SUPREME COURT REPORTS ANNOTATED

Honda Phils., Inc. vs. Samahan ng Malayang Manggagawa sa Honda

G.R. No. 145561. June 15, 2005.*

HONDA PHILS., INC., petitioner, vs. SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

Labor Law; Collective Bargaining Agreements; Definition; Where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.—A collective bargaining agreement refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.

Same; National Labor Relations Commission; Factual Findings; Appeals; Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality.—We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence. It is not our function to assess and evaluate the evidence all over again, particularly where the findings of both the arbiter and the Court of Appeals coincide.

Same; Benefits; 13th Month Pay; Basic Salary; Excluded from the computation of “basic salary” payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work done on rest days and special holidays.—For employees receiving regular wage, we have interpreted “basic salary” to mean, not the amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a given calendar year. Thus, we exclude from the computation of “basic salary” payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work done on rest days and special holidays.

Same; Same; Same; Same; 13th month pay primarily given to alleviate the plight of workers and to help them cope with the exorbitant increases in the cost of living.—The foregoing interpretation of law and jurisprudence is more in keeping with the underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the mandate that the workingman’s welfare should be the primordial and paramount consideration. What is more, the factual milieu of this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their constitutional rights to self-organization and to strike in accordance with law.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Abello, Concepcion, Regala & Cruz for petitioner.

Honorata O. Victoria for respondent.

YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month pay and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA) forged between petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which contained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.

Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial assistance to covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for the fourth and fifth years of their CBA. When the talks between the parties bogged down, respondent union filed a Notice of Strike on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then Department of Labor and Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and ordered the parties to cease and desist from committing acts that would aggravate the situation. Both parties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair labor practice alleging that Honda illegally contracted out work to the detriment of the workers. Respondent union went on strike and picketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certified the same to the National Labor Relations Commission (NLRC) for compulsory arbitration. The striking employees were ordered to return to work and the management accepted them back under the same terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum4 announcing its new computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike shall be considered unworked days for purposes of computing said benefits. As per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary shall be deducted from these bonuses, with a commitment however that in the event that the strike is declared legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25, 1999. Honda sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter dated January 4, 2000,5 the BWC agreed with the pro-rata payment of the 13th month pay as proposed by Honda.

The matter was brought before the Grievance Machinery in accordance with the parties’ existing CBA but when the issue remained unresolved, it was submitted for voluntary arbitration. In his decision6 dated May 2, 2000, Voluntary Arbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:

“WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby ruled that the Company’s implementation of pro-rated 13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The Company is thus ordered to compute each provision in full month basic pay and pay the amounts in question within ten (10) days after this Decision shall have become final and executory.

The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.

SO ORDERED.”7

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a petition was filed with the Court of Appeals, however, the petition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the 13th month pay and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit.8 As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy.9 Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.10

In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda wanted to implement a pro-rated computation of the benefits based on the “no work, no pay” rule. According to the company, the phrase “present practice” as mentioned in the CBA refers to the manner and requisites with respect to the payment of the bonuses, i.e., 50% to be given in May and the other 50% in December of each year. Respondent union, however, insists that the CBA provisions relating to the implementation of the 13th month pay necessarily relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being unequivocal. A cursory reading of the provisions will show that they did not state categorically whether the computation of the 13th month pay, 14th month pay and the financial assistance would be based on one full month’s basic salary of the employees, or pro-rated based on the compensation actually received. The arbitrator thus properly resolved the ambiguity in favor of labor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals affirmed the arbitrator’s finding and added that the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence.

It is not our function to assess and evaluate the evidence all over again, particularly where the findings of both the arbiter and the Court of Appeals coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all employers to pay their employees a 13th month pay, was issued to protect the level of real wages from the ravages of worldwide inflation. It was enacted on December 16, 1975 after it was noted that there had been no increase in the minimum wage since 1970

and the Christmas season was an opportune time for society to show its concern for the plight of the working masses so that they may properly celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13th month pay issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. The guidelines pertinently provides:

The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by his employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living allowances.14 (Emphasis supplied)

For employees receiving regular wage, we have interpreted “basic salary” to mean, not the amount actually received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a given calendar year. Thus, we exclude from the computation of “basic salary” payments for sick, vacation and maternity leaves, night differentials, regular holiday pay and premiums for work done on rest days and special holidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the 13th month pay due an employee was computed based on the employee’s basic monthly wage multiplied by the number of months worked in a calendar year prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or separation from work. As the rules state, under these circumstances, an employee is entitled to a pay in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year.19 The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker. In the present case, there being no gap in the service of the workers during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should be given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13th month pay before the instant case. Honda did not adduce evidence to show that the 13th month, 14th month and financial assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic pay computation was the “present practice” intended to be maintained in the CBA.21

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating scheme was to be implemented in the company. It was a convenient coincidence for the company that the work stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled them to devise a formula using 11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice at Honda is further bolstered by the affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when they were absent from work due

to motorcycle accidents, and after they have exhausted all their leave credits and were no longer receiving their monthly salary from Honda, they still received the full amount of their 13th month, 14th month and financial assistance pay.22

The case of Davao Fruits Corporation v. Associated Labor Unions, et al.23 presented an example of a voluntary act of the employer that has ripened into a company practice. In that case, the employer, from 1975 to 1981, freely and continuously included in the computation of the 13th month pay those items that were expressly excluded by the law. We have held that this act, which was favorable to the employees though not conforming to law, has ripened into a practice and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore, in Sevilla Trading Company v. Semana,24 we stated:

With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits Corporation vs. Associated Labor Unions, the company practice lasted for six (6) years. In another case, Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) years and nine (9) months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn by the employer without violating Art. 100 of the Labor Code.25 (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying principle for the grant of this benefit. It is primarily given to alleviate the plight of workers and to help them cope with the exorbitant increases in the cost of living. To allow the pro-ration of the 13th month pay in this case is to undermine the wisdom behind the law and the mandate that the workingman’s welfare should be the primordial and paramount consideration.26 What is more, the factual milieu of this case is such that to rule otherwise inevitably results to dissuasion, if not a deterrent, for workers from the free exercise of their constitutional rights to self-organization and to strike in accordance with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of Appeals dated September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052, affirming the decision rendered by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto.

SO ORDERED.

Davide, Jr. (C.J., Chairman), Quisumbing, Carpio and Azcuna, JJ., concur.

Petition denied, judgment and resolution affirmed in toto.

Note.—A bank in a depressed financial condition, reeling from tremendous losses, cannot be legally compelled to continue paying the same amount of bonuses to its employees. (Producers Bank of the Philippines vs. National Labor Relations Commission, 355 SCRA 489 [2001])

G.R. No. 179593. September 14, 2011.*

UNIVERSITY OF THE EAST, petitioner, vs. UNIVERSITY OF THE EAST EMPLOYEES’ ASSOCIATION, respondent.

Civil Procedure; Motion for Reconsideration; As a rule, a second motion for reconsideration (MR) is generally a prohibited pleading; Court does not discount instances when it may authorize the suspension of the rules of procedure so as to allow the resolution of a second motion for reconsideration.—Indeed, a second MR as a rule, is generally a prohibited pleading. The Court, however, does not discount instances when it may authorize the suspension of the rules of procedure so as to allow the resolution of a second motion for reconsideration, in cases of extraordinarily persuasive reasons such as when the decision is a patent nullity.

Same; Same; The rules of procedure are designed to secure and not to override substantial justice.—Time and again, the Court has upheld the theory that the rules of procedure are designed to secure and not to override substantial justice. These are mere tools to expedite the decision or resolution of cases, hence, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided.

Labor Law; Wages; Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer, thus, said benefits cannot be reduced, diminished, discontinued or eliminated by the latter.—Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer, thus, said benefits cannot be reduced, diminished, discontinued or eliminated by the latter. This principle against diminution of benefits, however, is applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long period of time which is consistent and deliberate. It does not contemplate the continuous grant of unauthorized or irregular compensation but it presupposes that a company practice, policy and tradition favourable to the employees has been clearly established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by them.

Same; Same; Jurisprudence is replete with the rule specifying a minimum number of years within which a company practice must be exercised in order to constitute voluntary company practice.—In the case at bench, contrary to UEEA’s claim, the distribution of the 70% incremental proceeds based on equal sharing scheme cannot be held to have ripened into a company practice that the respondents have a right to demand. Jurisprudence is replete with the rule specifying a minimum number of years within which a company practice must be exercised in order to constitute voluntary company practice. Even if UE had been continuously distributing the 70% incremental proceeds based on equal sharing scheme to all its covered employees, the same could not have ripened into a vested right because such grant would not have been characterized by a deliberate and voluntary act on the part of the petitioner.

Same; Same; The grant by an employer of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally discontinued.—As pronounced by the Court in the case of Globe Mackay Cable and Radio Corporation v. NLRC, 163 SCRA 71 (1988), the grant by an employer of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally discontinued. Here, no vested rights accrued to respondents. R.A. No. 6728 simply mandates that the 70% incremental proceeds arising from tuition fee increases should go to the payment of salaries, wages, allowances, and other benefits of the teaching and non-teaching personnel except administrators who are principal stockholders of the school. As to the manner of its distribution, however, the law is silent.

Same; Same; Prescription; Money claims arising from an employer-employee relationship must be filed within three (3) years from the time the cause of action accrued.—The Court agrees with UE and holds that UEEA’s right to question the distribution of the incremental proceeds for SY 1994-1995 has already prescribed. Article 291 of the Labor Code provides that money claims arising from an employer-employee relationship must be filed within three (3) years from the time

the cause of action accrued. In the present case, the cause of action accrued when the distribution of the incremental proceeds based on percentage of salary of the covered employees was discussed in the tripartite meeting held on June 19, 1995. UEEA did not question the manner of its distribution and only on April 27, 1999 did it file an action based therein. Hence, prescription had set in.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Bausa, Ampil, Suarez, Paredes & Bausa for petitioner.

Estrada & Associates Law Offices for respondent.

MENDOZA, J.:

Before the Court is a petition for review under Rule 45 of the Rules of Court assailing the February 26, 2007 Decision1 and September 5, 2007 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 90740, which set aside the February 28, 2005 Decision and May 31, 2005 Resolution of the National Labor Relations Commission (NLRC) in NLRC-NCR-00-04-05015-99. The dispositive portion of the CA decision reads:

“WHEREFORE, the instant petition is GRANTED. The Decision dated 28 February 2005 and Resolution dated 31 May 2005 rendered by the NLRC are SET ASIDE. The final resolutions dated 29 April 2004 and 24 August 2004 hereby REMAIN in effect.

SO ORDERED.”3

Facts of the Case

Petitioner University of the East (UE) is an educational institution duly organized and existing under Philippine laws. On the other hand, respondent University of the East Employees’ Association (UEEA) is a duly registered labor union of the rank-and-file employees of UE.

It appears from the records that prior to school year (SY) 1983-1984, the 70% incremental proceeds from tuition fee increases as mandated by Presidential Decree No. 451 (P.D. No. 451), as amended, was distributed by UE in proportion to the average number of academic and non-academic personnel. The distribution scheme became the subject of an Agreement4 dated October 18, 1983 signed by the management, faculty association and respondent.5 Starting SY 1994-1995, however, the 70% incremental proceeds from the tuition fee increase was distributed by UE to its covered employees based on a new formula of percentage of salary.

Not in conformity, UEEA, thru its president Ernesto C. Verceles (Verceles), sent a letter6 dated December 22, 1994 to then UE President, Dr. Rosalina S. Cajucom (Dr. Cajucom), questioning the manner of distribution of the employees’ share in the 1994-1995 tuition fee increase. The letter reads:

“Dear President Cajucom:

This is with reference to the recent distribution of the employees’ share in the 1994-95 tuition fee increase.

We understand that the University unilaterally instituted a partial distribution of FIVE PERCENT (5%) only of the basic wage of employees, faculty members and administration personnel.

This, to our mind, is quite irregular and unfair in view of the following considerations:

1.) We have all along instituted the practice of having a Tripartite Meeting where the three (3) sectors involved, i.e. management, faculty and employees’ representatives go over the incremental proceeds that have been realized and come to an agreement on the distribution of the share whether partial or total in nature;

2.)  The accepted and traditional practice was that for every P1.00 per share of faculty members based on the “full load equivalent,” management personnel and rank-and-file employees receive P100.00 a month;

3.)  Using as a basis 5% of the wages of University personnel entitled thereto besides being a departure from past practices, creates that unfair situation where those who have higher salaries receive more to the prejudice of low salaried employees and faculty members;

4.)  There is an existing Tripartite Agreement, with a xerox copy attached hereto as ANNEX “A,” clearly specifying the agreed manner of distribution. Even [if] the May 17, 1994 letter to UE President Rosa[lina] Cajucom by then Secretary of Education, Culture and Sports Armand V. Fabella, states under the third paragraph thereof that ‘the discretion is vested upon the school authorities xxx,” but, in the same breath, the Secretary qualifies the distribution or manner of remittance thereof with the phrase “(except where it forms part of a collective bargaining agreement but accrues to school personnel in any case) xxx.” In this light, Article XX Section 5 of our past and current CBAs provide succinctly that:

“The UNIVERSITY agrees to continue the implementation of all benefits hitherto enjoyed by the employees not embodied herein and are the subject of communication between the UNIVERSITY and the ASSOCIATION provided they are not inconsistent with the provisions of the Agreement or of the Labor Code. All other existing clauses, covenants, provisions or agreements shall remain in force.”

We, therefore, urge the University to rectify the aforementioned erroneous, unfair and irregular distribution instituted last December 13, 1994.

We believe that you may have been misled by your staff in so arriving at such objectionable manner of distributing our tuition fee shares. We therefore hope that in the spirit of the season, the University thru your good self would institute the necessary correction, thereby affording our lower salaried employees and faculty members the means to have a more meaningful Christmas celebration.

xxx”

On February 23, 1995, UEEA sent another letter7 to the UE President reiterating its earlier objection to the distribution scheme of the 70% incremental proceeds from the tuition fee increase and requested a tripartite conference among management, faculty, administration, and rank-and-file representatives to address the issue.

On June 19, 1995, a tripartite meeting was held among the representatives of management, faculty union and UEEA. In the said meeting, it was agreed that the distribution of the incremental proceeds would now be based on percentage of salary, and not anymore on the average number of personnel. The Minutes8 of the June 19, 1995 meeting was signed and attested to by UEEA officers who attended.

On April 27, 1999, UEEA filed a complaint before the NLRC for non-payment/underpayment of the rank-and-file employees’ share of the tuition fee increases against UE pursuant to P.D. No. 451, as amended, and Republic Act (R.A.) No. 6728 otherwise known as Government Assistance to Students and Teachers in Private Education Act.

In its position paper,9 UEEA alleged that starting SY 1994-1995, UE had been withholding from the rank-and-file employees a sizeable portion of their share in the tuition fee increases as mandated by P.D. No. 451, as amended. It asserted that before SY 1994-1995, shares of tuition fee increases were distributed proportionately among the management, faculty and rank-and-file employees based on equal sharing or on a share-and-share alike basis. In SY

1994-1995, however, UE arbitrarily and unilaterally distributed the tuition fee increase proceeds through percentage based on salaries, thereby reducing the shares of the rank-and-file employees, while increasing those of the management personnel.

In its reply,10 UE denied that the implementation of the new scheme in the distribution of the 70% incremental proceeds derived from tuition fee increases starting SY 1994-1995 was made arbitrarily and/or unilaterally. It explained that the distribution scheme was only implemented after inquiry from the Department of Education, Culture and Sports (DECS) regarding the provision of R.A. No. 6728. DECS explained that the law was silent on the manner of the distribution of the 70% incremental proceeds and stated that discretion in the distribution was vested in the school authorities. What the law clearly required was that the incremental proceeds from the tuition fee increases should be allocated for the payment of salaries/wages, allowances and other benefits of the teaching and non-teaching personnel except the administrators who were principal stockholders of the school. Thus, UE insisted that it may distribute the entire 70% incremental proceeds for an across-the-board salary increase, or for merit increase, or for allowances and other employment benefits.

Furthermore, UE pointed out that the new distribution scheme was implemented after a tripartite meeting was held on June 19, 1995 among the representatives of the management, UE Faculty Association (UEFA) and the UEEA, wherein it was agreed that for SY 1994-1995, the distribution of the incremental increase would be 9.96% of the salaries of the employees as of May 31, 1994. In fact, copies of the minutes of the meeting were distributed and signed by the participants. Hence, UEEA was estopped from questioning the distribution scheme when it accepted the benefits.

Lastly, UE asserted that the claim of the UEEA was already barred since it was filed three (3) years from the time its supposed cause of action accrued.

On September 4, 2002, Labor Arbiter Francisco A. Robles (LA) rendered a decision11 favoring UEEA, the fallo of which reads:

“WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent University of the East, to pay the members of University of the East Employees Association (UEEA) the amount of TWENTY-FIVE MILLION SEVEN HUNDRED FORTY-NINE THOUSAND NINE HUNDRED NINETY-FIVE PESOS AND 40/100 (P25,749,995.40) representing the portions of the tuition fee increases for the school year 1994-1995 and up to May 31, 2002 which were denied/withheld and/or lost by the members of the aforesaid Union as a result of the disputed distribution scheme based on percentage of salary which was arbitrarily and unilaterally adopted and implemented by the respondent. Furthermore, the respondent is hereby directed to submit to this Office a report to show compliance to the order herein stated.

SO ORDERED.”12

The LA ruled that the equal sharing distribution scheme in relation to the incremental proceeds from the tuition fee increases had been adopted as a matter of policy by UE since 1983 and was made part of its collective bargaining agreement with the UEEA. In addition, the LA noted that the existence of the said policy or practice in the university was made part of the tripartite agreement dated October 18, 1983, among UE, UEFA and UEEA. There was no evidence on record that the said agreement was superseded by another agreement between UE and UEEA. Furthermore, UE’s reliance on the letter-reply of then DECS Secretary Armand V. Fabella was misplaced as the law imposed a limitation on the extent of the discretionary authority given to the school officials such as when the disposition had been agreed upon in a collective bargaining agreement. The LA concluded that UE was legally bound to keep and maintain the established practice of distributing equally among its employees the incremental proceeds from the tuition fee increases particularly in light of the aforesaid tripartite agreement dated October 18, 1983 and the provisions of Article XX, Section 5 of the UE-UEEA collective bargaining agreement.

Undaunted, UE interposed an appeal before the NLRC. The NLRC, in its April 29, 2004 Resolution,13 dismissed the appeal and sustained the LA decision. UE filed a motion for reconsideration but it was denied in a resolution14 dated August 24, 2004 with a warning that no further motion for reconsideration shall be entertained.

Nonetheless, on September 20, 2004, UE filed a motion for leave to file and admit a second motion for reconsideration, incorporating therein its second motion for reconsideration. UE alleged that the NLRC resolution was not valid for failure to pass upon and consider the new and vital issues raised in its motion for reconsideration and for failure to comply with the prescribed form for NLRC resolutions pursuant to Section 13, Rule VII, NLRC New Rules of Procedure.15

On February 28, 2005, the NLRC gave due course to the second motion for reconsideration, reversed its earlier ruling and declared valid the distribution of the 70% incremental proceeds from tuition fee increases based on the percentage of salary of the covered employees.16 Consequently, UEEA filed a motion for reconsideration17 but it was denied in the NLRC Resolution18 dated May 31, 2005.

Aggrieved, UEEA filed a petition before the CA. The appellate court granted the petition and set aside the questioned decision and resolution of the NLRC.19 The CA declared that since the second motion for reconsideration was a prohibited pleading, it did not interrupt the running of the reglementary period. Therefore, the NLRC Resolution dated August 24, 2004 became final and executory after ten (10) days from receipt of the copy thereof by the parties. Accordingly, the said resolution had attained finality and could no longer be modified in any respect, even if the modification was meant to correct what was perceived to be an erroneous conclusion of fact or law.

UE filed a motion for reconsideration of the CA decision but it was denied in a resolution20 dated September 5, 2007. Hence, this appeal, anchored on the following:

GROUNDS:

I

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT PETITIONER’S SECOND MOTION FOR RECONSIDERATION IS A PROHIBITED PLEADING.

II

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THERE ARE “[NO] EXTRAORDINARY PERSUASIVE REASONS” IN THE INSTANT CASE WARRANTING THE ALLOWANCE OF A SECOND MOTION FOR RECONSIDERATION.

III

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE ISSUANCE OF THE ENTRY OF JUDGMENT DATED OCTOBER 15, 2004 IS NOT PREMATURE.

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FOUND PETITIONER UNIVERSITY’S MOTION FOR RECONSIDERATION A “PRO FORMA” MOTION.

The issues for resolution are: (1) whether or not UE’s second motion for reconsideration (MR) before the NLRC is a prohibited pleading; and (2) whether or not the change in the scheme of distribution of the incremental proceeds from tuition fee increase is a diminution of benefit.

UE argues that the CA erred in holding that the second MR was a prohibited pleading. It asserts that while a second MR is generally a prohibited pleading, it may be allowed in meritorious cases. Section 14 of the NLRC rules cannot be

construed as to prevent the NLRC from relieving itself from patent errors in order to render justice. UE stresses that the technical rules of procedure are not meant to frustrate but to facilitate justice.21

UE further contends that the Court in resolving the issue on the second MR should not be too dogmatic in its ruling. It persuades the Court to adopt a complete and holistic view, taking into consideration the peculiar circumstances of the case as well as the provisions on the liberal interpretation of the rules and the inherent power of the NLRC to amend and reverse its findings and conclusions as may be necessary to render justice.22

Petitioner further contends that there exist extraordinary persuasive reasons warranting the allowance of the second MR. First, it argues that the complaint is a money claim arising from employer-employee relationship; hence, it prescribes in three (3) years. Since the complaint was filed only on April 27, 1999, more than three (3) years from the alleged violation in 1994, prescription has set in. Second, UE maintains that the distribution of tuition fee increase based on percentage of salary was not arbitrary and/or unilateral because the new distribution scheme was taken up and agreed upon in the tripartite meeting held on June 19, 1995 and was adopted only after consultation with the DECS Secretary Armand Fabella. Third, the faculty union, UE Faculty Association (UEFA), a party to the Agreement dated October 18, 1983, did not complain against the new distribution scheme. Lastly, the new distribution scheme is in accordance with law. UE claims that the law and jurisprudence are clear that a private educational institution has the discretion on the disposition of the 70% incremental proceeds from tuition fee increase, with the only condition imposed that the proceeds should go to the salaries, wages and allowances and other benefits of teachers and non-teaching personnel.23

Indeed, a second MR as a rule, is generally a prohibited pleading.24 The Court, however, does not discount instances when it may authorize the suspension of the rules of procedure so as to allow the resolution of a second motion for reconsideration, in cases of extraordinarily persuasive reasons25 such as when the decision is a patent nullity.26

Time and again, the Court has upheld the theory that the rules of procedure are designed to secure and not to override substantial justice.27 These are mere tools to expedite the decision or resolution of cases, hence, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided.28

On the second issue, after a careful review of the records and the arguments of the parties, the Court finds the position of the petitioner meritorious.

The Court agrees with petitioner UE that the change in the distribution of the 70% incremental proceeds from tuition fee increase from equal sharing to percentage of salaries is not a diminution of benefits. Its distribution to covered employees based on equal sharing scheme cannot be considered to have ripened into a company practice that the respondents have a right to demand.

Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer, thus, said benefits cannot be reduced, diminished, discontinued or eliminated by the latter.29 This principle against diminution of benefits, however, is applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long period of time which is consistent and deliberate.30 It does not contemplate the continuous grant of unauthorized or irregular compensation but it presupposes that a company practice, policy and tradition favourable to the employees has been clearly established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by them.31 The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.32 In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefits over a significant period of time.33

In the case at bench, contrary to UEEA’s claim, the distribution of the 70% incremental proceeds based on equal sharing scheme cannot be held to have ripened into a company practice that the respondents have a right to demand. Jurisprudence is replete with the rule specifying a minimum number of years within which a company practice must be exercised in order to constitute voluntary company practice.34 Even if UE had been continuously distributing the 70% incremental proceeds based on equal sharing scheme to all its covered employees, the same could not have ripened into a vested right because such grant would not have been characterized by a deliberate and voluntary act on the part of the petitioner.

As pronounced by the Court in the case of Globe Mackay Cable and Radio Corporation v. NLRC,35 the grant by an employer of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not considered a voluntary act which cannot be unilaterally discontinued. Here, no vested rights accrued to respondents. R.A. No. 6728 simply mandates that the 70% incremental proceeds arising from tuition fee increases should go to the payment of salaries, wages, allowances, and other benefits of the teaching and non-teaching personnel except administrators who are principal stockholders of the school.36 As to the manner of its distribution, however, the law is silent. The letter37 of then DECS Secretary Armand Fabella, correctly stated that the discretion on what distribution scheme to adopt is vested upon the school authorities. In fact, the school can distribute the entire 70% for an across-the-board salary increase, for merit increase and/or for allowances or other benefits. The only limitations provided are the benefit must accrue to specific individual school personnel; and the benefit once given for a specific year cannot be revoked for that same year.

Neither can UEEA claim that the change in the distribution scheme from equal sharing to percentage of salary was done peremptorily. Verceles wrote two (2) letters dated December 22, 199438 and February 23, 1995,39 to then UE President, Dr. Cajucom, questioning the change in the distribution scheme from equal sharing to percentage of salary and requesting a tripartite meeting to settle the issue.

Consequently, a tripartite meeting was held on June 19, 1995. The said meeting was attended by the representatives of the management, UEFA and UEEA. From the minutes of the meeting, the tuition fee incremental proceeds for SY 1994-95 and the manner of its distribution based on percentage of the salaries of the covered employees were discussed and UEEA representatives, namely, Salvador Blancia and Miguel Teaño, did not object. They even later signed the minutes of the meeting to signify their conformity to it.

It was likewise erroneous for UEEA to rely on the October 18, 1983 Agreement40 which provides:

“The University of the East, represented by its Chairman of the Board and Chief Executive Officer, the UE Faculty Association (UEFA), represented by its President, and the UE Employees Association (UEEA), represented by its President, all assisted by their respective panels, hereby mutually agree:

1. That in determining the allocation of the 60% incremental proceeds from the approved increase in school fees effective school year 1982-83 among the three sectors (faculty, rank-and-file, and management personnel), the formula used in previous years shall be followed—namely, the allocation shall be in proportion to the average number of academic and non-academic personnel in the service as of the start of the first and second semesters of the school year 1982-83;

2. That the proposal of the UEEA, whereby the number of academic personnel is to be determined by using the “full load equivalent”, shall be adopted in allocating the 60% incremental proceeds from the approved increase in school fees effective school year 1983-84.

Manila, October 18, 1983.”

Clearly, the said agreement only pertains to the distribution of incremental proceeds for SY 1982-83. Besides, such agreement is deemed superseded by another agreement taken up during tripartite meeting held on June 19, 1995.

The Court agrees with UE and holds that UEEA’s right to question the distribution of the incremental proceeds for SY 1994-1995 has already prescribed. Article 291 of the Labor Code provides that money claims arising from an employer-employee relationship must be filed within three (3) years from the time the cause of action accrued. In the present case, the cause of action accrued when the distribution of the incremental proceeds based on percentage of salary of the covered employees was discussed in the tripartite meeting held on June 19, 1995. UEEA did not question the manner of its distribution and only on April 27, 1999 did it file an action based therein. Hence, prescription had set in.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 90740 are REVERSED and SET ASIDE. The Decision of the National Labor Relations Commission dated February 28, 2005 is REINSTATED.

SO ORDERED.

Velasco, Jr. (Chairperson), Peralta, Abad and Sereno,** JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Note.—An erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits. (TSPIC Corporation vs. TSPIC Employees Union [FFW], 545 SCRA 215 [2008])

VOL. 164, AUGUST 23, 1988

671

Phil. Long Distance Telephone Co. vs. NLRC

No. L-80609. August 23, 1988.*

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents.

Labor; Illegal Dismissal; Separation Pay; Rule in the Labor Code that a person dismissed for cause is not entitled to separation pay; Exception is based upon equity considerations; Definition and concept of equity.—The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not entitled to separation pay. The cases above cited constitute the exception, based upon considerations of equity. Equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law. Hence, it cannot prevail against the expressed provision of the labor laws allowing dismissal of employees for cause and without any provision for separation pay.

Same; Same; Same; Grant of separation pay is not merely based on equity but on the provisions of the Constitution on the promotion of social justice and protection of the rights of the workers.—Strictly speaking, however, it is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed employees other than the abstract consideration of equity. The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.

Same; Same; Same; Award of separation pay distinguished; Grant of separation pay to the dismissed employee is just where the separation was due to valid but inequitous causes as failure to comply with work standards; Grant of award is based on the social justice policy even if separation is for cause.—There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with the company. For example, a subordinate who has irreconcilable policy or personal differences with his employer may be validly dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be frequently absent because she has also to take care of her child may also be removed because of her poor attendance, this being another authorized ground. It is not the employee’s fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him just the same at the expense of efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause.

Same; Same; Same; Where the cause of separation is more serious than mere inefficiency, the award is not justified.—But where the cause of the separation is more serious that mere inefficiency, the generosity of the law must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense is misappropriation of the receipt of his

sales. This is no longer mere incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation is changed completely. This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified.

Same; Same; Same; Henceforth, separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character; Where the reason for the valid dismissal is habitual insubordination or an offense involving moral turpitude, the employer may not be required to give the dismissed employee separation pay or financial assistance.—We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, of financial assistance, or whatever other name it is called, on the ground of social justice.

Same; Same; Same; Same; Same; A contrary rule would have the effect of rewarding rather than punishing the erring employee for his offense.—A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

Same; Same; Same; Same; Same; The policy of social justice is not intended to countenance wrongdoing.—The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be the refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.

Same; Same; Same; Same; Same; Grant of separation pay to the private respondent who has been dismissed for dishonesty, is justified; Reason.—Applying the above considerations, we hold that the grant of separation pay in the case at bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the PLDT for more than a decade, if it is, to be considered at all, should be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables.

Same; Same; Same; Same; Same; Separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service.—The Court also rules that the separation pay, if found due under the circumstance of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material. This is without prejudice to the application of special

agreements between the employer and the employee stipulating a higher rate of computation and providing for more benefits to the discharged employee.

FERNAN, C.J., dissenting:

Labor; Illegal Dismissal; Separation Pay; Providing a rigid mathematical formula for determining the amounts of separation pay to lawfully dismissed employees will not be in keeping with the constitutional directives for the promotion of social justice and particularly the protection of the rights of workers; To allow the formula suggested would in effect be favoring the well-compensated employee than the low-salaried employee.—The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that “our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers”. It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that “those who have less in life should have more in law.” It cannot be denied that a low-salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low-salaried employee who would encounter difficulty finding another job.

Same; Same; Same; The opinions of Justice Sarmiento that the Supreme Court should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the NLRC if warranted, are correct.—I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the “environmental facts” of the case.

GRIÑO-AQUINO, J., dissenting:

Labor; Illegal Dismissal; Separation Pay; The Supreme Court should not rationalize compassion.—I dissent. We should not rationalize compassion. I vote to affirm the grant of financial assistance.

PADILLA, J., separate opinion:

Labor; Illegal Dismissal; Separation Pay; Separation pay as financial assistance to the private respondent should be disallowed since the ground for termination of employment is dishonesty.—I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties.

Same; Same; Same; Same; Amount of separation pay as financial assistance awarded to an employee if found due under the circumstances of each case, should be left to the judgment of the NLRC.—I do not, however, subscribe to the view that “the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material.” (p. 11, Decision). It is my considered view that, except for terminations based on dishonesty and serious misconduct involving moral turpitude—where no separation pay should be allowed—in other cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concerned

which is the NLRC. It is in such cases—where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude—that the Constitutional policy of affording protection to labor should be allowed full pay; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the “environmental facts” of each case.

Same; Same; Same; Same; The Supreme Court should not, as a rule, disturb the amount of separation pay awarded by the NLRC in cases of valid termination of employment but with financial assistance.—It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.

PETITION to the resolution of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.

Nicanor G. Nuevas for petitioner.

CRUZ, J.:

The only issue presented in the case at bar is the legality of the award of financial assistance to an employee who had been dismissed for cause as found by the public respondent.

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by two complainants of having demanded and received from them the total amount of P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone installation.1 Investigated and heard, she was found guilty as charged and accordingly separated from the service.2 She went to the Ministry of Labor and Employment claiming she had been illegally removed. After consideration of the evidence and arguments of the parties, the company was sustained and the complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter’s decision declared:

“WHEREFORE, the instant complaint is dismissed for lack of merit.

“Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally blameless in the light of the fact that the deal happened outside the premises of respondent company and that their act of giving P3,800.00 without any receipt is tantamount to corruption of public officers, complainant must be given one month pay for every year of service as financial assistance.”3

Both the petitioner and the private respondent appealed to the National Labor Relations Board, which upheld the said decision in toto and dismissed the appeals.4 The private respondent took no further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now before us to question the affirmance of the above-quoted award as having been made with grave abuse of discretion.

