of two (2) categories those with original charters, and those
organized under the general law and (b) employees of these corporations were of two (2) kinds those covered by
the Civil Service Law, rules and regulations because employed in corporations having original charters, and those not
subject to Civil Service Law but to the Labor Code because employed in said corporations organized under the general
law, or the Corporation Code. Yet Congress made no effort to distinguish between these two classes of government-
owned or controlled corporations or their employees in the Omnibus Election Code or subsequent related statutes,
particularly as regards the rule that any employee "in government-owned or controlled corporations, shall be
considered ipso facto resigned from his office upon the filing of his certificate of candidacy."29

Be this as it may, it seems obvious to the Court that a government-owned or controlled corporation does not lose its
character as such because not possessed of an original charter but organized under the general law. If a corporation's
capital stock is owned by the Government, or it is operated and managed by officers charged with the mission of
fulfilling the public objectives for which it has been organized, it is a government-owned or controlled corporation even
if organized under the Corporation Code and not under a special statute; and employees thereof, even if not covered by
the Civil Service but by the Labor Code, are nonetheless "employees in government-owned or controlled corporations,"
and come within the letter of Section 66 of the Omnibus Election Code, declaring them "ipso facto resigned from . . .
office upon the filing of . . . (their) certificate of candidacy."

What all this imports is that Section 66 of the Omnibus Election Code applies to officers and employees in government-
owned or controlled corporations, even those organized under the general laws on incorporation and therefore not
having an original or legislative charter, and even if they do not fall under the Civil Service Law but under the Labor
Code. In other words, Section 66 constitutes just cause for termination of employment in addition to those set forth in
the Labor Code, as amended.

The conclusions here reached make unnecessary discussion and resolution of the other issues raised in this case.

WHEREFORE, the petition is GRANTED; the decision of public respondent National Labor Relations Commission dated
April 24, 1991 and its Resolution dated June 21, 1991 are NULLIFIED AND SET ASIDE; and the complaint of Manuel S.
Pineda is DISMISSED. No costs.

SO ORDERED.
G.R. No. 87676 December 20, 1989

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL PARKS DEVELOPMENT COMMITTEE,petitioner,

vs.
THE HON. COURT OF APPEALS and THE NATIONAL PARKS DEVELOPMENT SUPERVISORY ASSOCIATION & THEIR
MEMBERS, respondents.

Bienvenido D. Comia for respondents.

GRIO-AQUINO, J.:

The Regional Trial Court of Manila, Branch III, dismissed for lack of jurisdiction, the petitioner's complaint in Civil Case
No. 88- 44048 praying for a declaration of illegality of the strike of the private respondents and to restrain the same. The
Court of Appeals denied the petitioner's petition for certiorari, hence, this petition for review.

The key issue in this case is whether the petitioner, National Parks Development Committee (NPDC), is a government
agency, or a private corporation, for on this issue depends the right of its employees to strike.

This issue came about because although the NPDC was originally created in 1963 under Executive Order No. 30, as the
Executive Committee for the development of the Quezon Memorial, Luneta and other national parks, and later renamed
as the National Parks Development Committee under Executive Order No. 68, on September 21, 1967, it was registered
in the Securities and Exchange Commission (SEC) as a non-stock and non-profit corporation, known as "The National
Parks Development Committee, Inc."

However, in August, 1987, the NPDC was ordered by the SEC to show cause why its Certificate of Registration should not
be suspended for: (a) failure to submit the General Information Sheet from 1981 to 1987; (b) failure to submit its
Financial Statements from 1981 to 1986; (c) failure to register its Corporate Books; and (d) failure to operate for a
continuous period of at least five (5) years since September 27, 1967.

On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed SEC that his Office had no objection to the
suspension, cancellation, or revocation of the Certificate of Registration of NPDC.

By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was attached to the Ministry (later Department)
of Tourism and provided with a separate budget subject to audit by the Commission on Audit.

On September 10, 1987, the Civil Service Commission notified NPDC that pursuant to Executive Order No. 120, all
appointments and other personnel actions shall be submitted through the Commission.

Meanwhile, the Rizal Park Supervisory Employees Association, consisting of employees holding supervisory positions in
the different areas of the parks, was organized and it affiliated with the Trade Union of the Philippines and Allied
Services (TUPAS) under Certificate No. 1206.

On June 15, 1987, two collective bargaining agreements were entered into between NPDC and NPDCEA (TUPAS local
Chapter No. 967) and NPDC and NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until June 30, 1989.

On March 20, 1988, these unions staged a stake at the Rizal Park, Fort Santiago, Paco Park, and Pook ni Mariang
Makiling at Los Banos, Laguna, alleging unfair labor practices by NPDC.