In its challenged resolution of September 22, 1987, the NLRC said:

“x x x Anent the award of separation pay as financial assistance in complainant’s favor, We find the same to be equitable, taking into consideration her long years of service to the company whereby she had undoubtedly contributed

to the success of respondent. While we do not in any way approve of complainants (private respondent) malfeasance, for which she is to suffer the penalty of dismissal, it is for reasons of equity and compassion that we resolve to uphold the award of financial assistance in her favor.”5

The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is entitled to reinstatement and backwages as required by the labor laws. However, an employee dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief at all because his dismissal is in accordance with law. In the case of the private respondent, she has been awarded financial assistance equivalent to ten months pay corresponding to her 10-year service in the company despite her removal for cause. She is, therefore, in effect rewarded rather than punished for her dishonesty, and without any legal authorization or justification. The award is made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such award puts a premium on dishonesty and encourages instead of deterring corruption.

For its part, the public respondent claims that the employee is sufficiently punished with her dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to help her for the loss of her employment after working faithfully with the company for ten years. In support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company of the Philippines v. Lariosa6 and Soco v. Mercantile Corporation of Davao,7 where the employees were dismissed for cause but were nevertheless allowed separation pay on grounds of social and compassionate justice. As the Court put it in the Firestone case:

“In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement. However, considering that Lariosa had worked with the company for eleven years with no known previous bad record, the ends of social and compassionate justice would be served if he is paid full separation pay but not reinstatement without backwages by the NLRC.”

In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded him full separation pay for his 11 years of service with the company. In Soco, the employee was also legally separated for unauthorized use of a company vehicle and refusal to attend the grievance proceedings but he was just the same granted one-half month separation pay for every year of his 18-year service.

Similar action was taken in Filipro, Inc. v. NLRC,8 where the employee was validly dismissed for preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of service. In Metro Drug Corporation v. NLRC,9 the employee was validly removed for loss of confidence because of her failure to account for certain funds but she was awarded separation pay equivalent to one-half month’s salary for every year of her service of 15 years. In Engineering Equipment, Inc. v. NLRC,10 the dismissal of the employee was justified because he had instigated labor unrest among the workers and had serious differences with them, among other grounds, but he was still granted three months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC,11 the employee’s 3- year service was held validly terminated for lack of confidence and abandonment of work but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy Minister of Labor and Employment, et al.,12 full separation pay for 6, 10, and 16 years service, respectively, was also allowed three employees who had been dismissed after they were found guilty of misappropriating company funds.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not entitled to separation pay.13 The cases above cited constitute the exception, based upon considerations of equity. Equity has been defined as justice outside law,14 being ethical rather than jural and belonging to the sphere of morals than of law.15 It is grounded on the precepts of conscience and not on any sanction of positive law.16 Hence, it cannot prevail against the expressed provision of the labor laws allowing dismissal of employees for cause and without any provision for separation pay.

Strictly speaking, however, it is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed employees other than the abstract consideration of equity. The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.

The Court notes, however, that where the exception has been applied, the decisions have not been consistent as to the justification for the grant of separation pay and the amount or rate of such award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow workers in the Engineering Equipment case were both awarded separation pay notwithstanding that the first cause was certainly more serious than the second. No less curiously, the employee in the Soco case was allowed only one-half month pay for every year of his 18 years of service, but in Filipro the award was two months separation pay for 2 years service. In Firestone, the employee was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee was granted only one-half month separation pay for every year of her 15-year service. It would seem then that length of service is not necessarily a criterion for the grant of separation pay and neither apparently is the reason for the dismissal.

The Court feels that distinctions are in order. We note that heretofore the separation pay, when it was considered warranted, was required regardless of the nature or degree of the ground proved, be it mere inefficiency or something graver like immoralily or dishonesty. The benediction of compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the validly dismissed employee whatever the reason for his dismissal. This policy should be re-examined. It is time we rationalized the exception, to make it fair to both labor and management, especially to labor.

There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with the company. For example, a subordinate who has irreconcilable policy or personal differences with his employer may be validly dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be frequently absent because she has also to take care of her child may also be removed because of her poor attendance, this being another authorized ground. It is not the employee’s fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the law must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation is changed completely. This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified.

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.

Applying the above considerations, we hold that the grant of separation pay in the case at bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables.

The Court also rules that the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material. This is without prejudice to the application of special agreements between the employer and the employee stipulating a higher rate of computation and providing for more benefits to the discharged employee.17

WHEREFORE, the petition is GRANTED. The challenged resolution of September 22, 1987, is AFFIRMED in toto except for the grant of separation pay in the form of financial assistance, which is hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so ordered.

Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortés and Medialdea, JJ., concur.

Fernan, C.J., see dissenting opinion.

Padilla, J., see separate opinion.

Griño-Aquino, J., I dissent. We should not rationalize compassion. I vote to affirm the grant of financial assistance.

FERNAN, C.J.: dissenting—

The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that “our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers.”1

It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that “those who have less in life should have more in law.” It cannot be denied that a low-salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low-salaried employee who would encounter difficulty finding another job.

I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the “environmental facts” of the case.

SEPARATE OPINION

PADILLA, J.:

I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties.

I do not, however, subscribe to the view that “the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material.” (p. 11, Decision). It is my considered view that, except for cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concerned which is the NLRC. It is in such cases—where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude—that the Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the “environmental facts” of each case.

It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with the financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.

Petition granted; challenged resolution affirmed.

Note.—Separation pay may be given for equitable consideration to security guard who was dismissed from employment for just cause. (National Service Corporation vs. Leogardo, Jr., 130 SCRA 502.)

G.R. Nos. 158786 & 158789. October 19, 2007.*

TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), ED CUBELO, EDWIN ALARANA, ALEX ALEJO, ERWIN ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO, DOMINADOR ARRIOLA, LESTER ATUN, ROLANDO BALUYOT, RODERICK BAYANI, ABEL BERCES, BENNY BERING, MELCHOR BLANCO, JERRY BOLOCON, ELMER BULAN, NELSON CABAHUG, JESSIE CABATAY, MARCELO CABEZAS, ROQUE CANDELARIO, JR., LORENZO CARAQUEO, DENNIS CARINGAL, GIENELL CASABA, CHRISTOPHER CATAPUSAN, RICO CATRAL, JULIUS COMETA, JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO DAVID, JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS SANTOS, JOSELITO DE OCAMPO, FRANK MANUEL DIA, ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR ESPADILLA, DENNIS ESPELOA, JASON FAJILAGUTAN, JOHN FAJURA, MELENCIO FRANCO, DEXTER FULGAR, EDUARDO GADO, ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA, RONALD GASPI, ANGELO GAVARRA, REYNALDO GOJAR, EDGAR HILANGA, EUGENE JAY HONDRADA, ALEJANDRO IMPERIAL, FERDINAND JAEN, JOEY JAVILLONAR, BASILIO LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY LUCIDO, ROMMEL MACALINDONG, NIXON MADRAZO, ROGELIO MAGISTRADO, JR., PHILIP JOHN MAGNAYE, ALLAN JOHN MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON, MANUEL MANALO, JR., JONAMAR MANAOG, JOVITO MANECLANG, BAYANI MANGUIL, JR., CARLITO MARASIGAN, ROMMEL MARIANO, BOBIT MENDOZA, ERICSON MONTERO, MARLAW MONTERO, EDWIN NICANOR, RODERICK NIERVES, LOLITO NUNEZ, FELIMON ORTIZ, EDWIN PECAYO, ERWIN PENA, JOWALD PENAMANTE, JORGE POLUTAN, EDDIE RAMOS, ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR., BERNARDO SALVADOR, BALDWIN SAN PABLO, JEFFREY SANGALANG, BERNABE SAQUILABON, ALEX SIERRA, ROMUALDO SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN, JR., RODEL TOLENTINO, ROMMEL TOLENTINO, GRANT ROBERT TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR UMITEN, JR., APOLLO VIOLETA, SR., DOMINADOR ZAMORA, JR., ROMMEL ARCETA, ANTONIO BORSIGUE, EMILIO COMPLETO, RANDY CONSIGNADO, BASILIO DELA CRUZ, ALEXANDER ESTEVA, NIKKO FRANCO, RODEL GAMIT, ROBERTO GONZALES, PHILIP JALEA, JOEY LLANERA, GERONIMO LOPEZ, RUEL MANEGO, EDWIN MANZANILLA, KENNETH NATIVIDAD, LARRY ORMILLA, CORNELIO PLATON, PAUL ARTHUR SALES, ALEJANDRO SAMPANG, LAURO SULIT, ROLANDO TOMAS, JOSE ROMMEL TRAZONA, MICHAEL TEDDY YANGYON, MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL DIGMA, JOSELITO HUGO, and RICKY CHAVEZ, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, (NLRC-2ND DIVISION), HON. COMMISSIONERS: VICTORINO CALAYCAY, ANGELITA GACUTAN, and RAUL AQUINO, TOYOTA MOTOR PHILIPPINES CORPORATION, TAKESHI FUKUDA, and DAVID GO, respondents.

G.R. Nos. 158798-99. October 19, 2007.*

TOYOTA MOTOR PHILIPPINES CORPORATION, petitioner, vs. TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TMPCWA), respondent.

Labor Law; Due Process; A party cannot complain of deprivation of due process if he was afforded an opportunity to participate in the proceedings but failed to do so—if he does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating the constitutional guarantee.—It is entirely the Union’s fault that its position paper was not considered by the NLRC. Records readily reveal that the NLRC was even too generous in affording due process to the Union. It issued no less than three (3) orders for the parties to submit its position papers, which the Union ignored until the last minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, 482 SCRA 562 (2006), it was explained that a party cannot complain of deprivation of due process if he was afforded an opportunity to participate in the proceedings but failed to do so. If he does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating the constitutional guarantee. Thus, there was no violation of the Union’s right to due process on the part of the NLRC.

Actions; Pleadings and Practice; Verification; The verification requirement is significant as it is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of

speculation—this requirement is simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily render it fatally defective.—The verification requirement is significant, as it is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation. This requirement is simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily render it fatally defective. Indeed, verification is only a formal and not a jurisdictional requirement.

Same; Same; Same; A petition is deemed to satisfy the formal requirements only with regard to petitioners who signed the petition but not their co-petitioners who did not sign or authorize the other petitioners to sign on their behalf—the petition shall be considered compliant with the formal requirements with respect to the parties who signed it and, therefore, can be given due course only with regard to them, while as to the other petitioners who did not sign the verification and certificate against forum shopping, they cannot be recognized as petitioners and have no legal standing before the Court.—In this case, the problem is not the absence but the adequacy of the Union’s verification, since only 159 out of the 227 petitioners executed the verification. Undeniably, the petition meets the requirement on the verification with respect to the 159 petitioners who executed the verification, attesting that they have sufficient knowledge of the truth and correctness of the allegations of the petition. However, their signatures cannot be considered as verification of the petition by the other 68 named petitioners unless the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus, in Loquias v. Office of the Ombudsman, 338 SCRA 62 (2000), we ruled that the petition satisfies the formal requirements only with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor authorize the other petitioner to sign it on his behalf. The proper ruling in this situation is to consider the petition as compliant with the formal requirements with respect to the parties who signed it and, therefore, can be given due course only with regard to them. The other petitioners who did not sign the verification and certificate against forum shopping cannot be recognized as petitioners have no legal standing before the Court. The petition should be dismissed outright with respect to the non-conforming petitioners.

Same; Strikes; Categories of Illegal Strikes; There are six (6) categories of illegal strikes, viz.: first, when it is contrary to a specific prohibition of law, such as strike by employees performing governmental functions, second, when it violates a specific requirement of law, third, when it is declared for an unlawful purpose; fourth, when it employs unlawful means in the pursuit of its objective, fifth, when it is declared in violation of an existing injunction, and sixth, when it is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration clause.—Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz.: (1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental functions; or (2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites of a valid strike]; or (3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor practice against non-union employees; or (4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or (5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or (6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration clause.

Same; Same; Words and Phrases; Strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute, and the fact that the conventional term “strike” was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation will be deemed controlling.—A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of the employer and the employee. In Bangalisan v. Court of Appeals, 276 SCRA 619 (1997), it was explained

that “[t]he fact that the conventional term ‘strike’ was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation and not its appearance, will be deemed controlling.” The term “strike” has been elucidated to encompass not only concerted work stoppages, but also slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or sabotage plant equipment and facilities, and similar activities.

Same; Jurisdictions; Assumption of Jurisdiction; Once the Secretary of Department of Labor and Employment (DOLE) assumes jurisdiction over the labor dispute and certifies the case for compulsory arbitration with the National Labor Relations Commission, the parties have to revert to the status quo ante.—It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case for compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of things as it was before).

Same; Same; The responsibility of union officials is greater than that of the members—if the implementation of an illegal strike is recommended, then they would mislead and deceive the membership and the supreme penalty of dismissal is appropriate.—Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly participates in the commission of illegal acts during a lawful strike. It is clear that the responsibility of union officials is greater than that of the members. They are tasked with the duty to lead and guide the membership in decision making on union activities in accordance with the law, government rules and regulations, and established labor practices. The leaders are expected to recommend actions that are arrived at with circumspection and contemplation, and always keep paramount the best interests of the members and union within the bounds of law. If the implementation of an illegal strike is recommended, then they would mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On the other hand, if the strike is legal at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot evade personal and individual liability for said acts.

Same; Same; Mere participation by union members in an illegal strike without committing any illegal act is not a ground for termination.—Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal act “during a strike.” While the provision is silent on whether the strike is legal or illegal, we find that the same is irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be terminated. However, when union members merely participate in an illegal strike without committing any illegal act, are they liable? This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC, 245 SCRA 627 (1995), where it was held that an ordinary striking worker cannot be terminated for mere participation in an illegal strike. This was an affirmation of the rulings in Bacus v. Ople, 132 SCRA 690 (1984), and Progressive Workers Union v. Aguas, 150 SCRA 429 (1987), where it was held that though the strike is illegal, the ordinary member who merely participates in the strike should not be meted loss of employment on the considerations of compassion and good faith and in view of the security of tenure provisions under the Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), 75 SCRA 73 (1977), it was explained that a member is not responsible for the union’s illegal strike even if he voted for the holding of a strike which became illegal.

Same; Same; Rule on Vicarious Liability; The rule on vicarious liability of a union member was abandoned by Philippine labor laws and it is only when a striking worker “knowingly participates in the commission of illegal acts during a strike” that he will be penalized with dismissal.—Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a union member in an illegal strike, starting with the “rule of vicarious liability,” thus: Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts of individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the theory that all the members are engaged in a general conspiracy, and the unlawful acts of the particular members are viewed as necessary incidents of the conspiracy. It has been said that in the absence of statute providing otherwise, the rule of vicarious liability applies. Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious liability

concept. It expressly provided that: No officer or member of any association or organization, and no association or organization participating or interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual officers, members, or agents, except upon proof of actual participation in, or actual authorization of, such acts or of ratifying of such acts after actual knowledge thereof. Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule. Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker “knowingly participates in the commission of illegal acts during a strike” that he will be penalized with dismissal.

Same; Same; Words and Phrases; No precise meaning was given the phrase “illegal acts” but it may encompass a number of acts that violate existing labor or criminal acts and other breaches of the law.—What are considered “illegal acts” under Art. 264(a)? No precise meaning was given to the phrase “illegal acts.” It may encompass a number of acts that violate existing labor or criminal laws, such as the following: (1) Violation of Art. 264(e) of the Labor Code which provides that “[n]o person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public thoroughfares”; (2) Commission of crimes and other unlawful acts in carrying out the strike; and (3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code. As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws. In the cases at bench, the individual respondents participated in several mass actions, viz.: (1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001; (2) The strikes held on March 17 to April 12, 2001; and (3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants. Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001? The answer is in the affirmative. As we have ruled that the strikes by the Union on the three different occasions were illegal, we now proceed to determine the individual liabilities of the affected union members for acts committed during these forbidden concerted actions.

Same; Same; Burden of Proof; It must be proved that the striking employee committed illegal acts during the strike and the striker who participated in the commission of illegal acts must be identified.—Our ruling in Association of Independent Unions in the Philippines v. NLRC, 305 SCRA 219 (1999), lays down the rule on the liability of the union members: Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: “[x x x] any worker [x x x] who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. [x x x]” It can be gleaned unerringly from the aforecited provision of law in point, however, that an ordinary striking employee can not be terminated for mere participation in an illegal strike. There must be proof that he committed illegal acts during the strike and the striker who participated in the commission of illegal act[s] must be identified. But proof beyond reasonable doubt is not required. Substantial evidence available under the circumstances, which may justify the imposition of the penalty of dismissal, may suffice. In the landmark case of Ang Tibay vs. CIR, 69 Phil. 635, the court ruled “Not only must there be some evidence to support a finding or conclusion, but the evidence must be ‘substantial.’ Substantial evidence is more than a mere scintilla. It means such relevant evidence that a reasonable mind might accept as sufficient to support a conclusion.” (Emphasis supplied.) Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the commission of illegal acts during the strikes.

Same; Same; Separation Pay; The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor Code exist, the employee is not entitled to separation pay, but the dismissed employee is entitled to “whatever rights, benefits and privileges she or he may have under the applicable individual or collective bargaining agreement with the employer or voluntary employer policy or practice” or under the Labor Code and other existing laws.—The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the

right to termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is entitled to “whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective bargaining agreement with the employer or voluntary employer policy or practice” or under the Labor Code and other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to receive from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits granted by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed employees to the benefits depends on the stipulations of the CBA or the company rules and policies.

Same; Same; Same; Separation pay may be given even though an employee is validly dismissed when the court finds justification in applying the principle of social justice well entrenched in the 1987 Constitution.—As in any rule, there are exceptions. One exception where separation pay is given even though an employee is validly dismissed is when the court finds justification in applying the principle of social justice well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, 164 SCRA 671 (1988), the Court elucidated why social justice can validate the grant of separation pay, thus: The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.

Same; Same; Same; There are two (2) exceptions when the National Labor Relations Commission (NLRC) or the courts should not grant separation pay based on social justice, that is, serious misconduct, or, acts that reflect on the moral character of the employee.— Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious misconduct.

Same; Same; It is high time that employer and employee cease to view each other as adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success of the business.—It is high time that employer and employee cease to view each other as adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success of the business. When they consider only their own self-interests, and when they act only with their own benefit in mind, both parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The employer wants the business to succeed, considering the investment that has been made. The employee in turn, also wants the business to succeed, as continued employment means a living, and the chance to better one’s lot in life. It is clear then that they both have the same goal, even if the benefit that results may be greater for one party than the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and of balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation between the employer and the employee. Even though strikes and lockouts have been recognized as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term solutions by forcing concessions from one party; but staging such strikes would damage the working relationship between employers and employees, thus endangering the business that they both want to succeed. The more progressive and truly effective means of dispute resolution lies in mediation, conciliation, and arbitration, which do not increase tension but instead provide relief from them. In the end, an atmosphere of trust and

understanding has much more to offer a business relationship than the traditional enmity that has long divided the employer and the employee.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Cesar Maravilla, Jr. for Toyota Motor Phils. Corp. Workers Association, et al.

De la Rosa, Tejero, Nograles for Toyota Motor Philippines Corporation.

VELASCO, JR., J.:

The Case

In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor Philippines Corporation Workers Association (Union) and its dismissed officers and members seek to set aside the February 27, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001 Decision2 and September 14, 2001 Resolution3 of the National Labor Relations Commission (NLRC), declaring illegal the strikes staged by the Union and upholding the dismissal of the 227 Union officers and members.

On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines Corporation (Toyota) prays for the recall of the award of severance compensation to the 227 dismissed employees, which was granted under the June 20, 2003 CA Resolution4 in CA-G.R. SP Nos. 67100 and 67561.

In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4) interrelated cases, they will be referred to as simply the Union and Toyota hereafter.

The Facts

The Union is a legitimate labor organization duly registered with the Department of Labor and Employment (DOLE) and is the sole and exclusive bargaining agent of all Toyota rank and file employees.5

Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles and parts.6 It is a Board of Investments (BOI) participant in the Car Development Program and the Commercial Vehicle Development Program. It is likewise a BOI-preferred non-pioneer export trader of automotive parts and is under the “Special Economic Zone Act of 1995.” It is one of the largest motor vehicle manufacturers in the country employing around 1,400 workers for its plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and provisions for income tax of PhP 120.9 million.

On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file employees with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No. NCR-OD-M-9902-001. MedArbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE Secretary granted the Union’s prayer, and, through the June 25, 1999 Order, directed the immediate holding of the certification election.7

After Toyota’s plea for reconsideration was denied, the certification election was conducted. Med-Arbiter Lameyra’s May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all the Toyota rank and file employees. Toyota challenged said Order via an appeal to the DOLE Secretary.8

In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but the latter refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of strike on January 16, 2001 with the NCMB, docketed as NCMB-NCR-NS-01-011-01, based on Toyota’s refusal to bargain. On February 5, 2001, the NCMB-NCR converted the notice of strike into a preventive mediation case on the ground that the issue of whether or not the Union is the exclusive bargaining agent of all Toyota rank and file employees was still unresolved by the DOLE Secretary.

In connection with Toyota’s appeal, Toyota and the Union were required to attend a hearing on February 21, 2001 before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory employees from the votes cast during the certification election. The February 21, 2001 hearing was cancelled and reset to February 22, 2001. On February 21, 2001, 135 Union officers and members failed to render the required overtime work, and instead marched to and staged a picket in front of the BLR office in Intramuros, Manila.9 The Union, in a letter of the same date, also requested that its members be allowed to be absent on February 22, 2001 to attend the hearing and instead work on their next scheduled rest day. This request however was denied by Toyota.

Despite denial of the Union’s request, more than 200 employees staged mass actions on February 22 and 23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota. Due to the deliberate absence of a considerable number of employees on February 22 to 23, 2001, Toyota experienced acute lack of manpower in its manufacturing and production lines, and was unable to meet its production goals resulting in huge losses of PhP 53,849,991.

Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring them to explain within 24 hours why they should not be dismissed for their obstinate defiance of the company’s directive to render overtime work on February 21, 2001, for their failure to report for work on February 22 and 23, 2001, and for their participation in the concerted actions which severely disrupted and paralyzed the plant’s operations.10 These letters specifically cited Section D, paragraph 6 of the Company’s Code of Conduct, to wit:

“Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to [Toyota’s] interest.

1st offense—dismissal.”11

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to participate in a strike/picket and to abandon their posts, the pertinent portion of which reads, as follows:

“YANIG sa kanyang komportableng upuan ang management ng TOYOTA. Ang dating takot, kimi, at mahiyaing manggagawa ay walang takot na nagmartsa at nagprotesta laban sa desperadong pagtatangkang baguhin ang desisyon ng DOLE na pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa ang lumahok.

x x x x

HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management ang CBA. Oo maari tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn. Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na lang ay magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na lang ay marupok na ang ating mga buto sa kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA, paano na? Hahayaan ba nating ang kumpanya lang ang makinabang sa yamang likha ng higit sa isang dekadang pagpapagal natin?

HUWAG BIBITIW SA NASIMULANG TAGUMPAY!

PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG

MAKATARUNGANG CBA!

HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA

MANGGAGAWA SA TOYOTA!”12 (Emphasis supplied.)

On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-NS-02-061-01 for union busting amounting to unfair labor practice.

On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the February 27, 2001 notices sent by Toyota to the erring employees. The Union members explained that their refusal to work on their scheduled work time for two consecutive days was simply an exercise of their constitutional right to peaceably assemble and to petition the government for redress of grievances. It further argued that the demonstrations staged by the employees on February 22 and 23, 2001 could not be classified as an illegal strike or picket, and that Toyota had already condoned the alleged acts when it accepted back the subject employees.13

Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees to clarify whether or not they are adopting the March 1, 2001 Union’s explanation as their own. The employees were also required to attend an investigative interview,14 but they refused to do so.

On March 16, 2001, Toyota terminated the employment of 227 employees15 for participation in concerted actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code. The notice of termination reads:

“After a careful evaluation of the evidence on hand, and a thorough assessment of your explanation, TMP has concluded that there are overwhelming reasons to terminate your services based on Article 282 of the Labor Code and TMP’s Code of Conduct.

Your repeated absences without permission on February 22 to 23, 2001 to participate in a concerted action against TMP constitute abandonment of work and/or very serious misconduct under Article 282 of the Labor Code.

The degree of your offense is aggravated by the following circumstances:

1. You expressed to management that you will adopt the union’s letter dated March 1, 2001, as your own explanation to the charges contained in the Due Process Form dated February 27, 2001. It is evident from such explanation that you did not come to work because you deliberately participated together with other Team Members in a plan to engage in concerted actions detrimental to TMP’s interest. As a result of your participation in the widespread abandonment of work by Team Members from February 22 to 23, 2001, TMP suffered substantial damage.

It is significant that the absences you incurred in order to attend the clarificatory hearing conducted by the Bureau of Labor Relations were unnecessary because the union was amply represented in the said hearings by its counsel and certain members who sought and were granted leave for the purpose. Your reason for being absent is, therefore, not acceptable; and

2. Your participation in the organized work boycott by Team Members on February 22 and 23 led to work disruptions that prevented the Company from meeting its production targets, resulting [in] foregone sales of more than eighty (80) vehicles, mostly new-model Revos, valued at more than Fifty Million Pesos (50,000,000.00).

The foregoing is also a violation of TMP’s Code of Conduct (Section D, Paragraph 6) to wit:

“Inciting or participating in riots, disorders, illegal strikes or concerted actions detrimental to TMP’s interest.”

Based on the above, TMP Management is left with no other recourse but to terminate your employment effective upon your receipt thereof.

[Sgd.]

JOSE MARIA ALIGADA

Deputy Division Manager16

In reaction to the dismissal of its union members and officers, the Union went on strike on March 17, 2001. Subsequently, from March 28, 2001 to April 12, 2001, the Union intensified its strike by barricading the gates of Toyota’s Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for work from entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated that:

“3. On March 17, 2001, members of the Toyota Motor Philippines Corporation Workers Association (TMPCWA), in response to the dismissal of some two hundred twenty seven (227) leaders and members of TMPCWA and without observing the requirements mandated by the Labor Code, refused to report for work and picketed TMPC premises from 8:00 a.m. to 5:00 p.m. The strikers badmouthed people coming in and hurled invectives such as “bakeru” at Japanese officers of the company. The strikers likewise pounded the officers’ vehicle as they tried to enter the premises of the company.

4. On March 28, 2001, the strikers intensified their picketing and barricaded the gates of TMPC’s Bicutan and Sta. Rosa plants, thus, blocking the free ingress/egress to and from the premises. Shuttle buses and cars containing TMPC employees, suppliers, dealers, customers and other people having business with the company, were prevented by the strikers from entering the plants.

5. As a standard operating procedure, I instructed my men to take photographs and video footages of those who participated in the strike. Seen on video footages taken on various dates actively participating in the strike were union officers Emilio C. Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo.

6. Based on the pictures, among those identified to have participated in the March 28, 2001 strike were Grant Robert Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito Puno, Baldwin San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino, Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as Annexes “1” to “18” are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants.

7. From March 29 to 31, 2001, the strikers continued to barricade the entrances to TMPC’s two (2) plants. Once again, the strikers hurled nasty remarks and prevented employees aboard shuttle buses from entering the plants. Among the strikers were Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres, Freddie Olit, Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar Espadilla, Domingo Javier, Apollo Violeta and Elvis Tabinao.”17

On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary restraining order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It sought free ingress to and egress

from its Bicutan and Sta. Rosa manufacturing plants. Acting on said petition, the NLRC, on April 5, 2001, issued a TRO against the Union, ordering its leaders and members as well as its sympathizers to remove their barricades and all forms of obstruction to ensure free ingress to and egress from the company’s premises. In addition, the NLRC rejected the Union’s motion to dismiss based on lack of jurisdiction.18

Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which was docketed as NLRC NCR (South) Case No. 30-04-01775-01, and prayed that the erring Union officers, directors, and members be dismissed.19

On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an Order20 certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking workers to return to work at their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to accept the returning employees under the same terms and conditions obtaining prior to the strike or at its option, put them under payroll reinstatement. The parties were also enjoined from committing acts that may worsen the situation.

The Union ended the strike on April 12, 2001. The union members and officers tried to return to work on April 16, 2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the DOLE Secretary.

In the meantime, the Union filed a motion for reconsideration of the DOLE Secretary’s April 10, 2001 certification Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution. Consequently, a petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No. 64998.

In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary, docketed the case as Certified Case No. 000203-01.

Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretary’s certification Order, several payroll-reinstated members of the Union staged a protest rally in front of Toyota’s Bicutan Plant bearing placards and streamers in defiance of the April 10, 2001 Order.

Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in front of the Bicutan Plant. At the same time, some twenty-nine (29) payrollreinstated employees picketed in front of the Santa Rosa Plant’s main entrance, and were later joined by other Union members.

On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which was docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the second notice of strike to be subsumed in the April 10, 2001 certification Order.

In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their respective position papers on June 8, 2001. The union, however, requested for abeyance of the proceedings considering that there is a pending petition for certiorari with the CA assailing the validity of the DOLE Secretary’s Assumption of Jurisdiction Order.

Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to submit their respective position papers on or before June 2, 2001. The same Order also denied the Union’s verbal motion to defer hearing on the certified cases.

On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRC’s June 19, 2001 Order, praying for the deferment of the submission of position papers until its petition for certiorari is resolved by the CA.

On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again ordered the Union to submit its position paper by July 19, 2001, with a warning that upon failure for it to do so, the case shall be considered submitted for decision.

Meanwhile, on July 17, 2001, the CA dismissed the Union’s petition for certiorari in CA-G.R. SP No. 64998, assailing the DOLE Secretary’s April 10, 2001 Order.

Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper on July 19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position paper on the scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for resolution based on the evidence on record.

During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its position paper. Later that day, the Union claimed it filed its position paper by registered mail.

Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the Union on February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads:

“WHEREFORE, premises considered, it is hereby ordered:

(1) Declaring the strikes staged by the Union to be illegal.

(2) Declared [sic] that the dismissal of the 227 who participated in the illegal strike on February 21-23, 2001 is legal.

(3) However, the Company is ordered to pay the 227 Union members, who participated in the illegal strike severance compensation in an amount equivalent to one month salary for every year of service, as an alternative relief to continued employment.

(4) Declared [sic] that the following Union officers and directors to have forfeited their employment status for having led the illegal strikes on February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.21

SO ORDERED.”22

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to comply with the procedural requirements of a valid strike under Art. 263 of the Labor Code.

After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the Union again staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of the Labor Code which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the President or the DOLE Secretary.

The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued the assumption/certification Order, and ruled that the Union did not respect the DOLE Secretary’s directive.

Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC denied in its September 14, 2001 Resolution.23 Consequently, both parties questioned the August 9, 2001 Decision24 and September 14, 2001 Resolution of the NLRC in separate petitions for certiorari filed with the CA, which were docketed as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA then consolidated the petitions.

In its February 27, 2003 Decision,25 the CA ruled that the Union’s petition is defective in form for its failure to append a proper verification and certificate of non-forum shopping, given that, out of the 227 petitioners, only 159 signed the verification and certificate of non-forum shopping. Despite the flaw, the CA proceeded to resolve the petitions on the

merits and affirmed the assailed NLRC Decision and Resolution with a modification, however, of deleting the award of severance compensation to the dismissed Union members.

In justifying the recall of the severance compensation, the CA considered the participation in illegal strikes as serious misconduct. It defined serious misconduct as a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. It cited Panay Electric Company, Inc. v. NLRC,26 where we revoked the grant of separation benefits to employees who lawfully participated in an illegal strike based on Art. 264 of the Labor Code, which states that “any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status.”27

However, in its June 20, 2003 Resolution,28 the CA modified its February 27, 2003 Decision by reinstating severance compensation to the dismissed employees based on social justice.

The Issues

Petitioner Union now comes to this Court and raises the following issues for our consideration:

I. Whether the mere participation of ordinary employees in an illegal strike is enough reason to warrant their dismissal.

II. Whether the Union officers and members’ act of holding the protest rallies in front of the BLR office and the Office of the Secretary of Labor and Employment on February 22 and 23, 2001 should be held as illegal strikes. In relation hereto, whether the protests committed on May 23 and 28, 2001, should be held as illegal strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order issued by the Secretary of Labor and Employment.

III. Whether the dismissal of 227 Union officers and members constitutes unfair labor practice.

IV. Whether the CA erred in affirming the Decision of the NLRC which excluded the Union’s Position Paper which the Union filed by mail. In the same vein, whether the Union’s right to due process was violated when the NLRC excluded their Position Paper.

V. Whether the CA erred in dismissing the Union’s Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:

I. Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially modifying its Decision dated February 27, 2003, and awarding severance compensation to the dismissed Union members.

In sum, two main issues are brought to the fore:

(1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and

(2) Whether separation pay should be awarded to the Union members who participated in the illegal strikes.

The Court’s Ruling

The Union contends that the NLRC violated its right to due process when it disregarded its position paper in deciding Toyota’s petition to declare the strike illegal.

We rule otherwise.

It is entirely the Union’s fault that its position paper was not considered by the NLRC. Records readily reveal that the NLRC was even too generous in affording due process to the Union. It issued no less than three (3) orders for the parties

to submit its position papers, which the Union ignored until the last minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a party cannot complain of deprivation of due process if he was afforded an opportunity to participate in the proceedings but failed to do so. If he does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating the constitutional guarantee.29 Thus, there was no violation of the Union’s right to due process on the part of the NLRC.

On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and posits that the verification signed by 159 out of the 227 petitioners has already substantially complied with and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court.

The Union’s proposition is partly correct.

Sec. 4 of Rule 7 of the Rules of Court states:

“Sec. 4. Verification.—Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on “information and belief” or upon “knowledge, information and belief,” or lacks a proper verification, shall be treated as an unsigned pleading.”

The verification requirement is significant, as it is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation.30 This requirement is simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily render it fatally defective. Indeed, verification is only a formal and not a jurisdictional requirement.31

In this case, the problem is not the absence but the adequacy of the Union’s verification, since only 159 out of the 227 petitioners executed the verification. Undeniably, the petition meets the requirement on the verification with respect to the 159 petitioners who executed the verification, attesting that they have sufficient knowledge of the truth and correctness of the allegations of the petition. However, their signatures cannot be considered as verification of the petition by the other 68 named petitioners unless the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus, in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies the formal requirements only with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor authorize the other petitioner to sign it on his behalf.32 The proper ruling in this situation is to consider the petition as compliant with the formal requirements with respect to the parties who signed it and, therefore, can be given due course only with regard to them. The other petitioners who did not sign the verification and certificate against forum shopping cannot be recognized as petitioners have no legal standing before the Court. The petition should be dismissed outright with respect to the nonconforming petitioners.

In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling in Loquias and instead proceeded to decide the case on the merits.

The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants constituted illegal strikes

When is a strike illegal?

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz.:

(1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites of a valid strike]; or

(3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor practice against nonunion employees; or

(4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or

(5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or

(6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration clause.”33

Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to peaceably assemble and petition the government for redress of grievances. Mainly relying on the doctrine laid down in the case of Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., Inc.,34 it argues that the protest was not directed at Toyota but towards the Government (DOLE and BLR). It explains that the protest is not a strike as contemplated in the Labor Code. The Union points out that in Philippine Blooming Mills Employees Organization, the mass action staged in Malacañang to petition the Chief Executive against the abusive behavior of some police officers was a proper exercise of the employees’ right to speak out and to peaceably gather and ask government for redress of their grievances.

The Union’s position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that of the present case, the Union fails to realize one major difference: there was no labor dispute in Philippine Blooming Mills Employees Organization. In the present case, there was an ongoing labor dispute arising from Toyota’s refusal to recognize and negotiate with the Union, which was the subject of the notice of strike filed by the Union on January 16, 2001. Thus, the Union’s reliance on Philippine Blooming Mills Employees Organization is misplaced, as it cannot be considered a precedent to the case at bar.

A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of the employer and the employee.35

In Bangalisan v. Court of Appeals, it was explained that “[t]he fact that the conventional term ‘strike’ was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation and not its appearance, will be deemed controlling.”36 The term “strike” has been elucidated to encompass not only concerted work stoppages, but also slowdowns, mass leaves, sitdowns, attempts to damage, destroy, or sabotage plant equipment and facilities, and similar activities.37

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the Labor Code. The Union’s position is weakened by the lack of permit from the City of Manila to hold “rallies.” Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the concerted action of the employees who deliberately failed to report for work on the convenient excuse that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23, 2001. The purported reason for these protest actions was to safeguard their rights against any abuse which the medarbiter may commit against their cause. However, the Union failed to advance convincing proof that the med-arbiter was biased against them. The acts of the med-arbiter in the performance of his duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to justify the February 2001 mass actions. What comes to the fore is that the decision not to work for two days was designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining agent of the company. This is not a legal and valid exercise of the right of assembly and to demand redress of grievance.

We sustain the CA’s affirmance of the NLRC’s finding that the protest rallies staged on February 21 to 23, 2001 were actually illegal strikes. The illegality of the Union’s mass actions was succinctly elaborated by the labor tribunal, thus:

“We have stated in our questioned decision that such mass actions staged before the Bureau of Labor Relations on February 21-23, 2001 by the union officers and members fall squarely within the definition of a strike (Article 212 (o), Labor Code). These concerted actions resulted in the temporary stoppage of work causing the latter substantial losses. Thus, without the requirements for a valid strike having been complied with, we were constrained to consider the strike staged on such dates as illegal and all employees who participated in the concerted actions to have consequently lost their employment status.

If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents without filing a notice of strike, in effect we are giving license to all the unions in the country to paralyze the operations of their companies/employers every time they wish to hold a demonstration in front of any government agency. While we recognize the right of every person or a group to peaceably assemble and petition the government for redress of grievances, the exercise of such right is governed by existing laws, rules and regulations.

Although the respondent union admittedly made earnest representations with the company to hold a mass protest before the BLR, together with their officers and members, the denial of the request by the management should have been heeded and ended their insistence to hold the planned mass demonstration. Verily, the violation of the company rule cannot be dismissed as mere absences of two days as being suggested by the union [are but] concerted actions detrimental to Petitioner Toyota’s interest.”38 (Emphasis supplied.)

It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without satisfying the prerequisites for a valid strike under Art. 263 of the Labor Code. The Union failed to comply with the following requirements: (1) a notice of strike filed with the DOLE 30 days before the intended date of strike, or 15 days in case of unfair labor practice;39 (2) strike vote approved by a majority of the total union membership in the bargaining unit concerned obtained by secret ballot in a meeting called for that purpose; and (3) notice given to the DOLE of the results of the voting at least seven days before the intended strike. These requirements are mandatory and the failure of a union to comply with them renders the strike illegal.40 The evident intention of the law in requiring the strike notice and the strike-vote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy objectives embodied in the law.41

As they failed to conform to the law, the strikes on February 21, 22, and 23, 2001 were illegal.

Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6 of Toyota’s Code of Conduct which prohibits “inciting or participating in riots, disorders, alleged strikes or concerted actions detrimental to [Toyota’s] interest.” The penalty for the offense is dismissal. The Union and its members are bound by the company rules, and the February 2001 mass actions and deliberate refusal to render regular and overtime work on said days violated these rules. In sum, the February 2001 strikes and walk-outs were illegal as these were in violation of specific requirements of the Labor Code and a company rule against illegal strikes or concerted actions.

With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the legal requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of the Bicutan and Sta. Rosa plants and blocked the free ingress to and egress from the company premises. Toyota employees, customers, and other people having business with the company were intimidated and were refused entry to the plants. As earlier explained, these strikes were illegal because unlawful means were employed. The acts of the Union officers and members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably, the strikes from March 28 to April 12, 2001 were illegal.

Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The Union asserts that the rallies held on May 23 and 28, 2001 could not be considered strikes, as the participants were the dismissed employees who were on payroll reinstatement. It concludes that there was no work stoppage.

This contention has no basis.

It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case for compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of things as it was before). The intended normalcy of operations is apparent from the fallo of the April 10, 2001 Order of then DOLE Secretary Patricia A. Sto. Tomas, which reads:

“WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at Toyota Motors Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This Certification covers the current labor cases filed in relation with the Toyota strike, particularly, the Petition for Injunction filed with the National Labor Relations Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Workers Association, et al., NLRC NCR Case No. 3004-01775-01, and such other labor cases that the parties may file relating to the strike and its effects while this Certification is in effect.

As provided under Article 2634(g) of the Labor Code, all striking workers are directed to return to work at their regular shifts by April 16, 2001; the Company is in turn directed to accept them back to work under the same terms and conditions obtaining prior to the work stoppage, subject to the option of the company to merely reinstate a worker or workers in the payroll in light of the negative emotions that the strike has generated and the need to prevent the further deterioration of the relationship between the company and its workers.

Further, the parties are hereby ordered to cease and desist from committing any act that might lead to the worsening of an already deteriorated situation.”42 (Emphasis supplied.)

It is explicit from this directive that the Union and its members shall refrain from engaging in any activity that might exacerbate the tense labor situation in Toyota, which certainly includes concerted actions.

This was not heeded by the Union and the individual respondents who staged illegal concerted actions on May 23 and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should be undertaken by them to aggravate the “already deteriorated situation.”

While it may be conceded that there was no work disruption in the two Toyota plants, the fact still remains that the Union and its members picketed and performed concerted actions in front of the Company premises. This is a patent violation of the assumption of jurisdiction and certification Order of the DOLE Secretary, which ordered the parties “to cease and desist from committing any act that might lead to the worsening of an already deteriorated situation.” While there are no work stoppages, the pickets and concerted actions outside the plants have a demoralizing and even chilling effect on the workers inside the plants and can be considered as veiled threats of possible trouble to the workers when they go out of the company premises after work and of impending disruption of operations to company officials and even to customers in the days to come. The pictures presented by Toyota undoubtedly show that the company officials and employees are being intimidated and threatened by the strikers. In short, the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed by the DOLE Secretary’s Order. We do not find any compelling reason to reverse the NLRC findings that the pickets on May 23 and 28, 2001 were unlawful strikes.

From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the March 17 to April 12, 2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes.

Union officers are liable for unlawful strikes or illegal acts during a strike

Art. 264 (a) of the Labor Code provides:

ART. 264. PROHIBITED ACTIVITIES

(a) x x x

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike.”

Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly participates in the commission of illegal acts during a lawful strike.

It is clear that the responsibility of union officials is greater than that of the members. They are tasked with the duty to lead and guide the membership in decision making on union activities in accordance with the law, government rules and regulations, and established labor practices. The leaders are expected to recommend actions that are arrived at with circumspection and contemplation, and always keep paramount the best interests of the members and union within the bounds of law. If the implementation of an illegal strike is recommended, then they would mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On the other hand, if the strike is legal at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot evade personal and individual liability for said acts.

The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the illegal strikes held from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001. We uphold the findings of fact of the NLRC on the involvement of said union officials in the unlawful concerted actions as affirmed by the CA, thus:

“As regards to the Union officers and directors, there is overwhelming justification to declare their termination from service. Having instigated the Union members to stage and carry out all illegal strikes from February 21-23, 2001, and May 23 and 28, 2001, the following Union officers are hereby terminated for cause pursuant to Article 264(a) of the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.”43

The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when affirmed by the appellate court, are generally accorded great respect, even finality.44

Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in the absence of clear showing that these were arbitrary and bereft of any rational basis.45 In the case at bench, the Union failed to convince us that the NLRC findings that the Union officials instigated, led, and knowingly participated in the series of illegal strikes are not reinforced by substantial evidence. Verily, said findings have to be maintained and upheld. We reiterate, as a reminder to labor leaders, the rule that “[u]nion officers are duty bound to guide their members to respect the law.”46 Contrarily, if the “officers urge the members to violate the law and defy the duly constituted authorities, their dismissal from the service is a just penalty or sanction for their unlawful acts.”47

Member’s liability depends on participation in illegal acts

Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal act “during a strike.” While the provision is silent on whether the strike is legal or illegal, we find that the same is irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be terminated.48 However, when union members merely participate in an illegal strike without committing any illegal act, are they liable?

This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,49 where it was held that an ordinary striking worker cannot be terminated for mere participation in an illegal strike. This was an affirmation of the rulings in Bacus v. Ople50 and Progressive Workers Union v. Aguas,51 where it was held that though the strike is illegal, the ordinary member who merely participates in the strike should not be meted loss of employment on the considerations of compassion and good faith and in view of the security of tenure provisions under the Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), it was explained that a member is not responsible for the union’s illegal strike even if he voted for the holding of a strike which became illegal.52

Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a union member in an illegal strike, starting with the “rule of vicarious liability,” thus:

“Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts of individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the theory that all the members are engaged in a general conspiracy, and the unlawful acts of the particular members are viewed as necessary incidents of the conspiracy. It has been said that in the absence of statute providing otherwise, the rule of vicarious liability applies.

Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious liability concept. It expressly provided that:

No officer or member of any association or organization, and no association or organization participating or interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual officers, members, or agents, except upon proof of actual participation in, or actual authorization of, such acts or of ratifying of such acts after actual knowledge thereof.

Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule.”53

Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker “knowingly participates in the commission of illegal acts during a strike” that he will be penalized with dismissal.

Now, what are considered “illegal acts” under Art. 264(a)?

No precise meaning was given to the phrase “illegal acts.” It may encompass a number of acts that violate existing labor or criminal laws, such as the following:

(1) Violation of Art. 264(e) of the Labor Code which provides that “[n]o person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public thoroughfares”;

(2) Commission of crimes and other unlawful acts in carrying out the strike;54 and

(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.

As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws.

In the cases at bench, the individual respondents participated in several mass actions, viz.:

(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;

(2) The strikes held on March 17 to April 12, 2001; and

(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants.

Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001?

The answer is in the affirmative.

As we have ruled that the strikes by the Union on the three different occasions were illegal, we now proceed to determine the individual liabilities of the affected union members for acts committed during these forbidden concerted actions.

Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on the liability of the union members:

“Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: “[x x x] any worker [x x x] who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. [x x x]” It can be gleaned unerringly from the aforecited provision of law in point, however, that an ordinary striking employee can not be terminated for mere participation in an illegal strike. There must be proof that he committed illegal acts during the strike and the striker who participated in the commission of illegal act[s] must be identified. But proof beyond reasonable doubt is not required. Substantial evidence available under the circumstances, which may justify the imposition of the penalty of dismissal, may suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled “Not only must there be some evidence to support a finding or conclusion, but the evidence must be ‘substantial.’ Substantial evidence is more than a mere scintilla. It means such relevant evidence that a reasonable mind might accept as sufficient to support a conclusion.”55 (Emphasis supplied.)

Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the commission of illegal acts during the strikes.

After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22, and 23, 2001 rallies and refused to render overtime work or report for work. These rallies, as we earlier ruled, are in reality illegal strikes, as the procedural requirements for strikes under Art. 263 were not complied with. Worse, said strikes were in violation of the company rule prohibiting acts “in citing or participating in riots, disorders, alleged strikes or concerted action detrimental to Toyota’s interest.”

With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of employees who did not render overtime work on February 21, 2001 and who did not report for work on February 22 and 23, 2001 as shown by Annex “I” of Toyota’s Position Paper in NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute at Toyota Motor Philippines Corp. The employees who participated in the illegal concerted actions were as follows:

“1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90. Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95. Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105. Jaen, Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising, Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120. Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado, Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang, Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza, Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson; 153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169. Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin; 174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald; 178. Piamonte, Melvin; 179. Piamonte,

Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex; 199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick; 209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214. Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227. Zamora, Dominador Jr.”

Toyota’s Position Paper containing the list of striking workers was attested to as true and correct under oath by Mr. Jose Ma. Aligada, First Vice President of the Group Administration Division of Toyota. Mr. Emerito Dumaraos, Assistant Department Manager of the Production Department of Toyota, likewise submitted a June 29, 2001 Affidavit56 confirming the low attendance of employees on February 21, 22, and 23, 2001, which resulted from the intentional absences of the aforelisted striking workers. The Union, on the other hand, did not refute Toyota’s categorical assertions on the participation of said workers in the mass actions and their deliberate refusal to perform their assigned work on February 21, 22, and 23, 2001. More importantly, it did not deny the fact of absence of the employees on those days from the Toyota manufacturing plants and their deliberate refusal to render work. Their admission that they participated in the February 21 to 23, 2001 mass actions necessarily means they were absent from their work on those days.

Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal acts like acts of coercion or intimidation and obstructing free ingress to or egress from the company premises. Mr. Eduardo Nicolas III, Toyota’s Security Chief, attested in his affidavit that the strikers “badmouthed people coming in and shouted invectives such as bakeru at Japanese officers of the company.” The strikers even pounded the vehicles of Toyota officials. More importantly, they prevented the ingress of Toyota employees, customers, suppliers, and other persons who wanted to transact business with the company. These were patent violations of Art. 264(e) of the Labor Code, and may even constitute crimes under the Revised Penal Code such as threats or coercion among others.

On March 28, 2001, the following have committed illegal acts––blocking the ingress to or egress from the two (2) Toyota plants and preventing the ingress of Toyota employees on board the company shuttle—at the Bicutan and Sta. Rosa Plants, viz.:

“1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18. Roberto Gonzales”

Photographs were submitted by Toyota marked as Annexes “1” through “18” of its Position Paper, vividly showing the participation of the aforelisted employees in illegal acts.57

To further aggravate the situation, a number of union members committed illegal acts (blocking the ingress to and egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant in Bicutan, to wit:

“1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto”

Pictures marked as Annexes “21” to “22” of Toyota’s Position Paper reveal the illegal acts committed by the aforelisted workers.58

On the next day, March 30, 2001, several employees again committed illegal acts (blocking ingress to and egress from the plant) during the strike at the Bicutan plant, to wit:

“1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao”

Pictures marked as Annexes “25” to “26” and “28” of Toyota’s Position Paper show the participation of these workers in unlawful acts.59

On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts (blocking ingress to and egress from the plant) during the strike held at the Bicutan plant, to wit:

“1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel Borebor; and 7. Alberto Lomboy”

The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes “32” and “33” of Toyota’s Position Paper.60

On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant.61 Then, on April 9, 2001, Alvin Paniterce, Dennis Apolinario, and Eduardo Miranda62 were identified to have committed illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant and were validly dismissed by Toyota.

Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001 and May 28, 2001 in front of the Bicutan and Sta. Rosa plants. These workers’ acts in joining and participating in the May 23 and 28, 2001 rallies or pickets were patent violations of the April 10, 2001 assumption of jurisdiction/certification Order issued by the DOLE Secretary, which proscribed the commission of acts that might lead to the “worsening of an already deteriorated situation.” Art. 263(g) is clear that strikers who violate the assumption/certification Order may suffer dismissal from work. This was the situation in the May 23 and 28, 2001 pickets and concerted actions, with the following employees who committed illegal acts:

a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel Berces; (3) Benny Bering; (4) Dexter Bolaños; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8) Herbert Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel Tagala.

Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a return-to-work order) committed by the aforelisted strikers.63

b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo

Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan; (53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.

Toyota presented photographs which show said employees conducting mass pickets and concerted actions.64

Anent the grant of severance compensation to legally dismissed union members, Toyota assails the turn-around by the CA in granting separation pay in its June 20, 2003 Resolution after initially denying it in its February 27, 2003 Decision. The company asseverates that based on the CA finding that the illegal acts of said union members constitute gross misconduct, not to mention the huge losses it suffered, then the grant of separation pay was not proper.

The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the right to termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is entitled to “whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective bargaining agreement with the employer or voluntary employer policy or practice”65 or under the Labor Code and other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to receive from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits granted by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed employees to the benefits depends on the stipulations of the CBA or the company rules and policies.

As in any rule, there are exceptions. One exception where separation pay is given even though an employee is validly dismissed is when the court finds justification in applying the principle of social justice well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court elucidated why social justice can validate the grant of separation pay, thus:

“The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate subtopic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.”66

In the same case, the Court laid down the rule that severance compensation shall be allowed only when the cause of the dismissal is other than serious misconduct or that which reflects adversely on the employee’s moral character. The Court succinctly discussed the propriety of the grant of separation pay in this wise:

“We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next

employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.”67

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious misconduct.

A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified on any of the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v. NLRC,68 we deleted the award of separation pay to an employee who, while unprovoked, hit her coworker’s face, causing injuries, which then resulted in a series of fights and scuffles between them. We viewed her act as serious misconduct which did not warrant the award of separation pay. In House of Sara Lee v. Rey,69 this Court deleted the award of separation pay to a branch supervisor who regularly, without authorization, extended the payment deadlines of the company’s sales agents. Since the cause for the supervisor’s dismissal involved her integrity (which can be considered as breach of trust), she was not worthy of compassion as to deserve separation pay based on her length of service. In Gustilo v. Wyeth Phils., Inc.,70 this Court found no exceptional circumstance to warrant the grant of financial assistance to an employee who repeatedly violated the company’s disciplinary rules and regulations and whose employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case of San Miguel v. Lao,71 this Court reversed and set aside the ruling of the CA granting retirement benefits or separation pay to an employee who was dismissed for willful breach of trust and confidence by causing the delivery of raw materials, which are needed for its glass production plant, to its competitor. While a review of the case reports does not reveal a case involving a termination by reason of the commission of a crime against the employer or his/her family which dealt with the issue of separation pay, it would be adding insult to injury if the employer would still be compelled to shell out money to the offender after the harm done.

In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful intent or they reflected adversely on the moral character of the employees. We therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his family, separation pay should not be conceded to the dismissed employee.

In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may opt to grant separation pay anchored on social justice in consideration of the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of separation pay.

In the case at bench, are the 227 striking employees entitled to separation pay?

In the instant case, the CA concluded that the illegal strikes committed by the Union members constituted serious misconduct.72

The CA ratiocinated in this manner:

“Neither can social justice justify the award to them of severance compensation or any other form of financial assistance. x x x

x x x x

Considering that the dismissal of the employees was due to their participation in the illegal strikes as well as violation of the Code of Conduct of the company, the same constitutes serious misconduct. A serious misconduct is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v. NLRC, the Supreme Court nullified the grant of separation benefits to employees who unlawfully participated in an illegal strike in light of Article 264, Title VIII, Book V of the Labor Code, that, “any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status.”

The constitutional guarantee on social justice is not intended only for the poor but for the rich as well. It is a policy of fairness to both labor and management.”73 (Emphasis supplied.)

In disposing of the Union’s plea for reconsideration of its February 27, 2003 Decision, the CA however performed a volte-face by reinstating the award of separation pay.

The CA’s grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance Telephone Co. v. NLRC that serious misconduct forecloses the award of separation pay. Secondly, the advertence to the alleged honest belief on the part of the 227 employees that Toyota committed a breach of the duty to bargain collectively and an abuse of valid exercise of management prerogative has not been substantiated by the evidence extant on record. There can be no good faith in intentionally incurring absences in a collective fashion from work on February 22 and 23, 2001 just to attend the DOLE hearings. The Union’s strategy was plainly to cripple the operations and bring Toyota to its knees by inflicting substantial financial damage to the latter to compel union recognition. The Union officials and members are supposed to know through common sense that huge losses would befall the company by the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million because of the willful desertion of company operations in February 2001 by the dismissed union members. In addition, further damage was experienced by Toyota when the Union again resorted to illegal strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded, and the company officials, employees, and customers were intimidated and harassed. Moreover, they were fully aware of the company rule on prohibition against concerted action inimical to the interests of the company and hence, their resort to mass actions on several occasions in clear violation of the company regulation cannot be excused nor justified. Lastly, they blatantly violated the assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of law. These acts indeed constituted serious misconduct.

A painstaking review of case law renders obtuse the Union’s claim for separation pay. In a slew of cases, this Court refrained from awarding separation pay or financial assistance to union officers and members who were separated from service due to their participation in or commission of illegal acts during strikes. In the recent case of Pilipino Telephone Corporation v. Pilipino Telephone Employees Association (PILTEA),74 this Court upheld the dismissal of union officers who participated and openly defied the return-to-work order issued by the DOLE Secretary. No separation pay or

financial assistance was granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,75 this Court declared that the union officers who participated in and the union members who committed illegal acts during the illegal strike have lost their employment status. In this case, the strike was held illegal because it violated agreements providing for arbitration. Again, there was no award of separation pay nor financial assistance. In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,76 the strike was declared illegal because the means employed was illegal. We upheld the validity of dismissing union members who committed illegal acts during the strike, but again, without awarding separation pay or financial assistance to the erring employees. In Samahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines,77 this Court upheld the dismissal of union officers who participated in an illegal strike sans any award of separation pay. Earlier, in Grand Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied Industries,78 we affirmed the dismissal of the Union’s officers who participated in an illegal strike without awarding separation pay, despite the NLRC’s declaration urging the company to give financial assistance to the dismissed employees.79 In Interphil Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc.,80 this Court affirmed the dismissal of the union officers who led the concerted action in refusing to render overtime work and causing “work slowdowns.” However, no separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v. NLRC,81 this Court affirmed the dismissal of union officers who participated in the strike and the union members who committed illegal acts while on strike, without awarding them separation pay or financial assistance. In 1996, in Allied Banking Corporation v. NLRC,82 this Court affirmed the dismissal of Union officers and members, who staged a strike despite the DOLE Secretary’s issuance of a return to work order but did not award separation pay. In the earlier but more relevant case of Chua v. NLRC,83 this Court deleted the NLRC’s award of separation benefits to an employee who participated in an unlawful and violent strike, which strike resulted in multiple deaths and extensive property damage. In Chua, we viewed the infractions committed by the union officers and members as a serious misconduct which resulted in the deletion of the award of separation pay in conformance to the ruling in PLDT. Based on existing jurisprudence, the award of separation pay to the Union officials and members in the instant petitions cannot be sustained.

One last point to consider—it is high time that employer and employee cease to view each other as adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success of the business. When they consider only their own selfinterests, and when they act only with their own benefit in mind, both parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The employer wants the business to succeed, considering the investment that has been made. The employee in turn, also wants the business to succeed, as continued employment means a living, and the chance to better one’s lot in life. It is clear thenthat they both have the same goal, even if the benefit that results may be greater for one party than the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and of balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation between the employer and the employee. Even though strikes and lockouts have been recognized as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term solutions by forcing concessions from one party; but staging such strikes would damage the working relationship between employers and employees, thus endangering the business that they both want to succeed. The more progressive and truly effective means of dispute resolution lies in mediation, conciliation, and arbitration, which do not increase tension but instead provide relief from them. In the end, an atmosphere of trust and understanding has much more to offer a business relationship than the traditional enmity that has long divided the employer and the employee.

WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R. Nos. 158798-99 are GRANTED.

The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance compensation is ANNULLED and SET ASIDE.

The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001 Decision of the NLRC but deleted the grant of severance compensation, is REINSTATED and AFFIRMED.

No costs.

SO ORDERED.

Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga, JJ., concur.

Petitions in G.R. No. 158786 and 158789 denied, while those in G.R. Nos. 158798-99 granted. Court of Appeals Resolution dated June 20, 2003 annulled and set aside while its decision dated February 27, 2003 reinstated and affirmed.

Notes.—While the employer is authorized to declare a union officer who participated in an illegal strike as having lost his employment, his/its option is not as wide with respect to union members or workers for the law itself draws a line and makes a distinction between union officers and members/ordinary workers—there must be proof that the latter committed illegal acts during the strike. (Nissan Motors Philippines, Inc. vs. Secretary of Labor and Employment, 491 SCRA 604 [2006])

It is obligatory that the one signing the verification and certification against forum shopping on behalf of the principal party or the other petitioners has the authority to do the same. (Fuentebella vs. Castro, 494 SCRA 183 [2006])

G.R. No. 164016. March 15, 2010.*

RENO FOODS, INC., and/or VICENTE KHU, petitioners, vs. NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)-KATIPUNAN on behalf of its member, NENITA CAPOR, respondent.

Labor Law; Termination of Employment; A criminal conviction is not necessary to find just cause for employment termination.—In Nicolas v. National Labor Relations Commission, 258 SCRA 250 (1996), we held that a criminal conviction is not necessary to find just cause for employment termination. Otherwise stated, an employee’s acquittal in a criminal case, especially one that is grounded on the existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty of acts inimical to the employer’s interests.

Same; Same; Separation Pay; Separation pay is not allowed when an employee is dismissed for just cause such as serious misconduct.—The law is clear. Separation pay is only warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal dismissal in which reinstatement is no longer feasible. It is not allowed when an employee is dismissed for just cause, such as serious misconduct.

Same; Same; Same; Jurisprudence has classified theft of company property as a serious misconduct and denied the award of separation pay to the erring employee.—Jurisprudence has classified theft of company property as a serious misconduct and denied the award of separation pay to the erring employee. We see no reason why the same should not be similarly applied in the case of Capor. She attempted to steal the property of her long-time employer. For committing such misconduct, she is definitely not entitled to an award of separation pay.

Same; Same; Length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.—Length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee. Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Daniel Co Law Office for petitioners.

R.L. Caabay & Associates for respondent.

DEL CASTILLO, J.:

There is no legal or equitable justification for awarding financial assistance to an employee who was dismissed for stealing company property. Social justice and equity are not magical formulas to erase the unjust acts committed by the employee against his employer. While compassion for the poor is desirable, it is not meant to coddle those who are unworthy of such consideration.

This Petition for Review on Certiorari1 assails the June 3, 2004 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 76789 which denied the petition for certiorari filed by the petitioners and affirmed the award of financial assistance to respondent Nenita Capor.

Factual Antecedents

Petitioner Reno Foods, Inc. (Reno Foods) is a manufacturer of canned meat products of which Vicente Khu is the president and is being sued in that capacity. Respondent Nenita Capor (Capor) was an employee of Reno Foods until her dismissal on October 27, 1998.

It is a standard operating procedure of petitioner-company to subject all its employees to reasonable search of their belongings upon leaving the company premises. On October 19, 1998, the guard on duty found six Reno canned goods wrapped in nylon leggings inside Capor’s fabric clutch bag.

The only other contents of the bag were money bills and a small plastic medicine container.

Petitioners accorded Capor several opportunities to explain her side, often with the assistance of the union officers of Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan. In fact, after petitioners sent a Notice of Termination to Capor, she was given yet another opportunity for reconsideration through a labor-management grievance conference held on November 17, 1999. Unfortunately, petitioners did not find reason to change its earlier decision to terminate Capor’s employment with the company.

On December 8, 1998, petitioners filed a complaint-affidavit against Capor for qualified theft in the Office of the City Prosecutor, Malabon-Navotas Substation. On April 5, 1999, a Resolution3 was issued finding probable cause for the crime charged. Consequently, an Information was filed against Capor docketed as Criminal Case No. 207-58-MN.

Meanwhile, the Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan filed on behalf of Capor a complaint4 for illegal dismissal and money claims against petitioners with the Head Arbitration Office of the National Labor Relations Commission (NLRC) for the National Capital Region. The complaint prayed that Capor be paid her full backwages as well as moral and exemplary damages. The complaint was docketed as NLRC NCR Case No. 00-01-00183-99.

Ruling of the Labor Arbiter

In the proceedings before the Labor Arbiter, Capor alleged that she was unaware that her clutch bag contained the pilfered canned products. She claimed that petitioners might have planted the evidence against her so it could avoid payment of her retirement benefits, as she was set to retire in about a year’s time.

After the submission of the parties’ respective position papers, the Labor Arbiter rendered his Decision5 dated November 16, 1999 finding Capor guilty of serious misconduct which is a just cause for termination.

The Labor Arbiter noted that Capor was caught trying to sneak out six cans of Reno products without authority from the company. Under Article 232 of the Labor Code, an employer may terminate the services of an employee for just cause, such as serious misconduct. In this case, the Labor Arbiter found that theft of company property is tantamount to serious misconduct; as such, Capor is not entitled to reinstatement and backwages, as well as moral and exemplary damages.

Moreover, the Labor Arbiter ruled that consistent with prevailing jurisprudence, an employee who commits theft of company property may be validly terminated and consequently, the said employee is not entitled to separation pay.6

Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the factual findings and monetary awards of the Labor Arbiter but added an award of financial assistance. The decretal portion of the September 20, 2002 Decision7 reads:

“WHEREFORE, premises considered, the decision under review is hereby MODIFIED by granting an award of financial assistance in the form of separation pay equivalent to one-half month pay for every year of service. In all other respects the decision stands affirmed. All other claims of the complainant are dismissed for lack of merit.”8

Both parties moved for a reconsideration of the NLRC Decision. Petitioners asked that the award of financial assistance be deleted, while Capor asked for a finding of illegal dismissal and for reinstatement with full backwages.9

On February 28, 2003, the NLRC issued its Resolution10 denying both motions for reconsideration for lack of merit.

Ruling of the Court of Appeals

Aggrieved, petitioners filed a Petition for Certiorari11 before the CA imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC for awarding financial assistance to Capor.

Citing Philippine Long Distance Telephone Company v. National Labor Relations Commission,12 petitioners argued that theft of company property is a form of serious misconduct under Article 282(a) of the Labor Code for which no financial assistance in the form of separation pay should be allowed.

Unimpressed, the appellate court affirmed the NLRC’s award of financial assistance to Capor. It stressed that the laborer’s welfare should be the primordial and paramount consideration when carrying out and interpreting provisions of the Labor Code. It explained that the mandate laid down in Philippine Long Distance Telephone Company v. National Labor Relations Commission13 was not absolute, but merely directory.

Hence, this petition.

Issue

The issue before us is whether the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in granting financial assistance to an employee who was validly dismissed for theft of company property.

Our Ruling

We grant the petition.

Conviction in a criminal case is not necessary to find just cause for termination of employment.

On the date that the appellate court issued its Decision, Capor filed a Manifestation14 informing the CA of her acquittal in the charge of qualified theft. The dispositive portion of said Decision reads:

“WHEREFORE, premises considered, judgment is hereby rendered acquitting Nenita Capor of the crime charged against her in this case on the ground of reasonable doubt with costs de oficio.”

Capor thus claims that her acquittal in the criminal case proves that petitioners failed to present substantial evidence to justify her termination from the company. She therefore asks for a finding of illegal dismissal and an award of separation pay equivalent to one month pay for every year of service.

On the other hand, petitioners argue that the dismissal of a criminal action should not carry a corresponding dismissal of the labor action since a criminal conviction is unnecessary in warranting a valid dismissal for employment.

Petitioners further maintain that the ruling in Philippine Long Distance Telephone Company v. National Labor Relations Commission15 regarding the disallowance of separation pay for those dismissed due to serious misconduct or moral

turpitude is mandatory. Petitioners likewise argue that in Zenco Sales, Inc. v. National Labor Relations Commission,16 the Supreme Court found grave abuse of discretion on the part of the NLRC when it ignored the principles laid down in the Philippine Long Distance Telephone Company v. National Labor Relations Commission. Thus, petitioners pray for the reversal of the CA Decision and reinstatement of the Labor Arbiter’s Decision dated November 16, 1999.