On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch III, a complaint against the union to declare
the strike illegal and to restrain it on the ground that the strikers, being government employees, have no right to strike
although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted the restraining order for lack of jurisdiction. It
held that the case "properly falls under the jurisdiction of the Department of Labor," because "there exists an employer-
employee relationship" between NPDC and the strikers, and "that the acts complained of in the complaint, and which
plaintiff seeks to enjoin in this action, fall under paragraph 5 of Article 217 of the Labor Code, ..., in relation to Art. 265 of
the same Code, hence, jurisdiction over said acts does not belong to this Court but to the Labor Arbiters of the
Department of Labor." (p. 142, Rollo.).

Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No. 14204). On March 31, 1989, the Court of appeals
affirmed the order of the trial court, hence, this petition for review. The petitioner alleges that the Court of Appeals
erred:

1) in not holding that the NPDC employees are covered by the Civil Service Law; and

2) in ruling that petitioner's labor dispute with its employees is cognizable by the Department of Labor.

We have considered the petition filed by the Solicitor General on behalf of NPDC and the comments thereto and are
persuaded that it is meritorious.

In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 84637-39, August 2, 1989, we ruled that the NPDC is an
agency of the government, not a government-owned or controlled corporation, hence, the Sandiganbayan had
jurisdiction over its acting director who committed estafa. We held thus:

The National Parks Development Committee was created originally as an Executive Committee on January 14,1963, for
the development of the Quezon Memorial, Luneta and other national parks (Executive Order No. 30). It was later
designated as the National Parks Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9,
1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia were designated Chairman and Vice- Chairman respectively (E.O.
No. 3). Despite an attempt to transfer it to the Bureau of Forest Development, Department of Natural Resources, on
December 1, 1975 (Letter of Implementation No. 39, issued pursuant to PD No. 830, dated November 27, 1975), the
NPDC has remained under the Office of the President (E.O. No. 709, dated July 27, 1981).

Since 1977 to 1981, the annual appropriations decrees listed NPDC as a regular government agency under the Office of
the President and allotments for its maintenance and operating expenses were issued direct to NPDC (Exh. 10-A Perlas,
Item No. 2, 3). (Italics ours.)

Since NPDC is a government agency, its employees are covered by civil service rules and regulations (Sec. 2, Article IX,
1987 Constitution). Its employees are civil service employees (Sec. 14, Executive Order No. 180).

While NPDC employees are allowed under the 1987 Constitution to organize and join unions of their choice, there is as
yet no law permitting them to strike. In case of a labor dispute between the employees and the government, Section 15
of Executive Order No. 180 dated June 1, 1987 provides that the Public Sector Labor- Management Council, not the
Department of Labor and Employment, shall hear the dispute. Clearly, the Court of Appeals and the lower court erred in
holding that the labor dispute between the NPDC and the members of the NPDSA is cognizable by the Department of
Labor and Employment.

WHEREFORE, the petition for review is granted. The decision of the Court of Appeals in CA-G.R. SP No. 14204 is hereby
set aside. The private respondents' complaint should be filed in the Public Sector Labor-Management Council as
provided in Section 15 of Executive Order No. 180. Costs against the private respondents.

SO ORDERED.
G.R. Nos. 109095-109107 February 23, 1995

ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO ESTOBIO, MARCELINO MATURAN, FRAEN
BALIBAG, CARMELITO GAJOL, DEMOSTHENES MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON LOYOLA,
JOSENIANO B. ESPINA, all represented by MARIANO R. ESPINA,petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES EXPLORATION (UNRFNRE) represented by its
operations manager, DR. KYRIACOS LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT,
Commissioners of National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City and IRVING
PETILLA, Labor Arbiter of Butuan City, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set aside the Resolution dated January 25,
1993 of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City.

We dismiss the petition.

Petitioners were dismissed from their employment with private respondent, the United Nations Revolving Fund for
Natural Resources Exploration (UNRFNRE), which is a special fund and subsidiary organ of the United Nations. The
UNRFNRE is involved in a joint project of the Philippine Government and the United Nations for exploration work in
Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-03-00078-91 and SRAB 10-07-00159-91
for illegal dismissal and damages.

In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had no jurisdiction over its
personality since it enjoyed diplomatic immunity pursuant to the 1946 Convention on the Privileges and Immunities of
the United Nations. In support thereof, private respondent attached a letter from the Department of Foreign Affairs
dated August 26, 1991, which acknowledged its immunity from suit. The letter confirmed that private respondent, being
a special fund administered by the United Nations, was covered by the 1946 Convention on the Privileges and
Immunities of the United Nations of which the Philippine Government was an original signatory (Rollo, p. 21).

On November 25, 1991, respondent Labor Arbiter issued an order dismissing the complaints on the ground that private
respondent was protected by diplomatic immunity. The dismissal was based on the letter of the Foreign Office dated
September 10, 1991.

Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the NLRC, which affirmed the
dismissal of the complaints in its Resolution dated January 25, 1993.

Petitioners filed the instant petition for certiorari without first seeking a reconsideration of the NLRC resolution.