Capor was acquitted in Criminal Case No. 207-58-MN based on reasonable doubt. In his Decision, the trial judge entertained doubts regarding the guilt of Capor because of two circumstances: (1) an ensuing labor dispute (though it omitted to state the parties involved), and (2) the upcoming retirement of Capor. The trial judge made room for the possibility that these circumstances could have motivated petitioners to plant evidence against Capor so as to avoid paying her retirement benefits. The trial court did not categorically rule that the acts imputed to Capor did not occur. It did not find petitioners’ version of the event as fabricated, baseless, or unreliable. It merely acknowledged that seeds of doubt have been planted in the juror’s mind which, in a criminal case, is enough to acquit an accused based on reasonable doubt. The pertinent portion of the trial court’s Decision reads:

“During the cross examination of the accused, she was confronted with a document that must be related to a labor dispute. x x x The Court noted very clearly from the transcript of stenographic notes that it must have been submitted to the NLRC. This is indicative of a labor dispute which, although not claimed directly by the accused, could be one of the reasons why she insinuated that evidence was planted against her in order to deprive her of the substantial benefits she will be receiving when she retires from the company. Incidentally, this document was never included in the written offer of evidence of the prosecution.

Doubt has, therefore, crept into the mind of the Court concerning the guilt of accused Nenita Capor which in this jurisdiction is mandated to be resolved in favor of her innocence.

Pertinent to the foregoing doubt being entertained by this Court, the Court of Appeals citing People v. Bacus, G.R. No. 60388, November 21, 1991: “the phrase ‘beyond reasonable doubt’ means not a single iota of doubt remains present in the mind of a reasonable and unprejudiced man that a person is guilty of a crime. Where doubt exists, even if only a shred, the Court must and should set the accused free.” (People v. Felix, CA-G.R. No. 10871, November 24, 1992)

WHEREFORE, premises considered, judgment is hereby rendered acquitting accused Nenita Capor of the crime charged against her in this case on the ground of reasonable doubt, with costs de oficio.

SO ORDERED.”17

In Nicolas v. National Labor Relations Commission,18 we held that a criminal conviction is not necessary to find just cause for employment termination. Otherwise stated, an employee’s acquittal in a criminal case, especially one that is grounded on the existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty of acts inimical to the employer’s interests.19

Criminal cases require proof beyond reasonable doubt while labor disputes require only substantial evidence, which means such relevant evidence as a reasonable mind might accept as adequate to justify a conclusion.20 The evidence in this case was reviewed by the appellate court and two labor tribunals endowed with expertise on the matter—the Labor Arbiter and the NLRC. They all found substantial evidence to conclude that Capor had been validly dismissed for dishonesty or serious misconduct. It is settled that factual findings of quasi-judicial agencies are generally accorded respect and finality so long as these are supported by substantial evidence. In the instant case, we find no compelling reason to doubt the common findings of the three reviewing bodies.

The award of separation pay is not war-

ranted under the law and jurisprudence.

We find no justification for the award of separation pay to Capor. This award is a deviation from established law and jurisprudence. 21

The law is clear. Separation pay is only warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal dismissal in which reinstatement is no longer feasible.22 It is not allowed when an employee is dismissed for just cause,23 such as serious misconduct.

Jurisprudence has classified theft of company property as a serious misconduct and denied the award of separation pay to the erring employee.24 We see no reason why the same should not be similarly applied in the case of Capor. She attempted to steal the property of her long-time employer. For committing such misconduct, she is definitely not entitled to an award of separation pay.

It is true that there have been instances when the Court awarded financial assistance to employees who were terminated for just causes, on grounds of equity and social justice. The same, however, has been curbed and rationalized in Philippine Long Distance Telephone Company v. National Labor Relations Commission.25 In that case, we recognized the harsh realities faced by employees that forced them, despite their good intentions, to violate company policies, for which the employer can rightfully terminate their employment. For these instances, the award of financial assistance was allowed. But, in clear and unmistakable language, we also held that the award of financial assistance shall not be given to validly terminated employees, whose offenses are iniquitous or reflective of some depravity in their moral character. When the employee commits an act of dishonesty, depravity, or iniquity, the grant of financial assistance is misplaced compassion. It is tantamount not only to condoning a patently illegal or dishonest act, but an endorsement thereof. It will be an insult to all the laborers who, despite their economic difficulties, strive to maintain good values and moral conduct.

In fact, in the recent case of Toyota Motors Philippines, Corp. Workers Association (TMPCWA) v. National Labor Relations Commission,26 we ruled that separation pay shall not be granted to all employees who are dismissed on any of the four grounds provided in Article 282 of the Labor Code. Such ruling was reiterated and further explained in Central Philippines Bandag Retreaders, Inc. v. Diasnes:27

“To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of separation pay based on social justice when an employee’s dismissal is based on serious misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of trust; or commission of a crime against the person of the employer or his immediate family—grounds under Art. 282 of the Labor Code that sanction dismissals of employees. They must be most judicious and circumspect in awarding separation pay or financial assistance as the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the employers when they are right, as here. In fine, we should be more cautious in awarding financial assistance to the undeserving and those who are unworthy of the liberality of the law.”

We are not persuaded by Capor’s argument that despite the finding of theft, she should still be granted separation pay in light of her long years of service with petitioners. We held in Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission28 that:

“Although long years of service might generally be considered for the award of separation benefits or some form of financial assistance to mitigate the effects of termination, this case is not the appropriate instance for generosity x x x. The fact that private respondent served petitioner for more than twenty years with no negative record prior to his dismissal, in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee’s length of service is to be regarded as justification for

moderating the penalty of dismissal, such gesture will actually become a prize for disloyalty, distorting the meaning of social justice and undermining the efforts of labor to clean its ranks of undesirables.”

Indeed, length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee.29 Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer. As stated in another case:

“x x x The fact that [the employer] did not suffer pecuniary damage will not obliterate respondent’s betrayal of trust and confidence reposed by petitioner. Neither would his length of service justify his dishonesty or mitigate his liability. His length of service even aggravates his offense. He should have been more loyal to petitioner company from which he derived his family bread and butter for seventeen years.”30

While we sympathize with Capor’s plight, being of retirement age and having served petitioners for 39 years, we cannot award any financial assistance in her favor because it is not only against the law but also a retrogressive public policy.

We have already explained the folly of granting financial assistance in the guise of compassion in the following pronouncements:

“x x x Certainly, a dishonest employee cannot be rewarded with separation pay or any financial benefit after his culpability is established in two decisions by competent labor tribunals, which decisions appear to be well-supported by evidence. To hold otherwise, even in the name of compassion, would be to send a wrong signal not only that “crime pays” but also that one can enrich himself at the expense of another in the name of social justice. And courts as well as quasi-judicial entities will be overrun by petitioners mouthing dubious pleas for misplaced social justice. Indeed, before there can be an occasion for compassion and mercy, there must first be justice for all. Otherwise, employees will be encouraged to steal and misappropriate in the expectation that eventually, in the name of social justice and compassion, they will not be penalized but instead financially rewarded. Verily, a contrary holding will merely encourage lawlessness, dishonesty, and duplicity. These are not the values that society cherishes; these are the habits that it abhors.”31

WHEREFORE, the petition is GRANTED. The assailed June 3, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 76789 affirming the September 20, 2002 Decision of the National Labor Relations Commission is ANNULLED and SET ASIDE. The November 16, 1999 Decision of the Labor Arbiter is REINSTATED and AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Brion, Abad and Perez, JJ., concur.

Petition granted, judgment annulled and set aside.

G.R. No. 123294. October 20, 2010.*

PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and AIDA M. QUIJANO, respondents.

Labor Law; Termination of Employment; Loss of Trust and Confidence; Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence, but in order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit to continue working for the employer.—At the onset, it should be noted that the parties do not dispute the validity of private respondent’s dismissal from employment for loss of confidence and acts inimical to the interest of the employer. The assailed September 29, 1995 Decision of the NLRC was emphatic in declaring that it was “not prepared to rule as illegal the preventive suspension and eventual dismissal from the service of [private respondent]” and rightfully so because the last position that private respondent held, Manager-ASAD (Agents Services Accounting Division), undeniably qualifies as a position of trust and confidence. Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. But, in order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit to continue working for the employer.

Same; Same; Same; Managerial Employees; As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the employer’s full trust and confidence.—As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the employer’s full trust and confidence. This must be distinguished from the case of ordinary rank and file employees, whose termination on the basis of these same grounds requires a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by the employer will not suffice.

Same; Same; Grave Abuse of Discretion; Words and Phrases; Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism.—Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism. This Court holds that the NLRC did not gravely abuse its discretion in granting separation pay to private respondent as the same is not characterized by caprice or arbitrariness being rooted in established jurisprudence.

Same; Same; Separation Pay; Social Justice; While the language of Article 279 of the Labor Code is pregnant with the implication that a legally dismissed employee is not entitled to separation pay, the Court, in exceptional cases, has granted separation pay to a legally dismissed employee as an act of “social justice” or based on “equity.”—The language of Article 279 of the Labor Code is pregnant with the implication that a legally dismissed employee is not entitled to separation pay, to wit: “An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.” However, in exceptional cases, this Court has granted separation pay to a legally dismissed employee as an act of “social justice” or based on “equity.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the employee or would involve moral turpitude. This

equitable and humanitarian principle was first discussed by the Court in the landmark case of Philippine Long Distance Telephone Co. (PLDT) v. National Labor Relations Commission, 164 SCRA 671 (1988).

Same; Same; Serious Misconduct; Equity; Words and Phrases; Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or wrong conduct, a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment; However serious such misconduct, it must, nevertheless, be in connection with the employee’s work to constitute just cause for his separation; Equity has been defined as justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law—it is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law.—Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To be serious within the meaning and intendment of the law, the misconduct must be of such grave and aggravated character and not merely trivial or unimportant. However serious such misconduct, it must, nevertheless, be in connection with the employee’s work to constitute just cause for his separation. The act complained of must be related to the performance of the employee’s duties such as would show him to be unfit to continue working for the employer. On the other hand, moral turpitude has been defined as “everything which is done contrary to justice, modesty, or good morals; an act of baseness, vileness or depravity in the private and social duties which a man owes his fellowmen, or to society in general, contrary to justice, honesty, modesty, or good morals.” In the case at bar, the transgressions imputed to private respondent have never been firmly established as deliberate and willful acts clearly directed at making petitioner lose millions of pesos. At the very most, they can only be characterized as unintentional, albeit major, lapses in professional judgment. Likewise, the same cannot be described as morally reprehensible actions. Thus, private respondent may be granted separation pay on the ground of equity which this Court had defined as “justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law.”

Same; Same; Retirement; Optional Retirement Plans; Any retirement pay provided by an employer’s “Special Retirement & Separation Program,” in the absence or legal inadequacy thereof, by Article 287 of the Labor Code does not operate nor can be made to operate for the benefit of an employee who was separated not pursuant to such retirement program.—At the risk of stating the obvious, private respondent was not separated from petitioner’s employ due to mandatory or optional retirement but, rather, by termination of employment for a just cause. Thus, any retirement pay provided by PAL’s “Special Retirement & Separation Program” dated February 15, 1988 or, in the absence or legal inadequacy thereof, by Article 287 of the Labor Code does not operate nor can be made to operate for the benefit of private respondent. Even private respondent’s assertion that, at the time of her lawful dismissal, she was already qualified for retirement does not aid her case because the fact remains that private respondent was already terminated for cause thereby rendering nugatory any entitlement to mandatory or optional retirement pay that she might have previously possessed.

Same; Same; Attorney’s Fees; Attorney’s fees can only be awarded when the employee is illegally dismissed in bad faith and is compelled to litigate or incur expenses to protect his rights by reason of the unjustified act of his employer.—Attorney’s fees are not proper in this case because the same can only be awarded when the employee is illegally dismissed in bad faith and is compelled to litigate or incur expenses to protect his rights by reason of the unjustified act of his employer. The aforementioned conditions do not obtain in this case.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Siquion Reyna, Montecillo & Ongsiako for petitioner.

The Law Office of Dante S. David for private respondent.

LEONARDO-DE CASTRO, J.:

This is a Petition for Certiorari under Rule 65 of the Rules of Court seeking to annul, reverse and set aside the following issuances of public respondent National Labor Relations Commission (NLRC): (1) Decision1 dated September 29, 1995 in NLRC NCR CA 007860-94 (NLRC NCR 00-03-01859-91), entitled “Aida M. Quijano v. Philippine Airlines, Inc.,” which set aside the Decision2 of Labor Arbiter Roberto I. Santos and ordered petitioner Philippine Airlines, Inc. (PAL) to pay private respondent Aida M. Quijano (Quijano) her separation pay in accordance with petitioner’s “Special Retirement & Separation Program,” and (2) Resolution3 dated November 14, 1995 denying petitioner’s Motion for Reconsideration thereof.

It bears stressing that pursuant to St. Martin Funeral Home v. National Labor Relations Commission4 and In Re: Dismissal of Special Civil Actions in NLRC Cases,5 all special civil actions arising out of any decision, final resolution or order of the NLRC must be filed with the Court of Appeals. However, since both parties of this case had filed their respective Memoranda prior to the promulgation of our decision in St. Martin Funeral Home, this case was no longer referred to the Court of Appeals.

The following are the pertinent facts, as summarized by the NLRC:

“Complainant Quijano rose from the ranks starting as accounting clerk in December 1967 until she became effective September 1, 1984, Manager-Agents Services Accounting Division (ASAD), vice Josefina Sioson.

ASAD, the specific unit in PAL charged with the processing, verification, reconciliation, and validation of all claims for commission filed by agents worldwide, is under the direct supervision and control of the Vice President-Comptroller, and within the scope of the audit program of the Vice President-Internal Audit & Control.

On May 5, 1989, an investigating committee chaired by Leslie W. Espino (hereinafter referred to as the Espino Committee) formally charged Quijano as Manager-ASAD in connection with the processing and payment of commission claims to Goldair Pty. Ltd. (Goldair for short) wherein PAL overpaid commissions to the latter amounting to several million Australian dollars during the period 1984-1987. Specifically, Quijano was charged as Manager-ASAD with the following:

“Failure on the job and gross negligence resulting in loss of trust and confidence in that you failed to:

a.  Exercise the necessary monitoring, control and supervision over your Senior Accounts Analyst to ensure that the latter was performing the basic duties and responsibilities of her job in checking and verifying the correctness and validity of the commission claims from Goldair.

b.  Adopt and perform the necessary checks and verification procedures as demanded by your position in order to ensure that the commission claims of Goldair which you were approving for payment were correct and valid claims thus resulting in consistent substantial overpayments to Goldair over a period of more than three years.

c.  Require or otherwise cause a final reconciliation of the remaining balance due as commission claims to Goldair for a particular month such that a claim for a particular month was never liquidated in a final amount and thus contributing to consistent overpayments to Goldair.”

The Senior Accounts Analyst referred to in the charge was Dora Jane Prado Curammeng who was included as a respondent. Curammeng was specifically assigned to handle and process commissions of agents in, among others, the

Australia Region, and Goldair was among the travel agents whose production reports and commission claims were handled by her. Curammeng was accused of failing to verify the completeness of the documents supporting the claims; to trace and match each ticket in the production report submitted by Goldair with the IATA, BSP and CTO sales report; and to perform a complete verification of the net/net amounts claimed in the production reports against the approved marketing arrangements. However, Curammeng had already resigned and became a resident of Canada at the time of the investigation conducted by the Espino Committee.

Pending further investigation, the Espino Committee placed Quijano under preventive suspension and at the same time requiredcher to submit her answer to the charges. As directed, Quijano submitted her answer wherein, among others, she explained as follows:

“My staff processes production reports submitted by both passenger and cargo agents. In 1984, they were only seven (7) people (with one on loan to Financial Analysis Division) and yet they process commission claims of an average of PHP four billion annually. My colleagues who are responsible for processing and recording gross passenger and cargo sales have around 51 people. Just the ratio of my staff to accounting sales staff, which is one to seven, would indicate the heavy load our unit experience.

I wish to emphasize however, that the staff assigned under my division have been selected on the basis of their judgment competence considering the very nature of marketing arrangements with agents are strictly private and confidential. Under the circumstances I have just mentioned, my staff’s judgment and competence is heavily relied on particularly when random checking of commission claims for traffic documents and airway bills against sales reports is being performed by them. I also seek your appreciation of the work environment we are in and the intermittent conflicts we experience due to the pressure of prompt settlement of claims to agents and yet having the satisfaction that the processing procedures are adequate.

x x x x

May I reiterate to the Committee that when my staff informed me of their findings of double claims on the production reports for the months of October and November 1987, I followed this up with a representative of Goldair. On June 1988, I received a handwritten note from the representative of Goldair signed by its General Manager Aleco Papazoglou, a xerox copy of it is hereto attached as Annex “A”. Mr. Papazoglou, in this note, guaranteed to me that he will undertake to collect any excessive payments on the agent fees from his agents and pay these to us afterwards.

At this point, I would like to emphasize that ASAD, before known as “Confidential Staff” under the Office of the VP-Comptroller, became a unit since 1976. Due to the confidential nature of its functions, the accounting procedures were not written. The procedures being performed by the staff were mainly practices handed down from their predecessors. Further, the procedures were tailored to adopt to the market environment of the country which were based on the approved marketing arrangements. But of course, there were inherent internal controls.

A final check whether accounting procedures being observed were appropriate in accordance with accounting standards, is the periodic examination of both our internal and external auditors.

During all these 4-1/2 years I have been with ASAD, I did not receive any feedback that there were weaknesses or lapses in accounting controls and procedures being followed.

In 1985, Cressop Mccormick & Paget made a study of the CMA’s. They conducted an interview of all key personnel including me who were involved in handling CMA’s. It was of course necessary for them to observe and evaluate the existing accounting procedures and controls. Their report, however, did not mention any adverse findings concerning my division.

In 1986, Sycip, Gorres, Velayo & Co. were engaged to look into the CMA functional specifications and to propose the best method of allocating commission expenses to flown revenues. To be able for them to render a report, it is, of course, necessary for them to delve into the reports we receive and the records we maintain. It is safe to surmise that they “walked through” our accounting procedures. No mention, however, of weaknesses on our accounting procedures and controls was made in their report.

Again, during the early part of 1987, all the production reports from Australia for the period April to September 1986 were borrowed and audited by Internal Audit and control. We apprised the auditor then of the various procedures we observed in processing these production reports. We did not receive any adverse feedback about their audit. Our confidence that the AMA’s were properly enforced by Australian agents and that there were no irregularities committed were thus regained. We shifted our concentration to the other agents particularly those under Nett-Nett settlement arrangements and tried to recall any commission that should be disallowed.

In the middle of 1987, a special team from the Commission on Audit conducted a fraud audit and again, interviewed my staff and I on our accounting procedures. Incentive commission figures by agent by country were also furnished to them. I wasn’t informed of any flaws in our accounting procedures and control nor existence of any fraud.

My division underwent scrutiny of three (3) prestigious consulting firms and of our own internal audit. I relied heavily on the absence of any unfavorable findings on accounting procedures and controls from them since their studies were quite extensive and lengthy. It is quite surprising at times why I am now asked how I could have failed to observe that certain accounting procedures were not being followed by my staff.

x x x x

Also, Internal Audit & Control made a regular audit in Australia in November, 1986 headed by no less than the Vice President-Internal Audit & Control. They did not discover any fraud nor report any questionable transaction on Passenger but on Cargo transaction only. If they, the auditors, did not find any discrepancy when their concentration is on Australia alone, how much more with us when our concentration is on the whole system? The production reports of Goldair was borrowed and assessed by the auditor before and after the regular audit.”

The other members of the Espino Committee were Ricardo G. Paloma, then Senior Vice President-Strategic Planning & Corporate Services wrote a dissenting opinion to the Final Draft Majority Report in the following manner, to wit:

“A new set of procedures was apparently installed by Romeo Ines and Josefina Sioson in April, 1984 (without any evident formal authorization by the Comptroller Dept.) upon receipt of Aleco Papazoglou’s letter that automatic payment be made upon presentation of his production reports in Manila Gold Air gained immunity against any possibility of cross of their production reports: it was simply impossible to cross check the production reports against sales reports are not yet in by the time the hand carried production reports arrive in ASAD.

Upon assumption of office by Aida Quijano this new set of procedure was carried over. She was made to understand that these were the OFFICIAL PROCEDURES, contrary to the actual procedure which called for production reports being initially checked by PAL Melbourne during the 1981 to 1983 period. This initial check which had until them been handled by the Regional Office was combined with the secondary check and were all dumped on ASAD.

A mitigating factor in Quijano’s favor is that UNSEEN HANDS designed or allowed this new procedures to be put in place. Ines, who became the VP Internal Audit should have known the prescribed procedures (or at the very least the actual practice during the period 1981 to 1983 when he was the VP Comptroller) and yet, did not alert her. Unknowingly, Quijano allowed the by-pass and the automatic payment of 80% upon presentation of production reports because Sioson assured her that was the procedure previously followed. Trustingly, she became a participant in this mess.”

It should be noted that the Romeo Ines mentioned in the dissenting opinion is the same Romeo R. Ines who was one of the members of the Espino Committee and who was later named a respondent in the second Goldair charge, together with Chairman Espino. Romeo R. Ines was the VP-Comptroller for the period 1981-1983 and VP-Internal Audit for the period 1984-1987. While Josefina Sioson, as earlier shown, was the Manager-ASAD during the period 1981-1983 until she was replaced by Quijano on September 1, 1984. Incidentally, as found by respondent’s witness Benigno Datoc, the Goldair fraud started in 1981 and continued until its discovery sometime in the latter part of 1987. And as of that year, Goldair had been PAL’s agent for about seventeen (17) years already.

On July 2, 1990, another Administrative charge involving the same Goldair anomaly was filed, this time including Committee Chairman Leslie W. Espino and Committee Member Romeo R. Ines and several others, for “gross incompetence and inefficiency, negligence, imprudence, mismanagement, dereliction of duty, failure to observe and/or implement administrative and executive policies, and related acts or omissions.” Pending the result of investigation by another committee chaired by Judge Martin S. Ocampo, the PAL Board of Directors suspended respondents Leslie W. Espino, Executive Vice-President and Chief Operating Officer; Ramon C. Lozon, Senior Vice-President-Finance; Romeo R. Ines, Vice President-Internal Audit & Control; Josefina Sioson, Manager-Staff Pricing; except respondents VP-Comptroller Robin C. Dui and Manager-ASAD Aida Quijano who were already suspended by the Espino Committee, and respondent Juan Yoga, former Regional Vice President-Australia who has already retired.

Meantime, PAL filed a civil case in Australia against Goldair seeking to recover AUD 11 million. Twice, Quijano went to Australia as witness for PAL. Thereafter, a settlement was reached whereby Goldair was to pay PAL a total of around AUD 7 million inclusive of court costs. A criminal case was nevertheless filed against Goldair’s owner, Alexandro Papazoglou, by the Fraud Squad Victorian Police.

The Ocampo Committee having submitted its findings to the PAL Board of Directors, the latter, in a resolution dated January 18, 1991, considered respondents Leslie W. Espino, Ramon C. Lozon, Romeo R. Ines, Robin C. Dui, Josefina Sioson, and Aida M. Quijano, resigned from the service effective immediately, for loss of confidence and for acts inimical to the interest of the company.

The Board found as follows:

“This is the extended Resolution.

The Goldair fraud has caused a total loss to PAL as of August 1990 in the amount of AUD 14.6 million (PHP 204 million). Goldair is a company that served then as the General Sales Agent of PAL in Australia against Goldair, a settlement was reached whereby Goldair was to pay PAL a total of around AUD 7 million inclusive of court costs. This settlement is said to be the most practical and realistic under the circumstances. A criminal case was nevertheless filed against Goldair’s owner, Alexandro Papazoglou, by the Fraud Squad Victorian Police. Hearings are still going on.

According to the evidence received and evaluated by the investigating committee, PAL lost the above huge sum of money to Goldair as a result of false, padded, erroneous or irregular claims for commissions submitted by Goldair and unwittingly paid by PAL. The Agents Services Accounting Division (ASAD), one of the divisions under the Comptroller Department, is the specific unit in the company charged with the processing, verification, and validation of all claims for commissions filed by the company’s agents worldwide (excluding the U.S. which is processed by the San Francisco Regional Office). Consequently, responsibility for the Goldair fraud has been attributed mainly to the failure of ASAD to properly process and validate Goldair’s commission claims prior to payment.

Thus, the following lapses or irregularities were uncovered in the course of the investigations that have been conducted:

1.  No adequate effort was exerted to see to it that the supporting documents (photocopies of tickets submitted and attached to the production report were complete). Neither was a verification or comparison made between the tickets and the production report.

2.  The simple and basic step of verifying the names of the passengers and their ticket numbers against ticket numbers, even on a check basis, to see whether they were reported more than once was not accomplished. If done, double or multiple reporting of tickets could have been readily detected.

3. Validation of the correctness of prorate values, by performing the proration, was not undertaken.

4.  No reconciliation was made of all the amounts due the agent for a particular month. Such reconciliation would have disclosed whether or not the account for a particular month could be closed.

5. Production reports were not cross-checked against sales report or flight coupon registers.

6.  Superiors failed to adequately monitor the activities of their subordinates to ensure that the latter were performing their duties.

7. The policy that cash vouchers could be approved only by duly authorized persons was in several cases violated.”

Resolving the case of Quijano, the Board said:

“The charge against Ms. Quijano is that:

Quijano was the Manager-ASAD (Agents Services Accounting Division) in 1984-87, and responsible for the final scrutiny of agents’ Production Reports and final recommendation for payment of travel agents’ commissions.

As Manager-ASAD from 1984 to 1987 (when the fraud was discovered), she failed to uncover or detect and report or grossly disregarded the fraud although the commissions vis-à-vis production were scandalously high.

Ms. Quijano claims that she relied heavily on Ms. Curammeng’s judgment competence to perform her work, particularly the “completeness of the documents” check. She argues that if she were to do the completeness check herself, there would be no need for the analyst. This argument, however, wittingly or unwittingly, misconceives the nature of her job. Precisely, her basic role and duty as a manager was to make sure that the analysts in her division were performing the tasks assigned to them. But Ms. Quijano did not see to it that the completeness check was actually being performed by Ms. Curammeng. This lapse in control, contributed materially to the double, multiple and fictitious reporting of tickets, and double claims for commissions perpetrated by Goldair. Ms. Quijano was certainly not expected to personally do and perform the completeness check herself. But as manager, it was clearly incumbent upon her to see to it that this completeness check was being done by her subordinates competently and efficiently. Yet, Ms. Quijano even failed to adopt ways and means of keeping herself sufficiently informed of the activities of her staff members so as to prevent or at least discover at an early stage the fraud being perpetrated on a massive scale by Goldair against her company.

Her incompetence at her job is patent.”

Her motion for reconsideration having been denied by the Board in a Resolution dated February 19, 1991, Quijano filed on March 25, 1991 the instant case against PAL for illegal suspension and illegal dismissal.”6

The Labor Arbiter dismissed private respondent’s complaint in a Decision dated September 7, 1994, the dispositive portion of which reads:

“WHEREFORE, in conformity with the opinion above-expressed, judgment is hereby rendered dismissing the above-captioned case for lack of merit and, consequently, the respondent is absolved from any liability.”7

Undeterred, private respondent filed an appeal before the NLRC which rendered the assailed Decision dated September 29, 1995, the dispositive portion of which reads:

“WHEREFORE, in view of all the foregoing considerations, the decision appealed from should be, as it is hereby, VACATED and SET ASIDE and another one entered, directing the Philippine Airlines, Inc., thru its responsible officials, to pay Aida M. Quijano her separation pay in accordance with its “Special Retirement & Separation Program” dated February 15, 1988, plus ten percent (10%) of the total amount by way of attorney’s fee.”8

Petitioner filed a Motion for Reconsideration but this was denied by the NLRC in its Resolution dated November 14, 1995, the dispositive portion of which reads:

“After due consideration of the Motion for Reconsideration filed by respondent-appellee on October 20, 1995, from the Decision of September 29, 1995, the Commission (Second Division) RESOLVED to deny the same for lack of merit.”9

Hence, this petition for certiorari.

Both parties submitted their respective Memoranda10 in late 1997, however, on September 11, 1998, petitioner filed a Motion for Suspension of Proceedings11 based on Presidential Decree No. 902-A which reads, in part:

“That upon appointment of management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.”12 (Underscoring supplied.)

The said motion referred to an Order13 dated June 23, 1998 of the Securities and Exchange Commission (SEC) which appointed an Interim Rehabilitation Receiver for petitioner pursuant to Presidential Decree No. 902-A that was followed by the issuance of another Order14 dated July 1, 1998 which commanded that “all claims against PAL are deemed suspended.”

After hearing both parties on the question of whether or not the Court should render judgment during the state of suspension of claims, we ruled in the negative in a Resolution15 dated September 4, 2000, the dispositive portion of which reads:

“IN VIEW THEREOF, the Motion for Suspension of Proceedings of petitioner is GRANTED.”16

Private respondent filed a Motion for Reconsideration17 on October 3, 2000 of the above Resolution but we denied the same in a Resolution18 dated November 13, 2000.

Since then petitioner was required by this Court to submit periodic status reports on the rehabilitation proceedings, the last of which was dated October 22, 2007,19 declaring that the petitioner’s request to exit from rehabilitation had been granted by the SEC via an Order20 issued on September 28, 2007, the dispositive portion of which reads:

“WHEREFORE, in the light of the foregoing, and considering PAL’s firm commitment to settle its outstanding obligations as well as the fact that its operations and its financial condition have been normalized and stabilized in conformity with the Amended and Restated Rehabilitation Plan exemplifying a successful corporate rehabilitation, the PAL’s request to exit from rehabilitation is hereby GRANTED.

The PRR is likewise directed to furnish all creditors and parties concerned with copies of this Order at the expense of the Petitioner and submit proof of service thereof to the Commission, within fifteen (15) days from date of receipt of this Order.”21

Considering the foregoing and the fact that both parties have long submitted their respective Memoranda in the instant case, private respondent filed a Motion to Resume Proceedings and to Render Judgment22 on December 11, 2007. In compliance with this Court’s Resolution23 dated January 21, 2008 requiring petitioner to comment on private respondent’s motion, petitioner filed a Comment/Manifestation24 on February 28, 2008 which confirmed that “with the issuance of the Securities and Exchange Commission’s September 28, 2007 Order granting PAL’s request to exit from rehabilitation, there is no longer any legal impediment to the resumption of the instant proceedings.”

In the instant petition, petitioner puts forward a singular argument, to wit:

“ASSUMING ARGUENDO (WITHOUT ADMITTING) THAT THE EQUITABLE CONSIDERATIONS CITED BY THE NLRC DID EXIST, THE SAME CANNOT JUSTIFY THE AWARD OF SEPARATION PAY TO MRS. QUIJANO (despite the finding that she was legally suspended and thereafter legally dismissed) IN THE FACE OF OVERWHELMING EVIDENCE SUBMITTED BY PETITIONER WHICH CLEARLY SHOW THAT PHILIPPINE AIRLINES, INC. LOST SEVERAL MILLION AUSTRALIAN DOLLARS AS A RESULT OF THE FRAUD COMMITTED BY GOLDAIR AND THAT SAID FRAUD COULD ONLY HAVE BEEN MADE POSSIBLE BY MRS. QUIJANO’S PATENT MISMANAGEMENT AND GROSS INCOMPETENCE AS ASAD MANAGER IN FAILING TO DETECT THE IRREGULARITY. IN AWARDING SEPARATION PAY TO MRS. QUIJANO, THE NLRC COMMITTED A GRAVE ABUSE OF ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION.”25

We affirm the NLRC ruling with modification.

At the onset, it should be noted that the parties do not dispute the validity of private respondent’s dismissal from employment for loss of confidence and acts inimical to the interest of the employer. The assailed September 29, 1995 Decision of the NLRC was emphatic in declaring that it was “not prepared to rule as illegal the preventive suspension and eventual dismissal from the service of [private respondent]”26 and rightfully so because the last position that private respondent held, Manager-ASAD (Agents Services Accounting Division), undeniably qualifies as a position of trust and confidence.

Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. But, in order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit to continue working for the employer.27

The January 18, 1991 Resolution of the PAL Board of Directors, the relevant portions of which are discussed in the narration of the facts of this case as culled from the assailed September 29, 1995 NLRC Decision, clearly laid out the reasons why it considered private respondent along with her other co-employees in PAL resigned from the service effective immediately for loss of confidence and for acts inimical to the interest of the company. In private respondent’s case, the Resolution underscored her acts of mismanagement and gross incompetence which made her fail to detect the irregularities in the Goldair account that resulted in huge financial losses for petitioner. Admittedly, the said findings are not backed by proof beyond reasonable doubt but are, nevertheless, given credence since they have been adopted by both the labor arbiter and the NLRC and are supported by substantial evidence. As we have consistently held, the degree of proof required in labor cases is not as stringent as in other types of cases.28

As a general rule, employers are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those who, while not of similar rank, perform functions which by their nature require the employer’s full trust and confidence. This must be distinguished from the case of ordinary rank and file employees, whose termination on the basis of these same grounds requires a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by the employer will not suffice.29

Having succinctly disposed of the issue of the validity of private respondent’s dismissal, we now delve into the true crux of this controversy which is the legality of the award of separation pay to private respondent despite having been lawfully terminated for a just cause.

Petitioner argues that, in light of the fact that a just cause forms the basis for her lawful termination from the job, private respondent is not entitled to separation pay. Likewise, petitioner insists that even assuming that the equitable considerations cited by the NLRC did exist, the same cannot justify the award of separation pay. And, in awarding the same, the NLRC committed grave abuse of discretion amounting to lack of jurisdiction.

We do not agree.

Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism.30 This Court holds that the NLRC did not gravely abuse its discretion in granting separation pay to private respondent as the same is not characterized by caprice or arbitrariness being rooted in established jurisprudence.

The language of Article 279 of the Labor Code is pregnant with the implication that a legally dismissed employee is not entitled to separation pay, to wit:

“An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

However, in exceptional cases, this Court has granted separation pay to a legally dismissed employee as an act of “social justice” or based on “equity.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the employee31 or would involve moral turpitude. This equitable and humanitarian principle was first discussed by the Court in the landmark case of Philippine Long Distance Telephone Co. (PLDT) v. National Labor Relations Commission,32 wherein it was held:

“Strictly speaking, however, it is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed employees other than the abstract consideration of equity. The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause.

x x x x

There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with the company. For example, a subordinate who has irreconcilable policy or personal differences with his employer may be validly dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be frequently absent because she has also to take care of her child may also be removed because of her poor attendance, this being another authorized ground. It is not the employee’s fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him

just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the law must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation is changed completely. This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified.

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.”33

In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations Commission,34 we clarified that the grant of separation pay may still be precluded even if the ground for the employee’s dismissal is not serious misconduct under Article 282(a) of the Labor Code but other just causes under the same article and/or other authorized causes provided for under the Labor Code. However, the TMPCWA case still recognized the social justice exception prescribed in Philippine Long Distance Telephone Company. To quote the relevant portions of that decision:

“Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social justice

¾serious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious misconduct.

A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified on any of the grounds under Art. 282, separation pay was not allowed. x x x.

x x x x

In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful intent or they reflected adversely on the moral character of the employees. We therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his family, separation pay should not be conceded to the dismissed employee.

In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may opt to grant separation pay anchored on social justice in consideration of the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of separation pay.”35 (Emphases supplied.)

In other words, under the present jurisprudential framework, the grant of separation pay as a matter of equity to a validly dismissed employee is not contingent on whether the ground for dismissal is expressly under Article 282(a) but

whether the ground relied upon is akin to serious misconduct or involves willful or wrongful intent on the part of the employee.

It, thus, becomes pertinent to examine the ground relied upon for the dismissal of private respondent and to determine if the special circumstances described in PLDT are present in the case at bar.

Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error of judgment. To be serious within the meaning and intendment of the law, the misconduct must be of such grave and aggravated character and not merely trivial or unimportant. However serious such misconduct, it must, nevertheless, be in connection with the employee’s work to constitute just cause for his separation. The act complained of must be related to the performance of the employee’s duties such as would show him to be unfit to continue working for the employer.36 On the other hand, moral turpitude has been defined as “everything which is done contrary to justice, modesty, or good morals; an act of baseness, vileness or depravity in the private and social duties which a man owes his fellowmen, or to society in general, contrary to justice, honesty, modesty, or good morals.”37

In the case at bar, the transgressions imputed to private respondent have never been firmly established as deliberate and willful acts clearly directed at making petitioner lose millions of pesos. At the very most, they can only be characterized as unintentional, albeit major, lapses in professional judgment. Likewise, the same cannot be described as morally reprehensible actions. Thus, private respondent may be granted separation pay on the ground of equity which this Court had defined as “justice outside law, being ethical rather than jural and belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of positive law, for equity finds no room for application where there is law.”38

A perusal of the assailed September 29, 1995 NLRC Decision would show that the following equitable considerations were relied upon by the NLRC to arrive at its assailed ruling, to wit:

a) The Goldair fraud was found to have started in 1981. Private respondent became the Manager-ASAD only on September 1, 1984. The former Manager-ASAD from 1981 to August 1984 was Josefina Sioson.39

b) ASAD is under the direct supervision and control of the Vice President-Comptroller and within the scope of the audit program of the Vice President-Internal Audit and Control. The VP-Comptroller for the period 1981 to 1983 and the VP-Internal Audit for the period 1984 to 1987 was Romeo Ines.40

c) The accounting procedures and controls inherited by private respondent when she took over ASAD were subjected to the scrutiny of prestigious accounting firms like Cressop, McCormick & Paget in 1985, the Sycip, Gorres, Velayo & Co., Inc. in 1986, including a special team from the Commission on Audit in 1987—all of which made no adverse findings concerning ASAD.41

d) No less than the VP-Internal Audit made a regular audit in Australia in November 1986 and in the early part of 1987, by borrowing all production reports covering April to September 1986, but found no irregularities nor made any adverse feedback against ASAD.42

e) Private respondent was the first to discover the overpayment of commission claims to Goldair in 1984 in rate differences in net/net settlement which, after her intervention, did not recur. She was also the one who first discovered the fraud in double and fictitious commission claims and promptly took action when she withheld all provisional payments due Goldair.43

f) Even after the Goldair anomaly was discovered, private respondent could have availed of PAL’s Special Retirement and Separation Program, but she stayed put and had gone twice to Australia, while under preventive suspension, to attend court proceedings as a witness for petitioner enabling the said company to recover and minimize its economic loss.44

g) Private respondent has no derogatory record during the entire period of her employment with petitioner for more than two decades. She steadily rose from the ranks until she became the ASAD Manager.45

h) In the dissenting opinion of Ricardo Paloma, Vice Chairman of the Espino Committee and PAL Senior VP Strategic Planning and Corporate Service, to the Final Draft Majority Report, he observed that “a mitigating factor in [private respondent’s] favor is that UNSEEN HANDS designed or allowed this new procedures to be put in place. Ines, who became the VP Internal Audit should have known the prescribed procedures (or at the very least the actual practice during the period 1981 to 1983 when he was the VP Comptroller) and yet, did not alert her. Unknowingly, [private respondent] allowed the by-pass and the automatic payment of 80% upon presentation of production reports because Sioson assured her that was the procedure previously followed. Trusting, she became a participant in this mess.”46

Considering the foregoing uncontroverted special circumstances, we rule that the NLRC did not commit grave abuse of discretion amounting to lack of jurisdiction in ordering petitioner to pay private respondent separation pay for equitable considerations.

However, we do not agree with the NLRC that private respondent’s separation pay should be awarded in accordance with PAL’s “Special Retirement & Separation Program” dated February 15, 1988 plus ten percent (10%) of the total amount by way of attorney’s fees.

At the risk of stating the obvious, private respondent was not separated from petitioner’s employ due to mandatory or optional retirement but, rather, by termination of employment for a just cause. Thus, any retirement pay provided by

PAL’s “Special Retirement & Separation Program” dated February 15, 1988 or, in the absence or legal inadequacy thereof, by Article 287 of the Labor Code47 does not operate nor can be made to operate for the benefit of private respondent. Even private respondent’s assertion that, at the time of her lawful dismissal, she was already qualified for retirement does not aid her case because the fact remains that private respondent was already terminated for cause thereby rendering nugatory any entitlement to mandatory or optional retirement pay that she might have previously possessed.

Likewise, attorney’s fees are not proper in this case because the same can only be awarded when the employee is illegally dismissed in bad faith and is compelled to litigate or incur expenses to protect his rights by reason of the unjustified act of his employer.48 The aforementioned conditions do not obtain in this case.

As to the matter of the proper amount of separation pay to be awarded to private respondent on the basis of equitable considerations, our pronouncement in Yrasuegui v. Philippine Airlines, Inc.49 is instructive, to wit:

“Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay for every year of service. It should include regular allowances which he might have been receiving. We are not blind to the fact that he was not dismissed for any serious misconduct or to any act which would reflect on his moral character. We also recognize that his employment with PAL lasted for more or less a decade.”

Private respondent’s circumstances are more or less identical to the above-cited case in the sense that, as previously discussed, her dismissal was neither for serious misconduct nor for an offense involving moral turpitude. Furthermore, her employment with petitioner spanned more than two decades unblemished with any derogatory record prior to the infractions at issue in the case at bar.

WHEREFORE, the assailed NLRC Decision dated September 29, 1995 as well as the Resolution dated November 14, 1995 are AFFIRMED with the MODIFICATION that petitioner Philippine Airlines, Inc. pay private respondent Aida Quijano one-half (1/2) month salary for every year of service as separation pay on equitable grounds.

SO ORDERED.

Corona (C.J., Chairperson), Velasco, Jr., Del Castillo and Perez, JJ., concur.

NLRC decision and resolution affirmed with modification.

Notes.—Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating their employees. (Mabeza vs. National Labor Relations Commission, 271 SCRA 670 [1997])

Loss of confidence should ideally apply only to cases involving employees occupying positions of trust and confidence or to those situations where the employee is routinely charged with the care and custody of the employer’s money or property. (Santos vs. Shing Hung Plastics, Co., Inc., 567 SCRA 11 (2008)

G.R. No. 167708. August 22, 2008.*

THE HON. SECRETARY OF LABOR AND EMPLOYMENT, EDGARDO M. AGAPAY and SAMILLANO A. ALONSO, JR., petitioners, vs. PANAY VETERAN’S SECURITY AND INVESTIGATION AGENCY, INC. and JULITO JALECO,1 respondents.

Labor Law; Appeals; Department of Labor and Employment (DOLE); To perfect an appeal of the Regional Director’s order involving a monetary award in cases which concern the visitorial and enforcement powers of the Secretary of Labor and Employment, the appeal must be filed and the cash or surety bond equivalent to the monetary award must be posted within ten calendar days from receipt of the order.—The rule is that, to perfect an appeal of the Regional Director’s order involving a monetary award in cases which concern the visitorial and enforcement powers of the Secretary of Labor and Employment, the appeal must be filed and the cash or surety bond equivalent to the monetary award must be posted within ten calendar days from receipt of the order. Failure either to file the appeal or post the bond within the prescribed period renders the order final and executory.

Same; Same; Same; The posting of a cash or surety bond by the employer intended to be the exclusive means by which an employer’s appeal may be perfected.—The legislative intent to make the bond an indispensable requisite for the perfection of an appeal by the employer is underscored by the provision that “an appeal by the employer may be perfected only upon the posting of a cash or surety bond.” The word “only” makes it clear that the lawmakers intended the posting of a cash or surety bond by the employer to be the exclusive means by which an employer’s appeal may be perfected.

Same; Same; Same; The jurisdiction of the National Labor Relations Commission (NLRC) is separate and distinct from that of the Secretary of Labor and Employment; Each agency is governed by its own rules of procedure.—The jurisdiction of the NLRC is separate and distinct from that of the Secretary of Labor and Employment. In the exercise of their respective jurisdictions, each agency is governed by its own rules of procedure. In other words, the rules of procedure of the NLRC are different from (and do not apply in) cases cognizable by the Secretary of Labor and Employment.

Same; Same; Same; The Rules on the Disposition of Labor Standards Cases does not sanction the suppletory resort to the rules of procedure of the National Labor Relations Commission (NLRC).—Unlike the New Rules of Procedure of the NLRC, no provision in the Rules on the Disposition of Labor Standards Cases governs the filing of a motion for the reduction of the amount of the bond. However, on matters that are not covered by the Rules on the Disposition of Labor Standards Cases, the suppletory application of the Rules of Court is authorized. In other words, the Rules on the Disposition of Labor Standards Cases does not sanction the suppletory resort to the rules of procedure of the NLRC.

PETITION for review on certiorari of the amended decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Julio O. Lopez for respondents.

CORONA, J.:

This is a petition for review2 of the November 25, 2004 amended decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 72713.

Petitioners Edgardo M. Agapay and Samillano A. Alonso, Jr.4 were hired by respondent Panay Veteran’s Security and Investigation Agency, Inc. as security guards sometime in 1988. They were stationed at the plant site of Food Industries, Inc. (FII) in Sta. Rosa, Laguna until FII terminated its contract with respondent security agency on July 6, 2000. They were not given new assignments and their benefits (including 13th month pay, overtime pay and holiday pay as well as wage differentials due to underpayment of wages) were withheld by respondent security agency. This prompted them to file a

complaint for violation of labor standards in the regional office of the Department of Labor and Employment in the National Capital Region (DOLE-NCR).

Acting on the complaint, Manuel M. Cayabyab, a labor employment officer of the DOLE-NCR, conducted an inspection of respondent security agency on October 30, 2000. During the inspection, respondent security agency failed to present its payroll as well as the daily time records submitted by petitioners Agapay and Alonso, Jr. Such failure was noted as a violation.

After conducting his inspection, Cayabyab issued a notice of inspection to respondent security agency through its authorized representative, respondent Julito Jaleco.5 Cayabyab explained the contents and significance of the notice to respondent Jaleco. He emphasized the need for respondents either to comply with labor standards by paying the claims of petitioners Agapay and Alonso, Jr. (as computed by Cayabyab) or to raise any question regarding the notice to the DOLE-NCR within five days.

Respondents neither paid the claims of petitioners Agapay and Alonso, Jr. nor questioned the labor employment officer’s findings. Thus, in his May 10, 2001 order, the Regional Director of the DOLE-NCR adopted the findings and computation of Cayabyab as to the unpaid benefits due to petitioners Agapay and Alonso, Jr. The dispositive portion of the order read:

“WHEREFORE, premises considered, Panay Veterans Security and Investigation Agency, Inc. and/or Julius Jaleco [are/]is hereby ordered to pay Edgardo Agapay, [et al.] the aggregate amount of P206,569.20 representing 13th month, overtime and legal holiday [pay] & [underpaid] wages within ten (10) days from receipt hereof.

Otherwise, a [w]rit of [e]xecution shall be issued for the enforcement of [this] order.

SO ORDERED.”6

Respondents moved for reconsideration but the DOLE-NCR Regional Director denied it.

Undeterred, respondents filed an appeal (with motion to reduce cash or surety bond) to the Secretary of Labor and Employment. In his July 9, 2002 order, the Secretary of Labor and Employment found that respondents failed to perfect their appeal since they did not post a cash or surety bond equivalent to the monetary award. Thus, the appeal was dismissed and the DOLE-NCR Regional Director’s May 10, 2001 order was declared final and executory. The Secretary of Labor and Employment denied reconsideration.

Respondents assailed the Secretary of Labor and Employment’s July 9, 2002 order via a petition for certiorari in the CA. The CA initially dismissed the petition for lack of merit and ordered respondents to pay a total recomputed amount of P224,603.26.7 However, the CA granted reconsideration by applying the following ruling in Star Angel Handicraft v. National Labor Relations Commission8 (NLRC) by analogy:

“Inasmuch as in practice, the NLRC allows the reduction of the appeal bond upon motion of appellant and on meritorious grounds, it follows that a motion to that effect may be filed within the reglementary period for appealing. Such motion may be filed in lieu of a bond which amount is being contested. In the meantime, the appeal is not deemed perfected and the Labor Arbiter retains jurisdiction over the case until the NLRC has acted on the motion and appellant has filed the bond as fixed by the NLRC.”

Thus, the CA amended its decision and allowed respondents to pursue their appeal.9 The Secretary of Labor and Employment moved for reconsideration but it was denied. Thus, this petition.

The Secretary of Labor and Employment contends that respondents failed to perfect their appeal in the manner prescribed by the Labor Code. He further asserts that a motion to reduce the appeal bond is not allowed by the Labor Code and the Rules of Disposition of Labor Standards Cases in the Regional Offices (Rules on the Disposition of Labor Standards Cases) and does not suspend the period of appeal. Moreover, the rules of procedure of the NLRC do not apply in this case.

We uphold the Secretary of Labor and Employment.

Respondents Failed to

Perfect Their Appeal

Article 128 of the Labor Code provides:

“ART. 128. Visitorial and enforcement power.—

(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have access to employer’s 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 which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the finding of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this Article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.” (emphasis supplied)

In this connection, this Court ruled in Guico, Jr. v. Hon. Quisumbing:10

“Article 128(b) of the Labor Code clearly provides that the appeal bond must be “in the amount equivalent to the monetary award in the order appealed from.” The records show that petitioner failed to post the required amount of the appeal bond. His appeal was therefore not perfected.”

The rule is that, to perfect an appeal of the Regional Director’s order involving a monetary award in cases which concern the visitorial and enforcement powers of the Secretary of Labor and Employment, the appeal must be filed and the cash or surety bond equivalent to the monetary award must be posted within ten calendar days from receipt of the order.11 Failure either to file the appeal or post the bond within the prescribed period renders the order final and executory.

The legislative intent to make the bond an indispensable requisite for the perfection of an appeal by the employer is underscored by the provision that “an appeal by the employer may be perfected only upon the posting of a cash or

surety bond.”12 The word “only” makes it clear that the lawmakers intended the posting of a cash or surety bond by the employer to be the exclusive means by which an employer’s appeal may be perfected.13 In one case, we held that:

“Anent the issue of whether or not the respondent Secretary of Labor acted with grave abuse of discretion in dismissing petitioner’s appeal on the ground that petitioner failed to post the required cash or surety bond, we rule in the negative.

Article 128 of the Labor Code likewise explicitly provides that in case an order issued by the duly authorized representative of the Secretary of Labor and Employment involves a monetary award, an appeal by the employer may be perfected only upon posting of a cash or surety bond in an amount equivalent to the monetary award in the order appealed from.

As correctly noted by the Office of the Solicitor General, since the Order appealed from involves a monetary award, an appeal by petitioner may be perfected only upon posting of a cash or surety bond issued by a reputable bonding company duly accredited by respondent Secretary of Labor in the amount equivalent to the monetary award in the Order appealed from.

It is undisputed that petitioner herein did not post a cash or surety bond when it filed its appeal with the Office of respondent Secretary of Labor. Consequently, petitioner failed to perfect its appeal on time and the Order of respondent Regional Director became final and executory.

Thus, the Secretary of Labor and Employment thru Undersecretary Cresenciano B. Trajano correctly dismissed petitioner’s appeal.”14 (emphasis supplied)

In this case, respondents admit that they failed to post the required bond when they filed their appeal to the Secretary of Labor and Employment. Because of such failure, the appeal was never perfected and the May 10, 2001 order of the DOLE-NCR Regional Director attained finality.

Motion To Reduce Appeal Bond

Is Not Allowed In Appeals To

The Secretary Of Labor

The jurisdiction of the NLRC is separate and distinct from that of the Secretary of Labor and Employment. In the exercise of their respective jurisdictions, each agency is governed by its own rules of procedure. In other words, the rules of procedure of the NLRC are different from (and do not apply in) cases cognizable by the Secretary of Labor and Employment.

Unlike the New Rules of Procedure of the NLRC,15 no provision in the Rules on the Disposition of Labor Standards Cases governs the filing of a motion for the reduction of the amount of the bond. However, on matters that are not covered by the Rules on the Disposition of Labor Standards Cases, the suppletory application of the Rules of Court is authorized.16 In other words, the Rules on the Disposition of Labor Standards Cases does not sanction the suppletory resort to the rules of procedure of the NLRC.

By ruling that the rules of procedure of the NLRC should be applied suppletorily to respondents’ appeal to the Secretary of Labor of Employment, the CA effectively amended the Rules on the Disposition of Labor Standards Cases. In the process, it encroached on the rule-making power of the Secretary of Labor and Employment.

The CA’s amended decision also contradicted the spirit that animates all labor laws, the promotion of social justice and the protection of workers. The posting of a cash or surety bond to perfect an appeal of an order involving a monetary award has a two-fold purpose: (1) to assure the employee that, if he finally prevails in the case, the monetary award will

be given to him upon dismissal of the employer’s appeal and (2) to discourage the employer from using the appeal to delay or evade payment of his obligations to the employee.17 The CA disregarded these pro-labor objectives when it treated respondents’ failure to post the required bond with undue leniency. The CA should have resolved any doubt in the implementation and interpretation of the Labor Code and its implementing rules in favor of labor.18 For like all laws which govern industrial relations (assuming all things are equal), the rules governing the proceedings in labor disputes should be interpreted in favor of the worker.

Moreover, Star Angel Handicraft permitted the filing of a motion for reduction of the appeal bond because the Court recognized the NLRC’s existing practice at that time to allow the reduction of the appeal bond “upon motion of appellant and on meritorious grounds.” In fact, the practice was subsequently institutionalized in the rules of procedure of the NLRC which now allow the reduction of the amount of the bond “in justifiable cases and upon motion of the appellant.”19 On the contrary, no such practice ever existed in cases taken cognizance of by the Secretary of Labor and Employment in the exercise of his visitorial and enforcement powers. Hence, Star Angel Handicraft cannot be applied in labor standards cases appealed to the Secretary of Labor and Employment.

In ruling that Star Angel Handicraft was applicable by analogy to appeals to the Secretary of Labor and Employment in cases involving his visitorial and enforcement powers, the CA effectively reversed Guico, Jr. and Allied Investigation Bureau, Inc. v. Secretary of Labor,20 thus arrogating to itself a power that it did not possess, a power only this Court sitting en banc may exercise.21 For this reason, the amended decision was invalid as it was rendered by the CA in excess of its jurisdiction.

Monetary Award Is

Subject to Legal Interest

In Eastern Shipping Lines, Inc. v. Court of Appeals,22 the Court laid down the following guidelines:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: a

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.”

The obligation of respondents to pay the lawful claims of petitioners Agapay and Alonso, Jr. was established with reasonable certainty on October 30, 2000 when respondents received the notice of inspection from the labor employment officer. Since such obligation did not constitute a loan or forbearance of money, it was subject to legal interest at the rate of 6% per annum from that date until the May 10, 2001 order of the DOLE-NCR Regional Director attained finality. From the time the May 10, 2001 order of the DOLE-NCR Regional Director became final and executory, petitioners Agapay and Alonso, Jr. were entitled to 12% legal interest per annum until the full satisfaction of their respective claims.

WHEREFORE, the petition is hereby GRANTED. The November 25, 2004 amended decision of the Court of Appeals in CA-G.R. SP No. 72713 is REVERSED and SET ASIDE. The July 9, 2002 order of the Secretary of Labor and Employment affirming the May 10, 2001 order of the DOLE-NCR Regional Director is hereby REINSTATED with the modification that the monetary award shall earn 6% legal interest per annum from October 30, 2000 until the finality of the May 10, 2001 order of the DOLE-NCR Regional Director and, thereafter, 12% legal interest per annum until the full satisfaction thereof.

SO ORDERED.

Puno (C.J., Chairperson), Carpio, Azcuna and Leonardo-De Castro, JJ., concur. [Secretary of Labor and Employment vs. Panay Veteran’s Security and Investigation Agency, Inc., 563 SCRA 112(2008)]

G.R. No. 146530. January 17, 2005.*

PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.

Labor Law; Elements of an employer-employee relationship.—The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct. The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. All the four elements are present in this case.

Same; Same; Benefits; Wages; Definition of Wages.—Wages are defined as “remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered.” That the petitioner was paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis for determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are present or not. In this case, it cannot be gainsaid that the petitioner received compensation from the respondent company for the services that he rendered to the latter.

Same; Same; Same; Same; Under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll.—Under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll. The payroll should show, among other things, the employee’s rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents did not present the payroll to

support their claim that the petitioner was not their employee, raising speculations whether this omission proves that its presentation would be adverse to their case.

Same; Same; Dismissals; Respondent’s power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver.—The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the guise of “severance of contractual relation” due allegedly to the latter’s breach of his contractual obligation.

Same; Same; Same; While an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.—Of the four elements of the employer-employee relationship, the “control test” is the most important. Compared to an employee, an independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under its own responsibility according to its own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. Hence, while an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.

Same; Same; Same; The employment status of a person is defined and prescribed by law and not by what the parties say it should be.—It bears stressing that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.

Same; Same; Same; Abandonment; As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause; Factors to constitute abandonment; A charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal more so when it includes a prayer for reinstatement.—As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause. In this case, the respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship. Obviously, the petitioner did not intend to sever his relationship with the respondent company for at the time that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for reinstatement.

Same; Same; Same; The negligence, to warrant removal from service, should not merely be gross but also habitual.—Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. The negligence, to warrant removal from service, should not merely be gross but also habitual. The single and isolated act of the petitioner’s negligence in the proper maintenance of the truck alleged by the respondents does not amount to “gross and habitual neglect” warranting his dismissal.

Same; Same; Same; The lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal.—The lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under

Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of 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.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Danilo S. Capuli for petitioner.

Tan, Acut & Lopez for private respondents.

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari of the Resolution1 dated December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which, affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.

The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and other packaging materials for export and distribution. It engaged the services of the petitioner, Pedro Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the respondent company’s products from its factory in Mariveles, Bataan, to its various customers, mostly in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto in the afternoon two or three days after. The deliveries were made in accordance with the routing slips issued by respondent company indicating the order, time and urgency of delivery. Initially, the petitioner was paid the sum of P350.00 per trip. This was later adjusted to P480.00 per trip and, at the time of his alleged dismissal, the petitioner was receiving P900.00 per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his (the petitioner’s) desire to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, 13th month pay, among others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of service which he and the respondent company entered into. The said contract provided as follows:

“That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the services to be rendered to the Principal, under the following terms and covenants heretofore mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to this travel route shall be subject to further agreement by the parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery transport services fully rendered by the Contractor shall be on a per trip basis depending on the size or classification of the truck being used in the transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (P300.00) and EFFECTIVE December 15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis, following the same route mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos and Effective December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;

4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of any damage to, loss of any goods, cargoes, finished products or the like, while the same are in transit, or due to reckless [sic] of its men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its men working for him subject to this agreement, and that the Contractor shall hold the Principal free and harmless from any liability or claim that may arise by virtue of the Contractor’s non-compliance to the existing provisions of the Minimum Wage Law, the Employees Compensation Act, the Social Security System Act, or any other such law or decree that may hereafter be enacted, it being clearly understood that any truck drivers, helpers or men working with and for the Contractor, are not employees who will be indemnified by the Principal for any such claim, including damages incurred in connection therewith;

6. This contract shall take effect immediately upon the signing by the parties, subject to renewal on a year-to-year basis.”2

This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10, 1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the contracts were substantially the same. The relationship of the respondent company and the petitioner was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which his work was accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to regularization because he was not an employee of the respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his contractual relation with the respondent company was due to his violation of the terms and conditions of their contract. The petitioner allegedly failed to observe the minimum degree of diligence in the proper maintenance of the truck he was using, thereby exposing respondent company to unnecessary significant expenses of overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that the petitioner was a regular employee of the respondent company as he was performing a service that was necessary and desirable to the latter’s business.

Moreover, it was noted that the petitioner had discharged his duties as truck driver for the respondent company for a continuous and uninterrupted period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a circumvention of the constitutional provision affording full protection to labor and security of tenure. The Labor Arbiter found that the petitioner’s dismissal was anchored on his insistent demand to be regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due process requirements, the respondents were found guilty of illegal dismissal. The dispositive portion of the Labor Arbiter’s decision states:

“WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his separation pay equivalent to one (1) month pay per year of service based on the average monthly pay of P10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good between the parties as the employment relationship has already become strained and full backwages from the time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his backwages shall continue to run. Also to pay complainant his 13th month pay, night shift differential pay and service incentive leave pay hereunder computed as follows:

a) Backwages ………………….. P248,400.00

b) Separation Pay ………….…... P140,400.00

c) 13th month pay ………….….. P 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

TOTAL P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorney’s fees.

SO ORDERED.”3

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed by the NLRC in its Decision4 dated January 27, 1998, as it affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC characterized the contract of service between the respondent company and the petitioner as a “scheme” that was resorted to by the respondents who, taking advantage of the petitioner’s unfamiliarity with the English language and/or legal niceties, wanted to evade the effects and implications of his becoming a regularized employee.5

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon, the NLRC rendered another Decision6 dated July 10, 1998, reversing its earlier decision and, this time, holding that no employer-employee relationship existed between the respondent company and the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not exercise control over the means and methods by which the petitioner accomplished his delivery services. It upheld the validity of the contract of service as it pointed out that said contract was silent as to the time by which the petitioner was to make the deliveries and that the petitioner could hire his own helpers whose wages would be paid from his own account. These factors indicated that the petitioner was an independent contractor, not an employee of the respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor Code on the regularization of employees. Said contract, including the fixed period of employment contained therein, having been

knowingly and voluntarily entered into by the parties thereto was declared valid citing Brent School, Inc. v. Zamora.7 The NLRC, thus, dismissed the petitioner’s complaint for illegal dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was referred to the CA following the ruling in St. Martin Funeral Home v. NLRC.8

The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the petitioner was a regular employee of the respondent company because as its truck driver, he performed a service that was indispensable to the latter’s business. Further, he had been the respondent company’s truck driver for ten continuous years. The CA also reasoned that the petitioner could not be considered an independent contractor since he had no substantial capital in the form of tools and machinery. In fact, the truck that he drove belonged to the respondent company. The CA also observed that the routing slips that the respondent company issued to the petitioner showed that it exercised control over the latter. The routing slips indicated the chronological order and priority of delivery, the urgency of certain deliveries and the time when the goods were to be delivered to the customers.

The CA, likewise, disbelieved the respondents’ claim that the petitioner abandoned his job noting that he just filed a complaint for regularization. This actuation of the petitioner negated the respondents’ allegation that he abandoned his job. The CA held that the respondents failed to discharge their burden to show that the petitioner’s dismissal was for a valid and just cause. Accordingly, the respondents were declared guilty of illegal dismissal and the decision of the Labor Arbiter was reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent company and the petitioner in this wise:

“In summation, we rule that with the proliferation of contracts seeking to prevent workers from attaining the status of regular employment, it is but necessary for the courts to scrutinize with extreme caution their legality and justness. Where from the circumstances it is apparent that a contract has been entered into to preclude acquisition of tenurial security by the employee, they should be struck down and disregarded as contrary to public policy and morals. In this case, the ‘contract of service’ is just another attempt to exploit the unwitting employee and deprive him of the protection of the Labor Code by making it appear that the stipulations of the parties were governed by the Civil Code as in ordinary transactions.”9

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it rendered the assailed Resolution dated December 15, 2000 upholding the contract of service between the petitioner and the respondent company. In reconsidering its decision, the CA explained that the extent of control exercised by the respondents over the petitioner was only with respect to the result but not to the means and methods used by him. The CA cited the following circumstances: (1) the respondents had no say on how the goods were to be delivered to the customers; (2) the petitioner had the right to employ workers who would be under his direct control; and (3) the petitioner had no working time.

The fact that the petitioner had been with the respondent company for more than ten years was, according to the CA, of no moment because his status was determined not by the length of service but by the contract of service. This contract, not being contrary to morals, good customs, public order or public policy, should be given the force and effect of law as between the respondent company and the petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the petitioner’s complaint for illegal dismissal.

Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the appellate court alleging that:

(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE “CONTRACT OF SERVICE” ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;

(B)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE “CONTROL TEST” WHICH IS CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.10

The threshold issue that needs to be resolved is whether there existed an employer-employee relationship between the respondent company and the petitioner. We rule in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct.11 The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.12 All the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the intervention of a third party.

Second. Wages are defined as “remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered.”13 That the petitioner was paid on a per trip basis is not significant. This is merely a method of computing compensation and not a basis for determining the existence or absence of employer-employee relationship. One may be paid on the basis of results or time expended on the work, and may or may not acquire an employment status, depending on whether the elements of an employer-employee relationship are present or not.14 In this case, it cannot be gainsaid that the petitioner received compensation from the respondent company for the services that he rendered to the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his employees by means of payroll.15 The payroll should show, among other things, the employee’s rate of pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents did not present the payroll to support their claim that the petitioner was not their employee, raising speculations whether this omission proves that its presentation would be adverse to their case.16

Third. The respondents’ power to dismiss the petitioner was inherent in the fact that they engaged the services of the petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the guise of “severance of contractual relation” due allegedly to the latter’s breach of his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the “control test” is the most important. Compared to an employee, an independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under its own responsibility according to its own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.17 Hence, while an independent contractor enjoys independence and freedom from the control and supervision of his principal, an employee is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.18

Although the respondents denied that they exercised control over the manner and methods by which the petitioner accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under the respondents’ supervision and control. Their right of control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent company’s goods; 19

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan;20 and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and routing slips.21

a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the same according to the order of priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the word RUSH printed thereon.

c. The routing slips also indicated the exact time as to when the goods were to be delivered to the customers as, for example, the words “tomorrow morning” was written on slip No. 2776.