II

Article 223 of the Labor Code of the Philippines, as amended, provides that decisions of the NLRC are final and
executory. Thus, they may only be questioned through certiorari as a special civil action under Rule 65 of the Revised
Rules of Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion for reconsideration is first filed before the
respondent tribunal, to allow it an opportunity to correct its assigned errors (Liberty Insurance Corporation v. Court of
Appeals, 222 SCRA 37 [1993]).

In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to the instant petition. Moreover, the
petition lacks any explanation for such omission, which may merit its being considered as falling under the recognized
exceptions to the necessity of filing such motion.

Notwithstanding, we deem it wise to give due course to the petition because of the implications of the issue in our
international relations.

Petitioners argued that the acts of mining exploration and exploitation are outside the official functions of an
international agency protected by diplomatic immunity. Even assuming that private respondent was entitled to
diplomatic immunity, petitioners insisted that private respondent waived it when it engaged in exploration work and
entered into a contract of employment with petitioners.

Petitioners, likewise, invoked the constitutional mandate that the State shall afford full protection to labor and promote
full employment and equality of employment opportunities for all (1987 Constitution, Art. XIII, Sec. 3).

The Office of the Solicitor General is of the view that private respondent is covered by the mantle of diplomatic
immunity. Private respondent is a specialized agency of the United Nations. Under Article 105 of the Charter of the
United Nations:

1. The Organization shall enjoy in the territory of its Members such privileges and immunities as are necessary for the
fulfillment of its purposes.

2. Representatives of the Members of the United Nations and officials of the Organization shall similarly enjoy such
privileges and immunities as are necessary for the independent exercise of their functions in connection with the
organization.

Corollary to the cited article is the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations, to which the Philippines was a signatory (Vol. 1, Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of
Article III thereof:

Sec. 4. The specialized agencies, their property and assets, wherever located and by whomsoever held shall enjoy
immunity from every form of legal process except insofar as in any particular case they have expressly waived their
immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution (Emphasis
supplied).

Sec. 5. The premises of the specialized agencies shall be inviolable. The property and assets of the specialized agencies,
wherever located and by whomsoever held, shall be immune from search, requisition, confiscation, expropriation and any
other form of interference, whether by executive, administrative, judicial or legislative action (Emphasis supplied).

As a matter of state policy as expressed in the Constitution, the Philippine Government adopts the generally accepted
principles of international law (1987 Constitution, Art. II, Sec. 2). Being a member of the United Nations and a party to
the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, the Philippine
Government adheres to the doctrine of immunity granted to the United Nations and its specialized agencies. Both
treaties have the force and effect of law.

In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to rule that:

It is a recognized principle of international law and under our system of separation of powers thatdiplomatic immunity is
essentially a political question and courts should refuse to look beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, the Solicitor General or other officer acting under his
direction. Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction by seizure and
detention of property, as to embarrass the executive arm of the government in conducting foreign relations, it is
accepted doctrine that "in such cases the judicial department of (this) government follows the action of the political
branch and will not embarrass the latter by assuming an antagonistic jurisdiction (Emphasis supplied).

We recognize the growth of international organizations dedicated to specific universal endeavors, such as health,
agriculture, science and technology and environment. It is not surprising that their existence has evolved into the
concept of international immunities. The reason behind the grant of privileges and immunities to international
organizations, its officials and functionaries is to secure them legal and practical independence in fulfilling their duties
(Jenks, International Immunities 17 [1961]).

Immunity is necessary to assure unimpeded performance of their functions. The purpose is "to shield the affairs of
international organizations, in accordance with international practice, from political pressure or control by the host
country to the prejudice of member States of the organization, and to ensure the unhampered performance of their
functions" (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).

In the International Catholic Migration Commission case, we held that there is no conflict between the constitutional
duty of the State to protect the rights of workers and to promote their welfare, and the grant of immunity to
international organizations. Clauses on jurisdictional immunity are now standard in the charters of the international
organizations to guarantee the smooth discharge of their functions.

The diplomatic immunity of private respondent was sufficiently established by the letter of the Department of Foreign
Affairs, recognizing and confirming the immunity of UNRFNRE in accordance with the 1946 Convention on Privileges and
Immunities of the United Nations where the Philippine Government was a party. The issue whether an international
organization is entitled to diplomatic immunity is a "political question" and such determination by the executive branch
is conclusive on the courts and quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949,
Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).

Our courts can only assume jurisdiction over private respondent if it expressly waived its immunity, which is not so in
the case at bench (Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, Art.
III, Sec. 4).

Private respondent is not engaged in a commercial venture in the Philippines. Its presence here is by virtue of a joint
project entered into by the Philippine Government and the United Nations for mineral exploration in Dinagat Island. Its
mission is not to exploit our natural resources and gain pecuniarily thereby but to help improve the quality of life of the
people, including that of petitioners.

This is not to say that petitioner have no recourse. Section 31 of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations states that "each specialized agency shall make a provision for appropriate
modes of settlement of: (a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party."

WHEREFORE, the petition is DISMISSED.

SO ORDERED.