These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by which the petitioner accomplished his work as truck driver of the respondent company. On the other hand, the Court is hard put to believe the respondents’ allegation that the petitioner was an independent contractor engaged in providing delivery or hauling services when he did not even own the truck used for such services. Evidently, he did not possess substantial capitalization or investment in the form of tools, machinery and work premises. Moreover, the petitioner performed the delivery services exclusively for the respondent company for a continuous and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed indubitably establish the existence of an employer-employee relationship between the respondent company and the petitioner. It bears stressing that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.22

Having established that there existed an employer-employee relationship between the respondent company and the petitioner, the Court shall now determine whether the respondents validly dismissed the petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.23 In this case, the respondents failed to prove any such cause for the petitioner’s dismissal. They insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors must concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship.24 Obviously, the petitioner did not intend to sever his relationship with the respondent company for at the time that he allegedly abandoned his job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for illegal dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for reinstatement.25

Neither can the respondents’ claim that the petitioner was guilty of gross negligence in the proper maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.26 The negligence, to warrant removal from service, should not merely be gross but also habitual.27 The single and isolated act of the petitioner’s negligence in the proper maintenance of the truck alleged by the respondents does not amount to “gross and habitual neglect” warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

“. . . As against the gratuitous allegation of the respondent that complainant was not dismissed from the service but due to complainant’s breach of their contractual relation, i.e., his violation of the terms and conditions of the contract, we are very much inclined to believe complainant’s story that his dismissal from the service was anchored on his insistent demand that he be considered a regular employee. Because complainant in his right senses will not just abandon for that reason alone his work especially so that it is only his job where he depends chiefly his existence and support for his family if he was not aggrieved by the respondent when he was told that his services as driver will be terminated on February 23, 1995.”28

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of 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.29 However, as found by the Labor Arbiter, the circumstances obtaining in this case do not warrant the petitioner’s reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an award of separation pay equivalent to one month for every year of service from the time of his illegal dismissal up to the finality of this judgment in addition to his full backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.

SO ORDERED.

Puno (Chairman), Austria-Martinez, Tinga and Chico-Nazario, JJ., concur.

Petition granted, resolution reversed and set aside. That of the Labor Arbiter reinstated.

Note.—The filing by an employee of a complaint for illegal dismissal is proof enough of his desire to return to work thus negating the employer’s charge of abandonment. (Millares vs. National Labor Relations Commission, 328 SCRA 79 [2000])

——o0o—— [Chavez vs. National Labor Relations Commission, 448 SCRA 273(2005)]

G.R. No. 169510. August 8, 2011.*

ATOK BIG WEDGE COMPANY, INC., petitioner, vs. jESUS P. GISON, respondent.

Labor Law; Employer-Employee Relationship; Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the National Labor Relations Commission (NLRC) shall be accorded not only respect but even finality when supported by substantial evidence.—Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence. Being a question of fact, the determination whether such a relationship exists between petitioner and respondent was well within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should have been accorded great weight by the CA in resolving the issue.

Same; Control Test; The so-called “control test” is commonly regarded the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.—To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test.” 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 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.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Laguesma, Magsalin, Consulta & Gastardo Law Offices for petitioner.

PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision1 dated May 31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005 denying petitioner’s motion for reconsideration.

The procedural and factual antecedents are as follows:

Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted petitioner’s retained legal counsel with matters pertaining to the prosecution of cases against illegal surface occupants within the area covered by the company’s mineral claims. Respondent was likewise tasked to perform liaison work with several government agencies, which he said was his expertise.

Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the management to discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee of P3,000.00 a month,3 which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer agreement, but such agreement was misplaced and can no longer be found.

The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint4 with the SSS against petitioner for the latter’s refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum5 advising respondent that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are no longer necessary.

On February 21, 2003, respondent filed a Complaint6 for illegal dismissal, unfair labor practice, underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

“x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the company’s problem involving the 700 million pesos crop damage claims of the residents living at the minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres offered to pay him P3,000.00 per month plus representation expenses. It was also agreed upon by him and Torres that his participation in resolving the problem was temporary and there will be no employer-employee relationship between him and Atok. It was also agreed upon that his compensation, allowances and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the crop damage claimants. Unfortunately, Atok’s representatives, including him, were virtually held hostage by the irate claimants who demanded on the spot payment of their claims. He was able to convince the claimants to release the company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties acquired by the partnership and some receivables by Benguet Corporation was the problem. He was again entangled with documentation, conferences, meetings, planning, execution and clerical works. After two years, the controversy was resolved and Atok received its share of the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atok’s accountabilities with Benguet Corporation in the amount of P900,000.00.

In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of the burden of paying 700 million pesos. In between attending the problems of the crop damage issue, he was also assigned to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the Courts and other government offices.

After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take charge of some liaison matters and public relations in Baguio and Benguet Province, and to report regularly to Atok’s office in Manila to attend meetings and so he had to stay in Manila at least one week a month.

Because of his length of service, he invited the attention of the top officers of the company that he is already entitled to the benefits due an employee under the law, but management ignored his requests. However, he continued to avail of his representation expenses and reimbursement of company-related expenses. He also enjoyed the privilege of securing interest free salary loans payable in one year through salary deduction.

In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his registration with the SSS. His request was again ignored and so he filed a complaint with the SSS. After filing his complaint with the SSS, respondents terminated his services.”7

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito rendered a Decision8 ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint for lack of merit.

Respondent then appealed the decision to the NLRC.

On July 30, 2004, the NLRC, Second Division, issued a Resolution9 affirming the decision of the Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the Resolution10 dated September 30, 2004.

Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following issues:

a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it affirmed the said Decision.11

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal portion of which reads:

“WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations Commission dismissing petitioner’s complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time these were withheld from him up to the time of his actual and effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages, allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge Company Incorporated.

SO ORDERED.”12

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have overlooked Article 280 of the Labor Code,13 or the provision which distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the provision to the respondent’s case, he is deemed a regular employee of the petitioner after the lapse of one year from his employment. Considering also that respondent had been performing services for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent’s employment would only be temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have waived his right to attain a regular status of employment when he agreed to perform these tasks on a temporary employment status, still, it was the law that recognized and considered him a regular employee after his first year of rendering service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT’S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.14

Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an employer-employee relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a casual employee from a regular employee for purposes of determining the rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.

The petition is meritorious.

At the outset, respondent’s recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous factual findings should

be left to the CA as it is procedurally equipped for that purpose. From the decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted to by the parties. Hence, respondent’s resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence.17 Being a question of fact, the determination whether such a relationship exists between petitioner and respondent was well within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should have been accorded great weight by the CA in resolving the issue.

To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test.”18 Of these four, the last one is the most important.19 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.20

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other things, respondent was not required to report everyday during regular office hours of petitioner. Respondent’s monthly retainer fees were paid to him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the freedom to accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not control the manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of the petitioner engenders a conclusion that he is not an employee of the petitioner.

Moreover, the absence of the parties’ retainership agreement notwithstanding, respondent clearly admitted that petitioner hired him in a limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent’s Position Paper:21

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the complainant that his participation on this particular problem of Atok will be temporary since the problem was then contemplated to be limited in nature, hence, there will be no employer-employee relationship between him and Atok. Complainant agreed on this arrangement. It was also agreed that complainant’s compensations, allowances, representation expenses and reimbursement of company-related expenses will be processed and paid through disbursement vouchers;22

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he agreed to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he became a regular employee of the petitioner based on his contention that the “temporary” aspect of his job and its “limited” nature could not have lasted for eleven years unless some time during that period, he became a regular employee of the petitioner by continually performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The appellate court’s premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latter’s business, even without being hired as an employee.23 Hence, respondent’s length of service and petitioner’s repeated act of assigning respondent some tasks to be performed did not result to respondent’s entitlement to the rights and privileges of a regular employee.

Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its findings that respondent became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute.24 It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-employee relationship exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent’s services by the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages, allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are REINSTATED.

SO ORDERED.

Carpio,** Velasco, Jr. (Chairperson), Brion*** and Sereno,**** JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

_______________

24 Purefoods Corporation (now San Miguel Purefoods Company, Inc.) v. National Labor Relations Commission, G.R. No. 172241, November 20, 2008, 571 SCRA 406, 412; Philippine Global Communications, Inc. v. De Vera, supra note 18, at p. 274.

** Designated as an additional member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1059 dated August 1, 2011.

*** Designated as an additional member in lieu of Associate Justice Jose Catral Mendoza, per Special Order No. 1056 dated July 27, 2011.

**** Designated as an additional member, per Special Order No. 1056 dated July 27, 2011.

206

206

SUPREME COURT REPORTS ANNOTATED

Atok Big Wedge Company, Inc. vs. Gison

Note.—Appointment letters or employment contracts, payrolls, organization charts, SSS registration, personnel list, as well as testimony of co-employees, may serve as evidence of employee status; While technical rules are not strictly followed in the NLRC, this does not mean that the rules on proving allegations are entirely ignored. (McLeod vs. National Labor Relations Commission, 512 SCRA 222 [2007])

——o0o—— [Atok Big Wedge Company, Inc. vs. Gison, 655 SCRA 193(2011)]

164

SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers (Phils.), Inc. vs. Climaco

G.R. No. 146881. February 5, 2007.*

COCA-COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, petitioners, vs. DR. DEAN N. CLIMACO, respondent.

Labor Law; Employer-Employee Relationship; Four-Fold Test.—The Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test,” considered to be the most important element.

Same; Same; Physicians; Retainer Agreements; Independent Contractors; There is nothing wrong with the employment of a doctor as a company retained physician; Where there is no employeremployee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of the retained physician.—The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination. The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis. Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Lily Uy-Valencia for petitioner.

Victorio M. Torrecampo, Jr. for private respondent.

AZCUNA, J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7, 2000, and its Resolution promulgated on January 30, 2001, denying peti-tioner’s motion for reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.

Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:

“WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree as follows:

1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988. The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written notice to the other.

2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS: Three Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may charge professional fee for hospital services rendered in line with his specialization. All payments in connection with the Retainer Agreement shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to such laws.

3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex “A” and made an integral part of this Retainer Agreement.

4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and Employment shall be followed.

5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury inflicted on, harm done against or damage caused upon the employee of the COMPANY or their dependents during the course of his examination, treatment or consultation, if such injury, harm or damage was committed through professional negligence or incompetence or due to the other valid causes for action.

6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of employees. It is further understood that the DOCTOR shall be on call at all times during the other workshifts to attend to emergency case[s];

7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee as may be due him at the time of termination.2

The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the Retainer Agreement, provided:

A. OBJECTIVE

These objectives have been set to give full consideration to [the] employees’ and dependents’ health:

1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.

2. To protect employees from any occupational health hazard by evaluating health factors related to working conditions.

3. To encourage employees [to] maintain good personal health by setting up employee orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident prevention and personnel safety.

4. To evaluate other matters relating to health such as absenteeism, leaves and termination.

5. To give family planning motivations.

B. COVERAGE

1. All employees and their dependents are embraced by this program.

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations, family planning, physical fitness and athletic programs and other activities such as group health education program, safety and first aid classes, organization of health and safety committees.

3. Periodically, this program will be reviewed and adjusted based on employees’ needs.

C. ACTIVITIES

1. Annual Physical Examination.

2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental health hazards.

7. Give family planning motivations.

8. Coordinate with Personnel Department regarding physical fitness and athletic programs.

9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.

The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner company concluding their retainership agreement effective 30 days from receipt thereof.

It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician,

having served the company continuously for four (4) years. He likewise stated that respondent must receive all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an employeremployee relationship existed between petitioner and respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the “four-fold” test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact. Hence, termination disputes or money claims arising from employeremployee relations exceeding P5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.

An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular company doctor and that he was, therefore, subject to social security coverage.

Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a regular employee. The management refused to do so.

On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.

While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.

In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the power of control over respondent’s performance of his duties, and recognized as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in the first case, RAB Case No. 06-02-1013894. The dispositive portion of the Decision reads:

“WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition as a regular employee.

SO ORDERED.”11

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-0210138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.

Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.

In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It declared that no employer-employee relationship existed between petitioner company and respondent based on the provisions of the Retainer Agreement which contract governed respondent’s employment.

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on August 7, 1998. Respondent filed a petition for review with the Court of Appeals.

In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished.

The Court of Appeals held:

“The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled with the actual services rendered by the petitioner, would show that all the elements of the above test are present.

First, the agreements provide that “the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement x x x” (Rollo, page 25). This clearly shows that Coca-Cola exercised its power to hire the services of petitioner.

Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of wages.

Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. “The said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice to the other.” (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole requirement being the former’s compliance with the 30-day notice requirement.

Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that is, control, over the conduct of petitioner in the latter’s performance of his duties as a doctor for the company.

It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the petitioner must render service to the company is laid down.

We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and activities to be observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and due to this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.

In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant physician, as among those comprising the committee.

It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter was not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying that “petitioner was not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo, page 228). We believe that if the “control test” would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we could declare that an entity exercises control over another’s activities only in instances where the

latter is directed by the former on each and every stage of performance of the particular activity. Anything less than that would be tantamount to no control at all.

To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case where the objectives and activities were laid out, and the specific time for performing them was fixed by the controlling party.”15

Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in Article 28016 of the Labor Code stating 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.” Further, it held that the termination of respondent’s services without any just or authorized cause constituted illegal dismissal.

In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages.

The dispositive portion of the Decision reads:

“WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in applying the law to the established facts, and are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils., Inc. is hereby ordered to:

1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the petitioner separation pay equivalent to one (1) month’s salary for every year of service rendered, computed at the rate of his salary at the time he was dismissed, plus backwages.

2. Pay petitioner moral damages in the amount of P50,000.00.

3. Pay petitioner exemplary damages in the amount of P50,000.00.

4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner became a regular employee (one year from effectivity date of employment) until the time of actual payment.

SO ORDERED.”17

Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.

In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its Decision failed to mention whether respondent was a fulltime or part-time regular employee. It also questioned how the benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him considering that such benefits were given only to regular employees who render a full day’s work of not less that eight hours. It was admitted that respondent is only required to work for two hours per day.

The Court of Appeals clarified that respondent was a “regular part-time employee and should be accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA.” It sustained its decision on all other matters sought to be reconsidered.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

The issues are:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER.

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYEREMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.

6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.

7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.

The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The resolution of the main issue will determine whether the termination of respondent’s employment is illegal.

The Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test,” considered to be the most important element.18

The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which contains the respondent’s objectives, duties and obligations, does not tell respondent “how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients, employees of [petitioner] company, in each case.” He likened this case to that of Neri v. National Labor Relations Commission,19 which held:

“In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.”

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was achieved, but did not control the means and methods by which respondent performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power of control that the contract provides that respondent shall be directly responsible to the employee concerned and their dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during emergency cases did not make him a regular employee. He explained, thus:

“Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular employee is offtangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to be at respondent company’s premises, he is not at all further required to just sit around in the premises and wait for an emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them accordingly—and if it is an employee of respondent company who is attended to by him for special treatment that needs hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to stay in the employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing situation here.”

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not amount to such control, but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor Relations Commission are REINSTATED.

No costs.

SO ORDERED.

Puno (C.J., Chairperson), Sandoval-Gutierrez, Corona and Garcia, JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Notes.—Where the company and the physician practically agreed on every term and condition of the latter’s engagement, the same negates the element of control in their relationship. (Philippine Global Communications, Inc. vs. De Vera, 459 SCRA 260 [2005])

The language of a contract is not determinative of the parties’ relationship—it is the totality of the facts and surrounding circumstances of the case. (San Miguel Corporation vs. Aballa, 461 SCRA 392 [2005]) [Coca-Cola Bottlers (Phils.), Inc. vs. Climaco, 514 SCRA 164(2007)]

56

SUPREME COURT REPORTS ANNOTATED

Lopez vs. Bodega City

G.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.

Labor Law; Appeals; While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorari of Court of Appeals decisions, there are well-recognized exceptions to this rule, as in this case, when the factual findings of the National Labor Relations Commission as affirmed by the Court of Appeals contradict those of the Labor Arbiter.—The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review on certiorari of CA decisions, 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. 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.

Employer-Employee Relationship; Evidence; Burden of Proof; 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; It is incumbent upon a party, in filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee, to prove the employee-employer relationship by substantial evidence.—It is a basic rule of evidence that each party must prove his affirmative allegation. 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. 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. 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. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. 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.

Same; Cash Vouchers; A solitary petty cash voucher does not prove that a person had been receiving salary from another or that she had been the latter’s employee for ten (10) years.—The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp., 430 SCRA 368 (2004), 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 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. To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an allowance for five (5) days. 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.

Same; Contracts; Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror; 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; Even if a person 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 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. For a contract, to arise, the acceptance must be made known to the offeror. 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. 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. 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.

Same; Estoppel; Words and Phrases; 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.— 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.

Same; Same; ID cards where the words “EMPLOYEE’S NAME” appear printed therein do not prove employer-employee relationship where said ID cards are issued for the purpose of enabling certain “contractors,” such as singers and band performers, to enter the premises of an establishment.—As to the ID card, it is true that the words “EMPLOYEE’S NAME” appear printed below petitioner’s name. However, she failed to dispute respondents’ evidence consisting of Habitan’s testimony, 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.

Same; Same; Control Test; 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.—In Consulta v. Court of Appeals, 453 SCRA 732 (2005), 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.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Jose C. Evangelista for petitioner.

Sandra P. Torres-Yap for respondent.

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 certiorari of 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 reexamining 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 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.”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.31 However, 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 conces-sionaire 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 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Ynares-Santiago (Chairperson), Chico-Nazario, Nachura and Reyes, JJ., concur.

Petition denied, assailed decision and resolution affirmed.

_______________

36 Consulta v. Court of Appeals, Id., at p. 740.

37 CA Rollo, p. 184.

74

74

SUPREME COURT REPORTS ANNOTATED

Hulst vs. PR Builders, Inc.

Notes.—A supplemental motion filed beyond the 10-day period prescribed by the NLRC Rules of Procedure should not be entertained at all. (Favila vs. National Labor Relations Commission, 308 SCRA 303 [1999])

Where the employment of project employees is extended long after the supposed project has been finished, the employees are removed from the scope of project employees and are considered regular employees. (Audion Electric Co., Inc. vs. National Labor Relations Commission, 308 SCRA 340 [1999])

[Lopez vs. Bodega City, 532 SCRA 56(2007)]

690

SUPREME COURT REPORTS ANNOTATED

Francisco vs. National Labor Relations Commission

G.R. No. 170087. August 31, 2006.*

ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, respondents.

Labor Law; Employment; Control Test; The better approach would therefore be to adopt a two-tiered test.—The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s 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 latter’s employment.

Same; Same; Same; Economic Activity; The determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity.—The determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s 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.

Dismissals; Constructive Dismissals; A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.—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. In Globe Telecom, Inc. v. Florendo-Flores, 390 SCRA 201 (2002), 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.

Labor Law; Equal Work Opportunity; In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.—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.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Conrado S. Dar Santos for petitioner.

Ramon P. Gutierrez for private respondents.

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, 20041 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 company’s employees.12

Petitioner’s 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 petitioner’s 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 complainant’s 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

(27,500 x 10 mos.)

275,000.00

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.

0% Attorney’s 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% attorney’s 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 petitioner’s 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 Appeals18 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 employer’s 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 employer’s 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 latter’s employment.

The control test initially found application in the case of Viaña 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 employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s 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 corporation’s 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. Petitioner’s 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 online 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 latter’s 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 petitioner’s 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. Nuestro29 that a corporation who registers its workers with the SSS is proof that the latterwere the former’s 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 petitioner’s job was as Kamura’s 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 Francisco’s 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.

_______________

35 Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126; 333 SCRA 589, 598 (2000).

36 438 Phil. 756; 390 SCRA 201 (2002).

SO ORDERED.

Panganiban (C.J., Chairperson), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

Petition granted, judgment and resolution annulled and set aside.

Note.—Factors to be considered in ascertaining an employer-employee relationship. (San Miguel Corporation vs. MAERC Integrated Services, Inc., 405 SCRA 579 [2003]) [Francisco vs. National Labor Relations Commission, 500 SCRA 690(2006)]

A.M. No. 10-9-15-SC. February 12, 2013.*

RE: REQUEST OF (RET.) CHIEF JUSTICE ARTEMIO V. PANGANIBAN FOR RECOMPUTATION OF HIS CREDITABLE SERVICE FOR THE PURPOSE OF RECOMPUTING HIS RETIREMENT BENEFITS.

Administrative Law; Judges; Retirement; The Supreme Court has unquestionably followed the practice of liberal treatment in passing upon retirement claims of judges and justices.―The Supreme Court has unquestionably followed the practice of liberal treatment in passing upon retirement claims of judges and justices, thus: (1) waiving the lack of required length of service in cases of disability or death while in actual service or distinctive service; (2) adding accumulated leave credits to the actual length of government service in order to qualify one for retirement; (3) tacking post-retirement service in order to complete the years of government service required; (4) extending the full benefits of retirement upon compassionate and humanitarian considerations; and (5) considering legal counselling work for a government body or institution as creditable government service.

Same; Same; Same; Republic Act No. 910; Under the beneficient provisions of Rep. Act 910, as amended, a Justice who reaches age 70 is entitled to full retirement benefits with no length of service required.―The generous extent of the Court’s liberality in granting retirement benefits is obvious in Re: Justice Efren I. Plana: It may also be stressed that under the beneficient provisions of Rep. Act 910, as amended, a Justice who reaches age 70 is entitled to full retirement benefits with no length of service required. Thus, a 69 year old lawyer appointed to the bench will get full retirement benefits for the rest of his life upon reaching age 70, even if he served in the government for only one year. Justice Plana served the government with distinction for 33 years, 5 months, and 11 days, more than 5 years of which were served as a Justice of the Court of Appeals of this Court.

Leonardo-Castro, J., Dissenting Opinion:

Administrative Law; Consultancy; Government Service; View that consultants are not required to take an oath of office because they are not rendering “government service” in the sense the term is understood for purposes of applying the laws and regulations applicable to public officers and employees; One who does not take an oath of office which demands the highest standard and responsibilities of public service is understandably not entitled to enjoy the benefits and privileges of a public officer or employee.―All public officers and employees from the highest to the lowest are required to take an oath of office which marks their assumption to duty. Notably, even the Court’s appointed utility personnel are required to take the oath of office mandated by the Constitution and the law. To be sure, since it is long settled that not all services rendered to the government partake of the nature of “government service,” consultants are not required to take an oath of office because they are not rendering “government service” in the sense the term is understood for purposes of applying the laws and regulations applicable to public officers and employees, among which are the retirement laws, the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019 as amended), and the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic Act No. 6713). Consultants can engage in the practice of their profession like former Chief Justice Panganiban who admitted in his personal data sheet submitted to the Court that he was a practicing lawyer as Senior Partner of PABLAW during the period for which he was deemed by the majority opinion to have rendered “government service.” One who does not take an oath of office which demands the highest standard and responsibilities of public service is understandably not entitled to enjoy the benefits and privileges of a public officer or employee. It is well-settled that an oath of office is a qualifying requirement for public office, a prerequisite to the full investiture of the office.

Same; Same; Same; View that the ruling of the majority, having set a precedent, may have now opened a Pandora’s box of claims for retirement benefits previously denied because prior to the ruling of the majority in this case, consultancy services rendered to the government have consistently not been credited as part of government service.―The ruling of the majority, having set a precedent, may have now opened a Pandora’s box of claims for retirement benefits previously

denied because prior to the ruling of the majority in this case, consultancy services rendered to the government have consistently not been credited as part of government service. The Court will be hard put to take the position that its ruling applies only to former Chief Justice Panganiban and to the Members of this Court who may invoke this ruling in the future due to their having previously rendered similar services to the government.

Brion, J., Dissenting Opinion:

Administrative Law; Retirement; Government Service; Republic Act No. 910; View that R.A. No. 910, as amended by R.A. No. 9946, only reduced the minimum requirement of government and/or judicial service for eligibility to lifetime pension from twenty (20) years to fifteen (15) years; It did not change the legal nature of the service that falls under the term “government service,” nor did it change the legal meaning and characterization of “consultancy.”―R.A. No. 910, as amended by R.A. No. 9946, only reduced the minimum requirement of government and/or judicial service for eligibility to lifetime pension from twenty (20) years to fifteen (15) years. The amendment only widened the extension of benefits to retirees by covering even the retirees who had rendered at least 15 years of government and/or judicial service, but retired prior to R.A. No. 9946; it did not change the legal nature of the service that falls under the term “government service,” nor did it change the legal meaning and characterization of “consultancy.”

Same; Same; Same; View that those who may render service with the government, without occupying any public office or without having been elected or appointed a public officer evidenced by a written appointment recorded in the Civil Service Commission, do so outside of the concept of government service. The ponencia interestingly broadens this concept of “government service.”―In sum, those who may render service with the government, without occupying any public office or without having been elected or appointed a public officer evidenced by a written appointment recorded in the CSC, do so outside of the concept of government service. The ponencia interestingly broadens this concept of “government service.” It literally interprets the term to include any service performed for the government; it thus claims that the “law x x x did not require a specific job description or job specification” and “the absence of a specific position in a governmental structure is not a hindrance.”

Same; Same; Same; View that rendering “government service” within the meaning of the law requires that (1) the person occupies, by appointment or by election, a public office that was created by law, not simply by contract; and (2) the office requires him to render service in the performance of a governmental function.―For clarity, rendering “government service” within the meaning of the law requires that (1) the person occupies, by appointment or by election, a public office that was created by law, not simply by contract; and (2) the office requires him to render service in the performance of a governmental function. This signification should particularly apply in construing retirement laws in order not to defeat the intent and purpose of the recognition of retirement and the grant of retirement benefits. Rep. Act No. 910 (as amended), in particular, is founded on this intent and purpose. It provides for retirement based either on age or disability, or on years of service. The intent to reward past service is made patent by the requirement for years of service, both in government and the Judiciary. This is the intent that the Supreme Court itself should be very careful about because it is an intent that applies to the Court itself.

Same; Public Office; Words and Phrases; View that “public office” is the right, authority and duty, created and conferred by law, by which, for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by the individual for the benefit of the public.―“Public office” is the right, authority and duty, created and conferred by law, by which, for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by the individual for the benefit of the public. When the term is used with reference to a person having to do a particular act or to perform a particular function in the exercise of governmental power, it includes any government employee, agent or body to do the act or exercise that function.

Same; Government Service; Consultancy; View that the requirement of a public office in considering “government service” also signifies service within the governmental structure and the exclusion of service outside of this structure, although beneficial work for the government might have been rendered in this role and capacity.―The requirement of a public office in considering “government service” also signifies service within the governmental structure and the exclusion of service outside of this structure, although beneficial work for the government might have been rendered in this role and capacity. This exclusion specifically refers to consultancy rendered pursuant to a contract of service, involving work and delivery to the government of results produced in the consultant’s own time and for his own account in the exercise of his profession. This exclusion also encompasses services outsourced by the government to private individuals for their special qualifications and expertise; these services do not constitute government service and do not characterize the private individuals as public officers. These aspects of the case are dwelt with at length at the proper places below. It is sufficient for now to simply state that the mere claim of having rendered services (and even proof of actual rendition of service) will be for naught unless made within an employment relationship existing under the structure established by law within the government.

Same; Same; Same; View that in a consultancy, no tie links the consultant to a public office that has been previously created by law; the elements of public office, and the fact of appointment and of the required oath are likewise missing.―As a contract of service, consultancy has been excluded as “government service” for retirement purposes because it does not satisfy the basic requirement that there be a public office as understood under the law. In a consultancy, no tie links the consultant to a public office that has been previously created by law; the elements of public office, and the fact of appointment and of the required oath are likewise missing. The CSC has fleshed out the requirements by pointedly excluding “consultancy services” for lack of the required employer-employee relationship. CSC Memorandum Circular No. 38, series of 1993, expressly provides that consultancy services “where no employer-employee relationship exists” are not considered government service.

Same; Same; Same; Legal Consultants; Words and Phrases; View that a “legal consultant” is one who has “adequate external” professional expertise in the law that no one in the agency could provide or render, and whose services therefore must be procured.―A “legal consultant” is one who has “adequate external” professional expertise in the law that no one in the agency could provide or render, and whose services therefore must be procured. A procured service is not government service, as it is service hired after the conduct of the procurement process; it is not part of the internal and regular services of the procuring governmental entity. Under Memorandum Circular No. 17, series of 2002, a consultancy contract or job order need not be recorded by the CSC because the “services to be rendered thereunder are not considered as government service.”

Same; Employer-Employee Relationship; View that to determine the existence of an employer-employee relationship, the Court has consistently adhered to the four-fold test.―To determine the existence of an employer-employee relationship, the Court has consistently adhered to the four-fold test and has asked: “(1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is the most important element,” and its absence renders any further discussion a surplusage. Recent jurisprudence adds another test, applied in conjunction with the control test, in determining the existence of employment relations. The two-tiered test involves an inquiry into: “(1) the putative employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished [control test]; and (2) the underlying economic realities of the activity or relationship [broader economic reality test].”

Same; Government Service; Consultancy; Unlike the Justices he cited in comparison, former Chief Justice Panganiban’s work did not involve the performance of duties pursuant to a public office, i.e., for work in a specific position under the governmental structure in the performance of public functions.―Unlike the Justices he cited in comparison, former

Chief Justice Panganiban’s work did not involve the performance of duties pursuant to a public office, i.e., for work in a specific position under the governmental structure in the performance of public functions. As I adverted to above, that he did consultancy work is what the affiants―Justice Pardo and Secretary Roces―attested to. Under what specific positions, under what specific role or capacity, and under what terms and structures are, at best, unclear as neither affiants gave definitive answers. As already mentioned in passing and as more fully discussed elsewhere, former Chief Justice Panganiban―by his own claim on file with the Court

―was at that time operating in the private sector and was then in active law practice. These undisputed facts cannot but significantly affect the characterization of the work former Chief Justice Panganiban rendered.

Same; Same; Same; View that in the absence of substantial proof creating a reasonable inference that the work rendered by Chief Justice Panganiban fell within the term “government service,” there is no reason, legal or factual, to grant former Chief Justice Panganiban’s request.―In the absence of substantial proof creating a reasonable inference that the work rendered by Chief Justice Panganiban fell within the term “government service,” there is no reason, legal or factual, to grant former Chief Justice Panganiban’s request. In any event, former Chief Justice Panganiban’s consultancy service, even if somehow considered service with the government (contrary to his own declaration of record with the Court), is still work excluded by law from the term “creditable government service.”

Same; Retirement; View that the discretionary power of the Supreme Court to exercise a liberal approach in the application of retirement laws is not unlimited.―The discretionary power of the Court to exercise a liberal approach in the application of retirement laws is not unlimited. The discretionary power is wielded only under circumstances where the retiree has adduced proof of entitlement that can be justified in a generous and expansive interpretation. The bottom line is that proof must be adduced; liberality must be exercised in the process of appreciating the proof adduced and in the interpretation of the law. The Court’s exercise of liberality is on a case-to-case basis premised on the circumstances of each case.

Same; Same; Government Service; View that a ruling that certifications alone, without more, are sufficient to establish government service leaves the door open to a possible deluge of similar claims from those who might have in the past entered into consultancy services with the government.―A ruling that certifications alone, without more, are sufficient to establish government service leaves the door open to a possible deluge of similar claims from those who might have in the past entered into consultancy services with the government. In the Judiciary alone, those of us who were in private law practice before entering judicial service might have, at one time or another, rendered consultancy service for the government. To be sure, there are many more out there among the professionals as this kind of service is a phenomenon that is not specific to lawyers and the Judiciary. Where does the line lie now and what happens to the rule of law when stretching the interpretation of law to its limits becomes the rule? Should the Government Service Insurance System, the Social Security System, and the concerned agencies now entertain applications for crediting, without the benefit of an appointment to public office and based solely on certifications that the applicant indeed delivered service? Should inaction now be excused by a claim of lapse of time?

ADMINISTRATIVE MATTER in the Supreme Court. Request for Recomputation of Creditable Service.

The facts are stated in the resolution of the Court.

R E S O L U T I O N

PERLAS-BERNABE, J.:

The Court is asked to pass upon the request of former Chief Justice Artemio V. Panganiban (CJ Panganiban) to include as creditable government service the period from January 1962 to December 1965 when he served the Department of

Education (DepEd), its Secretary, and the Board of National Education (BNE) to enable him to meet the present service requirement of fifteen (15) years for entitlement to retirement benefits.

When CJ Panganiban reached the compulsory age of retirement on December 7, 2006, he was credited with eleven (11) years, one (1) month and twenty-seven (27) days or 11.15844 years of government service. The Office of Administrative Services (OAS) did not include in the computation his 4-year service as Legal Counsel to the DepEd and its then Secretary, Alejandro R. Roces (Former Education Secretary Roces), and as Consultant to the BNE in a concurrent capacity, from January 1962 to December 1965, on the ground that consultancy “is not considered government service pursuant to Rule XI (Contract of Services/Job Orders) of the Omnibus Rules Implementing Book V of Executive Order No. 292.”1 Having failed to meet the twenty (20) years length of service then required under Republic Act (R.A.) No. 910,2 the OAS considered him eligible to receive only the 5-year lump sum payment under said law.

On January 10, 2010, then President Gloria Macapagal-Arroyo approved R.A. 9946,3 which not only reduced the requisite length of service under R.A. 910 from twenty (20) years to fifteen (15) years to be entitled to the retirement benefits with lifetime annuity, but provided also for a survivorship clause, among others.

Thus, the instant letter-request of CJ Panganiban seeking a recomputation of his creditable government service to include the previously-excluded 4-year government service to enable him to meet the reduced service requirement of fifteen (15) years for entitlement to retirement benefits under R.A. 9946.

On December 14, 2010, the Court issued a Resolution4 directing CJ Panganiban to submit additional documentary evidence to support his appointment as Legal Counsel to the DepEd and its Secretary and Consultant to the BNE. In compliance, he submitted the January 19, 2011 Certifications5 of Former Education Secretary Roces and Retired Justice Bernardo P. Pardo (Retired Justice Pardo) attesting to the fact of his tenure as Legal Counsel to the DepEd and its Secretary and Consultant to the BNE.

The Court finds merit in CJ Panganiban’s request.

A careful perusal of the actual functions and responsibilities of CJ Panganiban as outlined in his compliance with attached Sworn Statements of Former Education Secretary Roces and Retired Justice Pardo reveal that he performed actual works and was assigned multifarious tasks necessary and desirable to the main purpose of the DepEd and the BNE.

Former Education Secretary Roces certified that:

[C]hief Justice Panganiban rendered actual services to the BNE and the Department [of Education] and to me in my official capacity as Secretary of Education for said period [from January 1962 to December 1965], having been officially appointed by me as then Secretary of Education and as Chairman of the Board of Education, he having been paid officially by the government a monthly compensation for rendering such services to the government specifically to the Department of Education and to the Board of National Education. He worked with the Office of the Solicitor General on legal matters affecting the Department and the Board, collaborating closely with then Solicitor Bernardo P. Pardo who was assigned by the Office of the Solicitor General to the Department of Education.

Apart from legal issues, he devoted time and attention to matters assigned to him by the Department or by the Board, like the development of educational policies, the selection and distribution of textbooks and other educational materials, the setting of school calendars, the procurement of equipment and supplies, management of state schools, etc.6

His services both as Legal Counsel to the DepEd and its Secretary and as Consultant to the BNE during the period 1962-1965 was corroborated by Retired Justice Pardo who, in his affidavit, certified that in his “capacity as Solicitor assigned

by the Office of Solicitor General to the Department of Education and Board of National Education”7 he and CJ Panganiban “collaborated in many cases representing both the Board of National Education and Department of Education, particularly then Secretary of Education Alejandro R. Roces, as well as in rendering legal opinions to such offices.”8

CJ Panganiban performed work ranging from high level assignments involving policy development and implementation to the more humble tasks of selection and distribution of educational materials and setting of school calendars. He himself views his work, thus: “[u]nlike some present day consultants or counsels of government offices and officials, I rendered full and actual service to the Philippine government, working daily at an assigned desk near the Office of the Secretary of Education throughout the full term of Secretary Alejandro R. Roces, January 1962 to December 1965.”9

Associate Justice Arturo D. Brion (Justice Brion) is not persuaded by the evidence. He holds the view that there must be an appointment to a position that is part of a government organizational structure before any work rendered can be considered government service.

Under the old Administrative Code (Act No. 2657),10 a government “employee” includes any person in the service of the Government or any branch thereof of whatever grade or class. A government “officer,” on the other hand, refers to officials whose duties involve the exercise of discretion in the performance of the functions of government, whether such duties are precisely defined or not. Clearly, the law, then and now, did not require a specific job description and job specification. Thus, the absence of a specific position in a governmental structure is not a hindrance for the Court to give weight to CJ Panganiban’s government service as legal counsel and consultant. It must be remembered that retired Chief Justice Andres R. Narvasa’s (CJ Narvasa) stint in a non-plantilla position as Member of the Court Studies Committee of the Supreme Court, created under Administrative Order No. 164 of then Chief Justice Querube C. Makalintal, was considered sufficient for purposes of crediting him with an additional five (5) years of government service, reckoned from September 2, 1974 to 1979.11

In any case, having previously ruled to include as creditable government service the post-retirement work of Justice Abraham T. Sarmiento as Special Legal Counsel to the University of the Philippines System12 and to credit former CJ Narvasa with the legal counselling work he did for the Agrava Fact-Finding Board to which he was appointed General Counsel by then President Marcos,13 the Court sees no reason not to likewise credit in CJ Panganiban’s favor the work he had performed as Legal Counsel to the DepEd and its Secretary, not to mention his concurrent work as consultant to the BNE, and accordingly, qualify him for entitlement to retirement benefits.

In A.M. No. 07-6-10-SC,14 apart from his work as Member of the Court Studies Committee of the Supreme Court, CJ Narvasa was credited his term as General Counsel to the Agrava Fact-Finding Board for one (1) year (from October 29, 1983 to October 24, 1984), as well as his 10-month post-retirement service as Chairperson of the Preparatory Commission on Constitutional Reforms created under Executive Order No. 43, thus, entitling him to monthly pension computed from December 1, 2003. In A.M. No. 03-12-08-SC,15 the Court favorably considered Justice Sarmiento’s post-retirement work as Special Legal Counsel to the University of the Philippines (from August 24, 2000 to January 15, 2002) as part of his creditable government service apart from his service as Member of the UP Board of Regents (from January 16, 2002 to December 31, 2003) and Chairman of the UP Board of Regents (from January 1, 2004 to December 31, 2005).

Justice Brion views the Court’s favorable disposition of CJ Panganiban’s request for lifetime annuity as another case of flip-flopping, believing that the Court already denied former Chief Justice Panganiban’s request for full retirement benefits under R.A. No. 910 and would, thus, be making a complete turnabout even as CJ Panganiban makes a request for the second time and for the same previously-denied services.16

Justice Brion, however, is mistaken in his belief that the Court is reversing itself in this case. There is no flip-flopping situation to speak of since this is the first instance that the Court En Banc is being asked to pass upon a request concerning the computation of CJ Panganiban’s creditable service for purposes of adjusting his retirement benefits. It may be recalled that Deputy Clerk of Court and OAS Chief Atty. Eden T. Candelaria had simply responded to a query made by CJ Panganiban when she wrote17 him, thus:

June 10, 2008

Hon. Artemio V. Panganiban

Retired Chief Justice

Your Honor:

This refers to your query through Ms. Vilma M. Tamoria on why your Honor’s service in the Board of National Education was not included in the computation of retirement benefits.

In connection with his Honor’s Application for Compulsory Retirement, a Certification dated November 14, 2006 issued by former Secretary of Education, the Honorable Alejandro R. Roces, was submitted attesting that you had served as consultant to the Board of National Education and concurrently Legal Counsel to the Secretary of Education from January 1962 to December 1965.

Consultancy or Contract of Service is not considered government service pursuant to Rule XI (Contract of Services/Job Orders) of the Omnibus Rules Implementing Book V of Executive Order No. 292. Hence, your Honor’s service as consultant to the Board of National Education from January 1962 to December 1965 was not credited in the computation of creditable government service.

Your Honor is therefore entitled only to the benefits under Section 2 of R.A. 910 as amended which provides for a lump sum equivalent to five (5) years salary based on the last salary you were receiving at the time of retirement considering that you did not attain the length of service as required in Section 1. Thus, you Honor only has a total of 11 years, 1 month and 27 days or 11.15844 government service.

Very truly yours,

(Sgd.)

EDEN T. CANDELARIA

Deputy Clerk of Court and

Chief Administrative Officer

CJ Panganiban no longer pursued the matter with the OAS presumably because a converse ruling allowing credit for his service with the BNE would still have left his total length of government service short of the 20-year requirement as to entitle him to a lifetime annuity under Section 1 of R.A. 910. However, in view of the passage of R.A. 9946, which reduced the requisite period of service from twenty (20) years to fifteen (15) years to benefit from a grant of lifetime annuity, CJ Panganiban sought the Court’s approval to include his 4-year service as Legal Counsel to the DepEd and its Secretary, and as Consultant to the BNE as creditable government service.

Besides, nothing prevents the Court from taking a second look into the merits of a request and overturning a ruling determined to be inconsistent with principles of fairness and equality. In particular, the grant of life annuity benefit to Justice Sarmiento was a result of the Court’s reversal of its earlier Resolution denying the request for recomputation.

Notably, the Court found merit in Justice Sarmiento’s plea for liberality and considered his post-retirement work creditable government service to complete the 20-year length of service required for him to avail of full retirement benefits under R.A. 910.

It bears emphasis that treatment must be without preference especially between persons similarly situated or in equal footing. Just as CJ Narvasa’s work as General Counsel to the Agrava Board, and Justice Sarmiento’s service as Special Legal Counsel to UP were considered creditable government service, so should the consideration be for CJ Panganiban’s work, at least, as Legal Counsel to the DepEd and its Secretary.

Justice Brion asserts that CJ Panganiban’s own claim in his Bio-Data and Personal Data Sheet that he remained in active private law practice at the same time that he acted as Legal Counsel to the DepEd and its Secretary and as Consultant to the BNE prevents him from asserting any claim to the contrary. It should be stressed that CJ Panganiban only filed his request for recomputation of his retirement benefits in the hope that the Court will credit in his favor the work he rendered both as Legal Counsel to the DepEd and its Secretary and as Consultant to the BNE in the same way that it credited retired Justice Sarmiento’s and retired CJ Narvasa’s services as Special Legal Counsel to the UP and General Counsel to the Agrava Board, respectively. When CJ Panganiban submitted his claims to the Court’s sense of fairness and wisdom, it was the Court that directed him to present additional evidence in support of the true nature of the services he rendered to these government agencies.

The alleged inconsistency between his earlier statements of being in private law practice in his Bio-Data and Personal Data Sheet and his proffered evidence now showing the nature and extent of his services to the DepEd and its Secretary and to the BNE is more apparent than real. The perception of continuous and uninterrupted exercise of one’s legal profession, despite periodic interruptions foisted by public service, is not uncommon among legal practitioners. After all, legal counselling work, even if rendered to a government agency, is part of legal practice. During the time that CJ Narvasa served as Member of the Court Studies Committee of the Supreme Court from 1974 to 1979, prior to his appointment as General Counsel to the Agrava Board, he likewise appeared to have regarded himself in constant active law practice18 and yet this did not deter the Court from considering the weight of the work he actually rendered to the government and, thus, credited him not only his one-year stint as General Counsel of the Agrava Board but even the full term of his earlier involvement as Member of the Court Studies Committee of the Supreme Court.

Nonetheless, Justice Brion insists that no substantial proof has been presented to support the inference that the work rendered by CJ Panganiban constituted government service and, hence, the application of liberality in the appreciation and interpretation of the law is unjustified. Admittedly, the only evidence presented to support CJ Panganiban’s claim that he worked as Legal Counsel to the DepEd and its Secretary and as Consultant to the BNE are the Sworn Statements of Retired Justice Pardo and Former Education Secretary Roces and the submissions of CJ Panganiban but this evidence can hardly be considered undeserving of weight and lacking in substance, coming from a retired member of the Court, a former Cabinet Secretary and a former Chief Justice of the Supreme Court, whose credibility remains untarnished and is beyond question. Justice Brion himself does not dispute the veracity of their claims that CJ Panganiban did, in fact, render actual service. Hence, notwithstanding the absence of any other record of CJ Panganiban’s appointment to a position or item within the DepEd and the BNE, his actual service to these government agencies must be regarded as no less than government service and should, therefore, be credited in his favor consistent with the Court’s liberal rulings in the cases of CJ Narvasa and Justice Sarmiento.

The Supreme Court has unquestionably followed the practice of liberal treatment in passing upon retirement claims of judges and justices, thus: (1) waiving the lack of required length of service in cases of disability or death while in actual service19 or distinctive service; (2) adding accumulated leave credits to the actual length of government service in order to qualify one for retirement; (3) tacking post-retirement service in order to complete the years of government service

required; (4) extending the full benefits of retirement upon compassionate and humanitarian considerations;20 and (5) considering legal counselling work for a government body or institution as creditable government service.

The generous extent of the Court’s liberality in granting retirement benefits is obvious in Re: Justice Efren I. Plana:21

It may also be stressed that under the beneficient provisions of Rep. Act 910, as amended, a Justice who reaches age 70 is entitled to full retirement benefits with no length of service required. Thus, a 69 year old lawyer appointed to the bench will get full retirement benefits for the rest of his life upon reaching age 70, even if he served in the government for only one year. Justice Plana served the government with distinction for 33 years, 5 months, and 11 days, more than 5 years of which were served as a Justice of the Court of Appeals of this Court.

In the instant case, no liberal construction is even necessary to resolve the merits of CJ Panganiban’s request. The Court need only observe consistency in its rulings.

WHEREFORE, the Court resolves to GRANT former Chief Justice Artemio V. Panganiban’s request for a recomputation of his creditable government service to include the 4-year period from January 1962 to December 1965 that he served as Legal Counsel to the Department of Education and its then Secretary and Consultant to the Board of National Education, as duly attested to by retired Justice Bernardo P. Pardo and then Secretary of Education himself, Alejandro R. Roces.

ACCORDINGLY, the Office of Administrative Services is hereby DIRECTED to recompute former Chief Justice Artemio V. Panganiban’s creditable government service and his corresponding retirement benefits.

SO ORDERED.

Sereno (C.J.), Carpio, Velasco, Jr., Del Castillo, Perez, Reyes and Leonen, JJ., concur.

Leonardo-De Castro, J., I dissent in a separate opinion and join the dissent of Justice Brion.

Brion, J., I dissent.

Peralta, J., I join the dissent of J. Brion.

Bersamin and Villarama, Jr., JJ., I join the dissents of J. De Castro and J. Brion.

Abad, J., Inhibited self. For past favor received from C.J. A. V. Panganiban.

Mendoza, J., I join the dissents of J. T. De Castro and J. A. Brion.

DISSENTING OPINION

LEONARDO-DE CASTRO, J.:

In light of the ruling in the majority opinion that consultancy services rendered to the government partake of the nature of “government service” which can be credited in the availment of retirement benefits by public officers under the law, should the Civil Service Commission, the Government Service Insurance System, the Office of the Ombudsman, and all concerned government agencies now include within the coverage of their authority and jurisdiction all consultants presently rendering service to the government?

Conversely, is the ruling of the majority intended to apply only to former Chief Justice Artemio V. Panganiban who, because of his consultancy services in the practice of his profession to the former Secretary of Education from January 1962 to December 1965 (exact dates not specified), will now be entitled, among others, to the lifetime monthly pension

of the Members of the Judiciary at the rate equal to the salary of the incumbent Chief Justice? Or will this apply as well only to the Members of this Court similarly situated as the former Chief Justice who may have previously rendered consultancy services to the government? If so, how can the Court countenance or justify such an uneven application of the law?

These are nagging questions engendered by the ruling of the majority which overturned all settled legal principles and doctrines on the nature and character of consultancy services rendered to the government.

First off, the Constitution requires public officials and employees to take an oath of office. Specifically, Article IX(B) of the Constitution provides:

Sec. 4. All public officers and employees shall take an oath or affirmation to uphold and defend this Constitution.

The Administrative Code of 1987 (Executive Order No. 292) implements this constitutional provision as follows:

Chapter 10 — OFFICIAL OATHS

Sec. 40. Oaths of Office for Public Officers and Employees.―All public officers and employees of the government including every member of the armed forces shall, before entering upon the discharge of his duties, take an oath or affirmation to uphold and defend the Constitution; that he will bear true faith and allegiance to it; obey the laws, legal orders and decrees promulgated by the duly constituted authorities; will well and faithfully discharge to the best of his ability the duties of the office or position upon which he is about to enter; and that he voluntarily assumes the obligation imposed by his oath of office without mental reservation or purpose of evasion. Copies of the oath shall be deposited with the Civil Service Commission and the National Archives. (Book I.)

All public officers and employees from the highest to the lowest are required to take an oath of office which marks their assumption to duty. Notably, even the Court’s appointed utility personnel are required to take the oath of office mandated by the Constitution and the law.

To be sure, since it is long settled that not all services rendered to the government partake of the nature of “government service,” consultants are not required to take an oath of office because they are not rendering “government service” in the sense the term is understood for purposes of applying the laws and regulations applicable to public officers and employees, among which are the retirement laws, the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019 as amended), and the Code of Conduct and Ethical Standards for Public Officials and Employees (Republic Act No. 6713). Consultants can engage in the practice of their profession like former Chief Justice Panganiban who admitted in his personal data sheet submitted to the Court that he was a practicing lawyer as Senior Partner of PABLAW during the period for which he was deemed by the majority opinion to have rendered “government service.”

One who does not take an oath of office which demands the highest standard and responsibilities of public service is understandably not entitled to enjoy the benefits and privileges of a public officer or employee. It is well-settled that an oath of office is a qualifying requirement for public office, a prerequisite to the full investiture of the office.1

Hence, it is erroneous to consider all services rendered for the government as government service which can be credited to claim retirement benefits, particularly if the service is rendered not by virtue of an appointment or election to a specific public office or position, which requires the taking of an oath of office, but by a contractual engagement like that of a consultant.

It should be stressed that the Certification of the late former Secretary of Education Alejandro R. Roces did not state to what position former Chief Justice Artemio Panganiban was appointed. He stated that the latter was “appointed” to

render service. Such loose statement cannot suffice as numerous consultants are rendering service to the government pursuant to a contract of service which is not considered creditable government service under our retirement laws.

Unlike the case of former Chief Justice Panganiban, the cited precedents in the ponencia of Justice Estela Perlas-Bernabe identified the positions, designated by law or administrative/executive orders, to which the former Justices were appointed. The situation of former Chief Justice Panganiban is markedly different from the precedents cited by Justice Bernabe considering the presence of evidentiary support extant on record that showed incontrovertibly the appointment of former Chief Justice Andres Narvasa and Justice Abraham Sarmiento to specific positions in government.

The legal and factual issues regarding one’s entitlement to retirement benefits must be carefully considered because such benefits are accorded by law to public officers and employees who have assumed the concomitant responsibilities and obligations demanded by their oath of office during the mandatory period of time explicitly prescribed by the applicable retirement law.

The ruling of the majority, having set a precedent, may have now opened a Pandora’s box of claims for retirement benefits previously denied because prior to the ruling of the majority in this case, consultancy services rendered to the government have consistently not been credited as part of government service. The Court will be hard put to take the position that its ruling applies only to former Chief Justice Panganiban and to the Members of this Court who may invoke this ruling in the future due to their having previously rendered similar services to the government.

In view of the foregoing, I join the dissent of Justice Arturo D. Brion who has meticulously and astutely discussed the factual and legal issues in this administrative matter.

DISSENTING OPINION

BRION, J.:

This case involves the request of former Chief Justice Artemio Panganiban for the recomputation of his retirement benefits and his entitlement to lifetime annuity under the provisions of Republic Act (R.A.) No. 910, as amended by R.A. No. 9946, based on the crediting as government service of the work he rendered (1) as consultant of the Board of National Education (BNE) and (2) as legal counsel to former Department of Education (DepEd) Secretary Alejandro Roces.

I dissent and vote for the denial of the request as the crediting sought is not justified under the law, the rules and established jurisprudence. I respectfully submit the following reasons for this dissent:

First, the Court has twice previously rejected this request. Former Chief Justice Panganiban has not given the Court any reason to reconsider the rejection.

1. Former Chief Justice Panganiban’s request to include his four-year service as consultant of the BNE and as legal counsel to Secretary Roces as “creditable government service” has already been rejected by this Court several times.1 The present letter-request dated September 27, 2010 is effectively the third request that former Chief Justice Panganiban has made for the inclusion of the same consultancy services.

2. Absence of Supervening Event to Justify Change of Previous Decision. No supervening event or any compelling reason exists for this Court to reverse the exclusion of the consultancy former Chief Justice Panganiban rendered. R.A. No. 9946 (which changed the qualifying period for the receipt of full retirement benefits from 20 years under R.A. No.

910 to the current 15 years) did not affect at all the character of the government service that the law requires for retirement purposes.

Second, the request does not rest on meritorious legal and factual grounds:

1. The Cited Factual Basis is Contrary to Indisputable Record on File with the Court. Former Chief Justice Panganiban’s own record―his Bio Data and Personal Data Sheet filed immediately after he joined the Court―shows that he was in private law practice at the time he now claims to have been in government service. This record shows that he was then in private law practice as Senior Partner of Panganiban, Benitez, Parlade Africa & Barinaga Law Office (PABLAW) from 1963-1995.2

2. No Government Service Involved. Assuming that he did render consultancy service, this service is not “government service” that can be credited for retirement purposes.

a. Elements of Public Office and Public Officer Do Not Exist. The consultancy work did not qualify former Chief Justice Panganiban as a “public officer” occupying a “public office” as the law and the Civil Service rules require:

(i) he was neither elected nor appointed to a public office that was created by law, not simply by a mere contract;

(ii) he did not render service in the performance of a governmental function.

b. No Employer-Employee Relationship was Involved in the Service He Rendered. “Consultancy” service does not amount to “government service” in the absence of an employer-employee relationship.

3. No Sufficient Evidence was Submitted to Support the Request. Former Chief Justice Panganiban’s evidentiary submissions do not show that he was ever engaged in government service prior to his judicial service.

a. Former Chief Justice Panganiban’s request rests solely on the Sworn Certifications he submitted, which do not show compliance with the requirements of having been engaged in government service.

b. The Sworn Certifications attest to the presence of “consultancy” and do not prove that former Chief Justice Panganiban was ever appointed to or ever took an oath of office as a public officer.

c. The absence of appointment papers and evidence of the required oath cannot be excused by the simple appeal to the passage of time.

Third, the rulings in the cases of former Chief Justice Andres R. Narvasa3 and of former Justice Abraham Sarmiento4 are not applicable.

1. The factual backgrounds in the two cases are different from the case of former Chief Justice Panganiban.

Former Chief Justice Panganiban is not on the same or equal footing with Chief Justice Narvasa and with Justice Sarmiento―

(i) Position: Former Chief Justice Panganiban was a consultant who had not been appointed to any specific office in the BNE or the DepEd, while the Justices in the cited cases were appointed to specific offices.

(ii) Service: former Chief Justice Panganiban rendered consultancy service, while the cited Justices rendered services defined by law or by administrative issuances.

(iii) Creation of office: former Chief Justice Panganiban did not occupy any office created by law as the position of consultant was not part of the existing DepEd plantilla under Executive Order (E.O.) No. 94, while the cited Justices occupied offices created by law and/or administrative issuance:

  Former Chief Justice Narvasa was appointed under Presidential Decree No. 1886 (Agrava Board); E.O. No. 43 (Commission on Constitutional Reforms); and Administrative Order No. 164 (Court Studies Committee); and

  Justice Sarmiento was appointed pursuant to Section 2(12) of the Administrative Code of 1987 which provides that “[c]hartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges and the monetary authority of theState” and under Act No. 1870, as amended by R.A. No. 9500 (1908 UP Charter).

Fourth, the Court’s exercise of liberality is not justified in the case of former Chief Justice Panganiban.

No compelling reason exists to warrant the exercise of liberality in applying retirement laws to former Chief Justice Panganiban’s request.

a. Failure to Fully Comply with the Court’s Directive. Former Chief Justice Panganiban did not present the additional or sufficient documentary evidence that the Court required him to submit in the Resolution dated December 14, 2010. The present request rests on the same evidence previously found insufficient. In the absence of any new and significant evidence, the previous denials should stand.

b. Lack of Clean Hands Bars a Liberal Approach. Former Chief Justice Panganiban cannot now deny the presentations he made with this Court in his Bio Data and Personal Data Sheet; the Court’s denial in 2006 and 2008 of his request for crediting and by his acceptance and receipt (without or with delayed objection) of his retirement benefits without the presently claimed annuity, should now bar the grant of former Chief Justice Panganiban’s present request.

c. Far-reaching Consequences. A grant by this Court of former Chief Justice Panganiban’s request through an unjustified liberal approach carries far-reaching implications that may go beyond the grant’s immediate financial cost to the government.

(i) Impact on Retired Magistrates. The ruling will open the door to other submissions from many retired magistrates whose requests for liberality were not entertained by this Court.

(ii) Impact on the Supreme Court itself. A pro hac vice or “for former Chief Justice Panganiban only” ruling may particularly be objectionable to retired magistrates whose past applications for liberality have been strictly viewed by the Court. Such kind of ruling opens the Court itself to charges of selfishly ruling for its own interests.

(iii) Impact on Retirement in General. A ruling that certifications alone, without more, leaves the door open for the deluge of similar claims from those who might have in the past entered into consultancy service with the government.

The Antecedent Facts

1. The Retirement and the Applicable Law.

Former Chief Justice Panganiban retired on December 6, 2006 under the provisions of R.A. No. 910, which provided the following age and service requirements in the determination of retirement benefits:

Section 1. When a Justice of the Supreme Court or of the Court of Appeals who has rendered at least twenty years’ service either in the judiciary or in any other branch of the Government, or in both, (a) retires for having attained the age of seventy years, or (b) resigns by reason of his incapacity to discharge the duties of his office, he shall receive during the

residue of his natural life, in the manner hereinafter provided, the salary which he was receiving at the time of his retirement or resignation. And when a Justice of the Supreme Court or of the Court of Appeals has attained the age of fifty-seven years and has rendered at least twenty-years’ service in the Government, ten or more of which have been continuously rendered as such Justice or as judge of a court of record, he shall be likewise entitled to retire and receive during the residue of his natural life, in the manner also hereinafter prescribed, the salary which he was then receiving. It is a condition of the pension provided for herein that no retiring Justice during the time that he is receiving said pension shall appear as counsel before any court in any civil case wherein the Government or any subdivision or instrumentality thereof is the adverse party, or in any criminal case wherein an officer or employee of the Government is accused of an offense committed in relation to his office, or collect any fee for his appearance in any administrative proceedings to maintain an interest adverse to the Government, insular, provincial or municipal, or to any of its legally constituted officers.

Thus, for purposes of lifetime annuity, R.A. No. 910 at that time required the minimum age and service requirements: (1) of at least 20 years of service either in the Judiciary or in any other branch of the Government, or in both; (2) retirement for having attained the age of 70, or resignation by reason of his incapacity to discharge the duties of his office.

Former Chief Justice Panganiban compulsorily retired at the age of 70 in December 2006, with 11 years, one month and 27 days or 11.15844 years of government service, as computed by the Office of Administrative Services (OAS).5 This computation was never disputed. These years were wholly spent as a Justice of the Supreme Court.

2. The Computation of Benefits and Request for Recomputation.

a. The current request is not the first that former Chief Justice Panganiban made for recomputation. Prior to his retirement in 2006, former Chief Justice Panganiban had made a first request that his four-year service as consultant of the BNE and as legal counsel to Secretary Roces be considered as “creditable government service” for purposes of his retirement benefits. He attached to this earlier application Secretary Roces’ Sworn Certification6 dated November 14, 2006. This Sworn Certification reads―

November 14, 2006

To Whom It May Concern:

This is to certify that during my incumbency as Secretary of Education under President Diosdado Macapagal, from January 1962 to December 1965, Attorney, now Chief Justice, Artemio V. Panganiban, Jr. served officially as consultant to the Board of National Education (of which I was ex-officio chairman) and concurrently, legal counsel to the Secretary of Education.

I am executing this certification for whatever purpose it may serve, particularly to show that he served the government during the period mentioned.

(Sgd.) ALEJANDRO R. ROCES

In a letter dated November 14, 2006, Atty. Eden T. Candelaria, Deputy Clerk of Court and Chief Administrative Officer, OAS, merely noted former Chief Justice Panganiban’s claimed consultancy services. He was credited with only 11 years, one month, and 27 days of government service, lasting from October 10, 1995 to December 6, 2006 (the period of his incumbency in the Court as Associate Justice and, later, as Chief Justice), clearly excluding the consultancy service now being claimed.7 Thus, former Chief Justice Panganiban was given his five-year lump sum benefit under R.A. No. 910 and was not granted the lifetime annuity that begins five (5) years after retirement.

b. A second request for crediting was made sometime in 2008, through a query made by Ms. Vilma M. Tamorio, former Chief Justice Panganiban’s personal secretary, addressed to Atty. Candelaria.8 Atty. Candelaria responded through a letter9 dated June 10, 2008, explaining the exclusion:

Consultancy or Contract of Service is not considered government service pursuant to Rule XI (Contract of Services/Job Orders) of the Omnibus Rules Implementing Book V of Executive Order No. 292. Hence, your Honor’s service as consultant to the Board of National Education from January 1962 to December 1965 was not credited in the computation of creditable government service.10 (emphasis ours)

c. More than two years after Atty. Candelaria denied the second request for crediting, former Chief Justice Panganiban filed his letter11 to the Court dated September 27, 2010―effectively his third request―reiterating his request and claiming the existence of supervening events that would justify a different and favorable interpretation.

First, he cited the enactment of R.A. No. 9946 which amended R.A. No. 910 by reducing the minimum service requirement for eligibility to lifetime annuity from 20 years to 15 years of government and/or judicial service. Second, he invoked the rulings in the cases of former Chief Justice Narvasa12 and retired Justice Sarmiento13 where the Court included the services rendered by the two justices as general counsel of the Agrava Board and as special legal counsel of the University of the Philippines, respectively, as creditable government service.

Using these cited reasons, former Chief Justice Panganiban (who is short by three years, seven months and 13 days or 3.84156 years of government and/or judicial service from the minimum service requirement of 15 years) argued that he should be considered eligible to lifetime annuity because his four-year service as consultant of the BNE and as legal counsel to Secretary Roces should be added as “creditable government service,” resulting in his completion of the required 15 years of government and/or judicial service.

Atty. Candelaria, in her comment14 on the present letter-request, recommended its denial, as follows:

With due respect, it is our view that the services of CJ Panganiban as legal counsel to then Secretary Roces was rendered only to the Board of National Education (BNE) in the practice of his legal profession. While Secretary Roces was a member of the BNE in an ex-oficio capacity as Secretary of Education, there is no showing that CJ Panganiban actually rendered legal services directly to the Department of Education.

On the other hand, CJ Narvasa was appointed by then President Ferdinand E. Marcos as Special Legal Counsel to the Agrava Fact-Finding Board, which had in its organizational set up a position of Special Counsel. Hence, the service of CJ Narvasa in the said Board is considered government service.

In Civil Service Commission (CSC) Resolution No. 000831 Mory Q. Sison (Re: Consultancy Service) dated March 29, 2000, the CSC pronounced that “generally, consultancy services are not considered service since no employer-employee relationship exists (CSC Resolution No. 95-6339).”

And in CSC Resolution No. 021264 (Mayumi Juris A. Luna, Re: Consultancy; Query) dated September 27, 2002, it declared that “by definition, a consultant is one who provides professional advice on matters within the field of his special knowledge or training. There is no employer-employee relationship in the engagement of a consultant but that of a client-professional relationship. Thus, consultancy services are not considered government service.15 (emphasis ours; italics supplied)

As a related matter, recall that it was not until two years after retirement that former Chief Justice Panganiban made his second request for recomputation, and it was not until four years after retirement that he brought the present request.

Justice Estela M. Perlas-Bernabe explains that former Chief Justice Panganiban acceded to the Court’s exclusion of his consultancy service and simply accepted his five-year lump sum benefit immediately after retirement because he was not then eligible for lifetime annuity under the original provisions of R.A. No. 910.

This position, however, rests on pure speculation and is not in fact accurate. It is not supported by the evidence on record and it should not be for this Court to speculate about former Chief Justice Panganiban’s state of mind or his reasons for not immediately pursuing his request in 2006 and 2008. His inaction is an established factual matter which commands greater weight than any speculation as to his motive or intention.

Aside from being speculative, the explanation is inaccurate, since former Chief Justice Panganiban gave up any claim for a higher longevity pay when he did not pursue the requests16 and immediately accepted the Court’s computation. Longevity pay is a 5% increment additionally given for every five years of service rendered in the Judiciary.17 He would have been entitled to this pay had he established his claim either in 2006 or 2008.

d. Court Action on the Present Request. On December 14, 2010, the Court issued a Resolution in this case.18 The Court―after noting former Chief Justice Panganiban’s reference to the recomputation of the retirement benefits of former Chief Justice Narvasa―held:

It bears noting, however, that CJ Narvasa’s appointment to the Agrava Board was sanctioned by Presidential Decree No. 1886 issued by President Marcos.

To determine the true nature of the services rendered by CJ Panganiban, the Court deems it prudent to require the submission of additional documentary evidence, e.g., payroll slip or appointment paper indicating that he was, or appeared as consultant for BNE or to Secretary Roces in the latter’s official capacity. This is not without precedent. In A.M. No. 10654-Ret. (In Re: Judge Antonio S. Alano), the Court required retired Judge Alano to submit additional proof that he served in Sangguniang Bayan of Isabela, Basilan for purposes of determining his entitlement to monthly pension under RA 910 as amended.

WHEREFORE, the Court resolves to DIRECT Chief Justice Artemio V. Panganiban (Ret.) to submit additional documentary evidence as regards his appointment as consultant for the Board of National Education and/or as counsel for then Secretary of Education Alejandro R. Roces within fifteen (15) days from notice.19 (emphasis ours; italics supplied)

Thus, while there was no express denial of the request of former Chief Justice Panganiban, the Court―by the tenor of its Resolution―actually denied the request due to lack of valid proof of government service as consultant for the Board of National Education (BNE) and/or as counsel for then Secretary of Education Alejandro R. Roces. The implied denial can be plainly discerned from the Resolution itself when it mentioned at the outset that former Chief Justice Narvasa was authorized by law to render service as special counsel; had there been a similar legal authority for former Chief Justice Panganiban, the Court would have approved his request and would not have asked for “additional documentary evidence.” In blunter terms, the Court did not consider the affidavit of actual service by Secretary Roces as sufficient proof of government service.

e. Refutation on the Ponencia’s Position on the Denials. Incidentally, I do not see any merit in Justice Perlas-Bernabe’s view that this is the first time that the present request has ever been raised before the Court.

The Court, as a matter of practice, considers each and every request made, particularly on the matter of retirement, although it may not be seen to be acting directly, as in this case where it acted through Atty. Candelaria. As a matter of law and practice, applications for compulsory retirement are acted upon by the OAS and by the Fiscal Management and Budget Office (FMBO) of this Court.20 The organizational structure of the Supreme Court delegates the processing of retirement claims by members of the Judiciary to the OAS21 and to the FMBO.22 The OAS screens the applications to

ascertain compliance with the documentary requirements; once approved, the OAS endorses the application to the FMBO. The FMBO makes a computation of the retirement benefits due the applicant and releases a check of the computed retirement benefits to the claimant.

Atty. Candelaria is an agent of the Court and, in its stead, she possesses the delegated authority to act on the application for retirement of former Chief Justice Panganiban. Unless revoked, her actions in any application for compulsory retirement are considered as the Court’s action.23 For the Court to disavow Atty. Candelaria’s action at this stage is to disregard the law and established practice governing the processing of applications for compulsory retirement.

f. Compliance with the Court’s Directive. Former Chief Justice Panganiban complied with the Court’s directive through two Sworn Certifications (both dated January 19, 2011) executed by Secretary Roces and by retired Justice Bernardo P. Pardo. These Sworn Certifications referred to the same consultancy service that the Court did not favorably consider, and attested to the following:

(1) Former Chief Justice Panganiban rendered actual services as consultant of the BNE and as legal counsel to Secretary Roces in his official capacity as Secretary of Education from January 1962 to December 1965;

(2) He was officially appointed by Secretary Roces and was officially paid by the government a monthly compensation for services rendered to the DepEd;

(3) He worked with the Office of the Solicitor General (OSG) on legal matters affecting the BNE and the DepEd, and collaborated on these matters with Justice Pardo (who was then the Solicitor General); and

(4) He handled matters assigned by the BNE and by the DepEd, such as “the development of educational policies, the selection and distribution of textbooks and other educational materials, the setting of school calendars, the procurement of equipment and supplies, management of state schools, etc.”24

Former Chief Justice Panganiban explained that the lapse of almost 50 years precludes him from presenting other documentary proofs like time records of actual attendance or receipts of vouchers showing compensation for his services.25

Significantly, he did not endeavor to make any other submissions, such as his payroll slips or appointment papers (as specifically requested), certified copies of these documents from official sources (such as those from the National Archives), or other pieces of evidence, such tax declarations or certifications as to earnings or tax withheld, showing that he had indeed been in the government’s regular payroll at the time he claimed, or that he was not then in the practice of law.

Thus, his case depended solely on the bare and unqualified statements of Justice Pardo and Secretary Roces (who passed away on May 23, 2011). These two affiants both attested to the same period and the same consultancy service.

THE DISSENT

A bare reading of the submissions, considered in light of the undisputed facts on record, leads me to conclude that former Chief Justice Panganiban’s request is not meritorious.

R.A. No. 910, as amended, requires

15 years of government service

R.A. No. 910, as amended by R.A. No. 9946, only reduced the minimum requirement of government and/or judicial service for eligibility to lifetime pension from twenty (20) years to fifteen (15) years. The amendment only widened the

extension of benefits to retirees by covering even the retirees who had rendered at least 15 years of government and/or judicial service, but retired prior to R.A. No. 9946; it did not change the legal nature of the service that falls under the term “government service,” nor did it change the legal meaning and characterization of “consultancy.”

Thus, to comply with the legal requirement, former Chief Justice Panganiban had to show that the consultancy service he rendered, prior to his judicial years, could all along be classified as government service.

Former Chief Justice Panganiban’s

work with the BNE and with Secre-

tary Roces is not government service

(a) The concept of government service

The core issue this case presents is whether the consultancy former Chief Justice Panganiban undertook for the BNE and for Secretary Roces can be classified and credited as government service. The resolution of this issue must be based on the law, the applicable rules and jurisprudence, and, most importantly, on the peculiar facts of the case as supported by the submitted evidence.

Former Chief Justice Panganiban, as the requesting party, carries the burden of proving that his claim is meritorious. To my mind, he failed in this endeavor. The ponencia, in fact, is not based on facts supportive of former Chief Justice Panganiban’s claim as it is grounded on speculations and inferences, and it has not properly appreciated the documentary evidence submitted by former Chief Justice Panganiban. Alternatively (i.e., failing to establish strict legal merits), the ponencia falls back on an appeal to liberality, but in so doing, it cited and applied Court rulings in cases with completely different factual and legal circumstances. A liberal approach cannot also be made if the supporting pieces of evidence, such as the Sworn Certifications submitted and records within the Court’s control, do not warrant the application of a liberal approach.

What constitutes government service may be plainly derived from the provisions of Act No. 2657 or the Administrative Code, as amended. The old Administrative Code, as amended, defines the terms “employee” or “officer” in this wise:

“Employee,” when generally used in reference to persons in the public service, includes any person in the service of the Government or any branch thereof of whatever grade or class.

“Officer,” as distinguished from “clerk” or “employee,” refers to those officials whose duties, not being of a clerical or manual nature, may be considered to involve the exercise of discretion in the performance of the functions of government, whether such duties are precisely defined by law or not.

“Officer,” when used with reference to a person having authority to do a particular act or perform a particular function in the exercise of governmental power, shall include any Government employee, agent, or body having authority to do the act or exercise the function in question.26 (emphases and italics ours)

These provisions were substantially reproduced in the Administrative Code of 1987.27

Similarly relevant, too, is the governing law on service with the government at the time of former Chief Justice Panganiban’s claimed consultancy―the Civil Service Act of 1959 (R.A. No. 2260) which was approved on June 19, 1959. Section 1 of this law classifies positions in the civil service into: (a) competitive service, (b) non-competitive service, and (c) exempt service; Section 3 provides that the “exempt” service is not within the scope of the law; and Section 6 defines exempt service to include (aside from elective officers and the members of the military) “persons employed on a contract basis[,]” as well as temporary, emergency or casual laborers.

A noteworthy feature of this law, for purposes particularly of the present dispute, is that it refers only to those who are covered by an employer-employee relationship with the government. Thus, even those whose relationship with the government is on a “contract basis” (and, thus, are within the exempt service not covered by the Civil Service Act) must be “employed” and must gain entry to government service through the electoral or the appointive process. The Revised Civil Service Rules accompanying the Act, in its Rule VI, requires that appointments be made in the prescribed from, duly signed by the appointing officer, and submitted to the Civil Service Commission (CSC), even if only for proper notation and record with respect to those in the non-competitive or unclassified service.

In sum, those who may render service with the government, without occupying any public office or without having been elected or appointed a public officer evidenced by a written appointment recorded in the CSC, do so outside of the concept of government service. The ponencia interestingly broadens this concept of “government service.” It literally interprets the term to include any service performed for the government; it thus claims that the “law x x x did not require a specific job description or job specification” and “the absence of a specific position in a governmental structure is not a hindrance.”28

This broad construction, if adopted, would cover services performed by a person for the government in any capacity¸ whether as a public officer or employee. For purposes of the retirement law, this broad construction would dilute the policy behind public retirement laws, i.e., to reward government employees because they gave the best years of their lives to the service of their country.29

For clarity, rendering “government service” within the meaning of the law requires that (1) the person occupies, by appointment or by election, a public office that was created by law, not simply by contract; and (2) the office requires him to render service in the performance of a governmental function. This signification should particularly apply in construing retirement laws in order not to defeat the intent and purpose of the recognition of retirement and the grant of retirement benefits. Rep. Act No. 910 (as amended), in particular, is founded on this intent and purpose. It provides for retirement based either on age or disability, or on years of service. The intent to reward past service is made patent by the requirement for years of service, both in government and the Judiciary. This is the intent that the Supreme Court itself should be very careful about because it is an intent that applies to the Court itself.

(b) No “public office” element exists

“Public office” is the right, authority and duty, created and conferred by law, by which, for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the government, to be exercised by the individual for the benefit of the public.30 When the term is used with reference to a person having to do a particular act or to perform a particular function in the exercise of governmental power, it includes any government employee, agent or body to do the act or exercise that function.31

Either as Chief Justice or even in his earlier role as Associate Justice of the Supreme Court, former Chief Justice Panganiban was indisputably a public officer, occupying a public office, and undertaking sovereign functions of the government. No less than the Constitution speaks of the positions of Chief Justice and of Associate Justices of the Supreme Court and the judicial power vested in that Court which the Justices exercise.32 The function of this Court in the constitutional scheme is to adjudicate disputes, to supervise the courts, and to regulate law practice.33 For the positions he held in this Court, former Chief Justice Panganiban was granted the retirement benefits that R.A. No. 910 grants and defines for the members of the Judiciary.

In stark contrast with the post for which he had been granted retirement benefits, the role of a “consultant” (that the Sworn Certifications cite as evidence of his claimed government service), former Chief Justice Panganiban points to no specific position in the government under which he served as consultant. He likewise failed to cite any law pursuant to

which he was appointed as consultant. He did not produce any appointment paper or any copy of an oath of office that he took when he allegedly assumed the offices that the Sworn Certifications pointed to.

To be sure, these Sworn Certifications did in fact attest to the “actual service” rendered for the BNE and to Secretary Roces, but their reference to public offices went only that far, as discussed at length below. They only pointed to alleged tasks that former Chief Justice Panganiban undertook, but without more, these tasks―however significant or important they might have been―cannot amount to the performance of public functions as understood under the law. This is the legal reality that the rule of law has to recognize in former Chief Justice Panganiban’s present claim: outside of his judicial posts, he never occupied a public office that can be recognized as basis for the additional retirement benefits that he now seeks.

(c) Service within the governmental structure

The requirement of a public office in considering “government service” also signifies service within the governmental structure and the exclusion of service outside of this structure, although beneficial work for the government might have been rendered in this role and capacity. This exclusion specifically refers to consultancy rendered pursuant to a contract of service, involving work and delivery to the government of results produced in the consultant’s own time and for his own account in the exercise of his profession. This exclusion also encompasses services outsourced by the government to private individuals for their special qualifications and expertise; these services do not constitute government service and do not characterize the private individuals as public officers. These aspects of the case are dwelt with at length at the proper places below. It is sufficient for now to simply state that the mere claim of having rendered services (and even proof of actual rendition of service) will be for naught unless made within an employment relationship existing under the structure established by law within the government.

(d) The Status of consultancy services

As a contract of service, consultancy has been excluded as “government service” for retirement purposes because it does not satisfy the basic requirement that there be a public office as understood under the law. In a consultancy, no tie links the consultant to a public office that has been previously created by law; the elements of public office, and the fact of appointment and of the required oath are likewise missing.

The CSC has fleshed out the requirements by pointedly excluding “consultancy services” for lack of the required employer-employee relationship. CSC Memorandum Circular No. 38, series of 1993, expressly provides that consultancy services “where no employer-employee relationship exists” are not considered government service.

The CSC, in the first place, has long clarified and defined what “consultancy” means. Its definition of the term “consultant” in Resolution No. 95-6939 (Pagaduan v. Malonzo) dated November 2, 1995 is an example of its consistent and established ruling. It held a “consultant” to be―

one who provides professional advice on matters within the field of his special knowledge or training. There is no employer-employee relationship in the engagement of a consultant but that of client-professional relationship. Thus, consultancy services and a consultant is not a government employee. Consequently, a contract of consultancy is not submitted to the Commission for approval.34

Interestingly, this definition is practically the same as that given in Webster’s Third New International Dictionary which gives the commonly understood definition of a “consultant” as “one who gives professional advice or services regarding matters in the field of his official knowledge or training.”

R.A. No. 9184 (Government Procurement Reform Act) further reinforces this understanding by defining the term consulting services as “services for Infrastructure Projects and other types of projects or activities of the Government

requiring adequate external technical and professional [expertise] that are beyond the capability and/or capacity of the government to undertake such as, but not limited to: (i) advisory and review services; (ii) pre-investment or feasibility studies; (iii) design; (iv) construction supervision; (v) management and related services; and (vi) other technical services or special studies.”35

Thus, a “legal consultant” is one who has “adequate external” professional expertise in the law that no one in the agency could provide or render, and whose services therefore must be procured. A procured service is not government service, as it is service hired after the conduct of the procurement process; it is not part of the internal and regular services of the procuring governmental entity.

Under Memorandum Circular No. 17, series of 2002, a consultancy contract or job order need not be recorded by the CSC because the “services to be rendered thereunder are not considered as government service.”

(e) No proof of employment relationship likewise existed

To determine the existence of an employer-employee relationship, the Court has consistently adhered to the four-fold test and has asked: “(1) whether the alleged employer has the power of selection and engagement of an employee; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages. Of the four, the control test is the most important element,”36 and its absence renders any further discussion a surplusage.

Recent jurisprudence adds another test, applied in conjunction with the control test, in determining the existence of employment relations.37 The two-tiered test involves an inquiry into: “(1) the putative employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished [control test]; and (2) the underlying economic realities of the activity or relationship [broader economic reality test].”38

Employment relationship under the control test is determined by asking whether “the person for whom the services are performed reserves [a] the right to control not only the end [to be] achieved but also the manner and means [to be used in reaching such] end.”39 The broader economic reality test calls for the determination of the nature of the relationship based on the circumstances of the whole economic activity, namely: “(1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s 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 on the employer for his continued employment in that line of business. 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.”40

The two-tiered test gives a complete picture of the relationship between the parties.41 Aside from the employer’s power to control the employee, an inquiry into the economic realities of the relationship helps provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.42

An examination of former Chief Justice Panganiban’s submitted evidence―consisting of two Sworn Certifications (both dated January 19, 2011) executed by Secretary Roces (now deceased) and Justice Pardo―does not show the employment relationship that “government service” requires as a basic element.

The Sworn Certifications do not expressly claim that former Chief Justice Panganiban was in an employment relationship with the BNE and with the DepEd. What they expressly state is that former Chief Justice Panganiban rendered “actual

services,” as a consultant, to the BNE and as legal counsel to Secretary Roces in his official capacity as Secretary of Education; that he worked with the OSG (where Justice Pardo was the Solicitor General) on legal matters with respect to the BNE and the DepEd; that he handled assignments from the BNE and the DepEd on various matters; and that he was officially paid by the government a monthly compensation.

The statement alone that former Chief Justice Panganiban was a “consultant” already raises alarm bells for questions that the Sworn Certifications do not (and apparently cannot) answer. Aside from questions arising from the Civil Service rules and rulings, the Court can judicially notice that the position of “consultant” is not included in the organizational chart of government agencies as the services a consultant renders are usually demanded by exigencies of the service or by the lack of qualified persons to perform the required tasks in the organization.

It is perhaps for this reason that the Sworn Certifications simply named former Chief Justice Panganiban as a “consultant” without referring to or attaching an organizational chart indicating the position a consultant occupies at the BNE or the DepEd. The omission, however, should be significant as it can be read as an implied admission of how former Chief Justice Panganiban actually stood at the BNE or the DepEd―a consultant who did not occupy any fixed position that would entitle him to recognition as a public officer.

Another striking feature of the Sworn Certifications―

arising from their characterization of former Chief Justice Panganiban as a consultant―is that the assignment to and the handling by former Chief Justice Panganiban of legal matters are logically consistent with a consultancy engagement that the Sworn Certifications stated. How and in what manner former Chief Justice Panganiban performed the assigned consultancy are matters not established in the records; in fact, no inference of “control”―both with respect to the means and to the end to be achieved―can be read from the submitted Sworn Certifications. Their allegations are also insufficient to support the inference that the consultancy service “was not merely advisory” or that the work performed was “not usual for a consultancy,” as Justice Perlas-Bernabe observed in an earlier version of her ponencia.43

Even granting that former Chief Justice Panganiban was paid a monthly compensation, the Sworn Certifications attest only to the matter of payment. The fact of payment per se, however, is meaningless in an employer-employee relationship issue where the evidence expressly states that actual services were rendered as “consultant.” In fact, if indeed payment had been paid for consultancy work, then what had been paid should have been consultancy fees made on a monthly basis, in a manner similar to retainer fees. That indeed the payments were made in the concept of retainer fees is an easy inference to make if we consider that, at that time (January 1962 to December 1965), former Chief Justice Panganiban was in active law practice, initially as an Associate in the Salonga Law Office and later as the Senior Partner of PABLAW.

In other words, former Chief Justice Panganiban did not receive wages in the way that one in an employment relationship would receive his pay. Indeed, it is hard to contemplate that former Chief Justice Panganiban, at that time the Senior Partner in a major law firm, would be engaged as an employee in the government, doing what the Sworn Certifications state he was doing.

Neither do the submitted Sworn Certifications satisfy the broader economic reality test to establish that an employer-employee relationship existed.

First, while the consultancy services performed by former Chief Justice Panganiban may be important, the records do not show that they were vital to the operations of the BNE and of the DepEd. Notably, the plantilla of both the BNE and the DepEd under E.O. No. 94, series of 1947, did not include any item for legal counsel or consultant. Under existing laws at that time (Act No. 2657 and Act No. 271144 or the Revised Administrative Code), legal services were then rendered by

the Attorney-General.45 Thus, without any further explanation from former Chief Justice Panganiban, no support exists for the claim that the BNE and the DepEd could not properly function without his consultancy services.

Even if we consider the legal services rendered by former Chief Justice Panganiban as performance of a governmental function, the capacity in which the services were rendered precludes them from being characterized as creditable government service for purposes of retirement. Without a public position to which he had been appointed, the services rendered by former Chief Justice Panganiban by way of consultancy would only amount to services specific to the BNE or for the Secretary, for their sole benefits, and―at most―paid from a budget for outside consultants that the budget of these government offices might have allowed.

Under these circumstances and without any position in the BNE or the DepEd structural hierarchy, former Chief Justice Panganiban simply remained a private lawyer on call for specific questions or requirements of the BNE and of Secretary Roces. That he might have been required at that time to do textbook distribution and other menial tasks is beside the point. This statement in the Sworn Certifications only stressed the need to produce an official description of the “position” of “legal consultant” that the CSC prescribed even at that time.

Incidentally, part of the necessary consequence that characterization of being a “public officer” or “employee” undertaking government service would have been the requirement to take an oath of office pursuant to the Constitution.46 Former Chief Justice Panganiban would have likewise been required to file a statement of assets, liabilities and net worth.47 No such proof was ever shown, not even after he had been prompted by the Court en banc to make additional submissions.

Second, former Chief Justice Panganiban remained in active private law practice at the same time that he rendered consultancy services for the BNE and to Secretary Roces. This was the statement he made in his Bio Data and Personal Data Sheet filed with the Court long before the present controversy. The uncontroverted fact that former Chief Justice Panganiban was engaged in private law practice for the same period that he rendered service for the BNE and to Secretary Roces outrightly rejects any inference that an employment relationship existed between him and the government. The ponencia itself recognizes that legal counseling work, even if rendered to a government agency, is part of legal practice.48 The incompatibility of simultaneously holding public and private employment should lead to no other conclusion than that there was only a consultancy arrangement which was part of former Chief Justice Panganiban’s legal practice.

In this regard, the ponencia cites the case of former Chief Justice Narvasa because it saw him to be in active law practice while he was the general counsel of the Agrava Board. This is an erroneous view as the Philippine Center for Investigative Journalism article49 it cited in fact stated that former Chief Justice Narvasa took a leave of absence from his law practice during his term with the Agrava Board from October 29, 1983 to October 24, 1984.

The Court also credited former Chief Justice Narvasa for his five-year (1974-1979) involvement as Member of the Court Studies Committee, while he was at the same time engaged in private law practice. The Court, in so acting, apparently gave special consideration and recognition to former Chief Justice Narvasa’s participation in the Court Studies Committee created under the specific mandate of Administrative Order No. 164 issued by then Chief Justice Querube C. Makalintal on September 2, 1974.50

Significantly, no proof has ever been presented of any similar activity undertaken by former Chief Justice Panganiban. For that matter, no specific function that former Chief Justice Panganiban discharged as consultant of the BNE and as counsel to Secretary Roces was ever made.

Third, former Chief Justice Panganiban continued with his private law practice even after the termination of his consultancy services. This continuity indicates that he has been in private law practice all the time and simply rendered

consultancy services on the side. In other words, his consultancy service was separate from and was not dependent on any employment relationship with the government.

Fourth, there was no degree of permanency in the consultancy work former Chief Justice Panganiban rendered as it expired after four years. On the other hand, his private law practice, as his Bio Data and Personal Data Sheet indicate, went way beyond, all the way to 1995 when he was appointed to the High Court. In other words, former Chief Justice Panganiban’s relationship with the BNE and with Secretary Roces and his department was a tenuous one and did not have the character of permanency or stability that an employment relationship usually carries.

Fifth, former Chief Justice Panganiban’s consultancy was based largely on his own invested capital and labor. As the Sworn Certifications state and imply, the BNE and Secretary Roces relied on him, as a consultant, for the advice he gave on specific legal and policy matters, not for the hours he was available at the BNE or the DepEd to handle specific tasks. Where and when he held office, the Sworn Certifications do not specify, although his Bio Data and Personal Data Sheet would suggest that he had an office of his own as Senior Partner of PABLAW.

In these lights, the Sworn Certifications do not clearly indicate that an employer-employee relationship, requiring the elements of control and dependency, existed between former Chief Justice Panganiban, on the one hand, and the BNE and Secretary Roces, on the other hand. On the contrary, these sworn statements―read jointly with former Chief Justice Panganiban’s Bio Data and Personal Data Sheet―point to the existence of a consultancy extended to former Chief Justice Panganiban as a lawyer on active private law practice.

(f) Former Chief Justice Narvasa’s and Justice Sarmiento’s cases

In addition to the lack of employment relations, the Court has previously ruled that the compensation received for “creditable government service” must be paid for the performance of public duties.51

The cases of former Chief Justice Narvasa and Justice Sarmiento fully fell within the descriptions that characterized their work as “government service.” On the other hand, Chief Justice Panganiban’s case never did.

The services rendered by Chief Justice Narvasa and by Justice Sarmiento (as general counsel of the Agrava Board for Chief Justice Narvasa; and as special legal counsel and member, and thereafter chairperson, of the Board of Regents of the University of the Philippines for Justice Sarmiento) were undoubtedly work in the performance of public functions in positions that are part of the governmental structure; they occupied and discharged functions of a public office. As pointed out by Atty. Candelaria in her comment to the second letter-request:

On the other hand, CJ Narvasa was appointed by then President Ferdinand E. Marcos as Special Legal Counsel to the Agrava Fact-Finding Board [created pursuant to Presidential Decree No. 1886], which had in its organizational set up a position of Special Counsel. Hence, the service of CJ Narvasa in the said Board is considered government service.52

The government service characterization of the services rendered by Justice Sarmiento―as special legal counsel, as a member of the Board of Regents and, later on, as chairperson of the Board of Regents of the University of the Philippines53―cannot likewise be disputed. These are positions falling under the organizational structure of the University of the Philippines, the country’s primary state university. Justice Sarmiento rendered services in positions under this state university structure so that these services constituted public service.

Unlike the Justices he cited in comparison, former Chief Justice Panganiban’s work did not involve the performance of duties pursuant to a public office, i.e., for work in a specific position under the governmental structure in the performance of public functions. As I adverted to above, that he did consultancy work is what the affiants―Justice Pardo and Secretary Roces―attested to. Under what specific positions, under what specific role or capacity, and under what terms and structures are, at best, unclear as neither affiants gave definitive answers. As already mentioned in passing

and as more fully discussed elsewhere, former Chief Justice Panganiban―by his own claim on file with the Court―was at that time operating in the private sector and was then in active law practice. These undisputed facts cannot but significantly affect the characterization of the work former Chief Justice Panganiban rendered.

Other than the fact that former Chief Justice Panganiban actually rendered work for the BNE and for Secretary Roces, the Sworn Certifications of Secretary Roces and Justice Pardo merely enumerated the work he did, i.e., services as consultant for the BNE and as legal counsel to Secretary Roces; collaboration with the OSG on BNE and DepEd matters; and the development and implementation of education policies, etc.―which were largely within the field of his special knowledge and training as a lawyer, his specific calling and activity under his Bio Data on record with this Court. This Bio Data shows that at the relevant time (1963-1995), he was engaged in the private practice of law as the Senior Partner of a major law firm that carried his name―PABLAW.

Of course, the submitted Sworn Certifications also stated that former Chief Justice Panganiban undertook assigned matters, such as “the selection and distribution of textbooks and other educational materials, the setting of school calendars, the procurement of equipment and supplies, management of state schools, etc.” These allegedly assigned tasks, however, and as previously discussed, are beside the point. The statement in the Sworn Certifications only stressed the need to produce an official description of the “position” of “legal consultant” that the CSC prescribed even at that time. The listing is no more than an enumeration of the tasks of the DepEd and of the BNE and, as I already implied above, are hardly believable to be tasks handled by the Senior Partner of a major law firm like the PABLAW.

A significant aspect of the Sworn Certifications relates not to what they expressly state, but to what they do not say―specifically, they do not materially describe the true nature of the work former Chief Justice Panganiban rendered in terms of the specific role and capacity he assumed. The Sworn Certifications do not categorically state whether the work he rendered was as service under a specific position under the governmental structure in the performance of the listed functions, or merely as a consultant rendering legal advice to the government in the exercise of his legal profession. To be exact, these Sworn Certifications merely elaborated on the specific functions performed by former Chief Justice Panganiban as indicated in the Sworn Certification of Secretary Roces, which the Court had considered when it denied the first request of former Chief Justice Panganiban.

Under these circumstances, not even a stretched reading of the Sworn Certifications and the proffered excuse for the absence of records can lead to the conclusion that former Chief Justice Panganiban had rendered “creditable government service” that the Court should now recognize. The kind of reading of the facts that former Chief Justice Panganiban urges the Court to do is simply beyond the stretching point of believability and cannot and should not be made by this Court.

The Court, in fact, should simply gloss over former Chief Justice Panganiban’s ready excuse of lapse of time as this is not truly a believable reason. It is unbelievable that records dating back only from the 1960s would no longer be available from the DepEd or the National Archives from where certified photocopies can be secured. To cite a case in point, Justice Florenz Regalado started government service in the military on November 15, 1943. As in the case of former Chief Justice Panganiban, he was only paid a five-year lump sum upon retirement because his previous military and civil services were not supported by documents. He likewise applied for a recomputation and was granted an increased entitlement by the Court after he secured certified copies of documents dating back to the war years.

(g) Chief Justice Panganiban’s characterization of his consultancy work as private practice of law

What the Sworn Certifications lack in terms of details when they described former Chief Justice Panganiban’s service as “consultancy,” is filled in by his Bio Data and Personal Data Sheet on file with the Court and which we take judicial notice of as indisputable information within our reach and immediate access.

In these data sheets, filed with the Court before any controversy arose, the presence of consultancy rather than government service is very clearly indicated. This Bio Data notably mentions his consultancy with Secretary Roces from 1963 to 1965, under the heading “As a Practicing Lawyer.” It also clearly states that, at that time, he was in the practice of law as the Senior Partner in PABLAW, from 1963 to 1995.54

These undisputed facts, made by Chief Justice Panganiban when he entered judicial service, cannot but overwhelm the facts he adduced when he made claims for retirement benefits as he was leaving this same service while asking for increased retirement benefits.

In the absence of substantial proof creating a reasonable inference that the work rendered by Chief Justice Panganiban fell within the term “government service,” there is no reason, legal or factual, to grant former Chief Justice Panganiban’s request. In any event, former Chief Justice Panganiban’s consultancy service, even if somehow considered service with the government (contrary to his own declaration of record with the Court), is still work excluded by law from the term “creditable government service.”

The Court’s exercise of liberality is governed by jurisprudential standards

(a) The exercise of liberality and its limits

The discretionary power of the Court to exercise a liberal approach in the application of retirement laws is not unlimited. The discretionary power is wielded only under circumstances where the retiree has adduced proof of entitlement that can be justified in a generous and expansive interpretation. The bottom line is that proof must be adduced; liberality must be exercised in the process of appreciating the proof adduced and in the interpretation of the law. The Court’s exercise of liberality is on a case-to-case basis premised on the circumstances of each case.

The conclusions in the cases when the Court exercised liberality in retirement issues were arrived at only after a consideration of the factual circumstances peculiar to each case. The Court’s rulings in Plana,55 Britanico56 and Escolin57 were made in light of the presence of circumstances that were unique and personal to Justices Efren I. Plana, Ramon B. Britanico, and Venicio T. Escolin. These Justices found themselves involuntarily separated from their judicial offices under the political circumstances of their time. The Court additionally appreciated their cases individually in light of circumstances personal to each Justice.

The Court in extending liberality used Justice Plana’s accumulated leaves to cover the deficiency in his retirement age. At the time of his separation from the service, Justice Plana also had a total of 33 years, five months and 11 days of government service. In Justice Escolin’s case, he had accumulated leaves, which left him merely two months short of the retirement age; he likewise had exemplary judicial service in the 17 years he was with the Judiciary. Justice Britanico, on the other hand, had 36.23 years of government service; he likewise retired under the second category of Section 1 of R.A. No. 910 where no age requirement is required.

Similarly, the Court considered a personal circumstance in applying a liberal approach to retirement laws in the case of Justice Ruperto G. Martin.58 Justice Martin suffered a cerebral stroke during his incumbency as Supreme Court Associate Justice and was compelled to retire two years and 17 days short of the retirement age.59 The Court ruled:

The ten-year lump sum payment provided in Section 3 of RA 910 is intended to assist the stricken retiree in meeting his hospital and doctors’ bills and expenses for his support. The law is not intended to deprive him of his lifetime pension if he is also entitled to retire under Section 1 and is fortunate to be still alive after ten years. The retirement law aims to assist the retiree in his old age, not to punish him for having survived.60

The above circumstances are not present in Chief Justice Panganiban’s case. Politically, his circumstances are far from those of Justices Plana, Escolin and Britanico who exited the Judiciary due to political changes in the national scene. It is

a matter of record that former Chief Justice Panganiban left the Judiciary after retirement based on the compulsory retirement age.

Given all these, there is no point in comparing the cases of these other Justices to that of former Chief Justice Panganiban. Rather than reliance on comparisons from the point of view of liberality, his requested grant of life annuity should be assessed strictly on its merits.

(b) Liberality and the Narvasa and Sarmiento cases

Neither are the circumstances of former Chief Justice Narvasa61 and Justice Sarmiento62 comparable with those of former Chief Justice Panganiban. Chief Justice Narvasa and Justice Sarmiento undoubtedly performed public functions in positions that were or are part of the governmental structure. Thus, both the nature of their work and the positions they occupied indisputably gave their services a characterization falling within the concept of “creditable government service.” This characterization is not true for former Chief Justice Panganiban. At the risk of repetition, his four-year stint as consultant for the BNE and as legal counsel to Secretary Roces was not in the performance of a public function that attaches to a position under the governmental structure and thus was not “government service” or at least “creditable government service.” Additionally and more importantly, no such government service was ever established under the evidence that he submitted.

For a complete picture of how the Court has exercised liberality, the Court―on the basis of the exact same considerations―in several instances deemed it proper to refuse to exercise liberality in light of the attendant circumstances of the case.

A recent case in point is that of Re: Application for Retirement of Judge Moslemen T. Macarambon under Republic Act No. 910, as amended by Republic Act No. 9946.63 The Court did not allow the respondent judge to retire under R.A. No. 910 although he undisputedly possessed a total of 18 years, one month and 16 days of judicial service and a total of 35 years of government service.

The rule is that retirement laws are construed liberally in favor of the retiring employee. However, when in the interest of liberal construction the Court allows seeming exceptions to fixed rules for certain retired Judges or Justices, there are ample reasons behind each grant of an exception. The crediting of accumulated leaves to make up for lack of required age or length of service is not done indiscriminately. It is always on a case to case basis.

In some instances, the lacking element-such as the time to reach an age limit or comply with length of service is de minimis. It could be that the amount of accumulated leave credits is tremendous in comparison to the lacking period of time.

More important, there must be present an essential factor before an application under the Plana or Britanico rulings may be granted. The Court allows a making up or compensating for lack of required age or service only if satisfied that the career of the retiree was marked by competence, integrity, and dedication to the public service; it was only a bowing to policy considerations and an acceptance of the realities of political will which brought him or her to premature retirement.64 (emphases and underscore mine)

The above standards were also applied by the Court in denying the claims of the respondent judges in Re: Gregorio G. Pineda.65 In refusing to exercise liberality, the Court remarked, among others, that “[t]here are other instances when a Judge must content himself with the retirement benefits under less generous legislation.”66

The Court even stressed in another case that the doctrine of liberal construction cannot be applied where the law invoked is clear, unequivocal and leaves no room for interpretation or construction.67

Adhering to the clear provisions of R.A. No. 910 is the Court’s ruling in the case of In Re: Claim of CAR Judge Noel.68 The Court did not authorize the respondent judge’s claim to monthly pension and annuity under R.A. No. 910 considering that his length of government service falls short of the minimum requirement.

Even for humanitarian considerations, the Court has reined in its exercise of liberality and denied the plea of the widow and the eight children of a judge who died during his incumbency in office.69 Strictly applying the clear letter of the law, the Court held:

It is clear from the aforequoted Section 3 in relation to Section 1, that to be entitled to the lump sum payment of the gratuity equivalent to ten years’ salary and allowances, a member of the Judiciary should have retired by reason of permanent disability contracted during his incumbency in office and prior to the date of retirement and should have rendered, at the least, twenty (20) years service in the Judiciary or in any other branch of the Government, or both.70

Given the varying results of the Court’s decisions over the years on the exercise of liberality in retirement issues, any generalization based on the results alone can only be fraught with risk. Comparisons can only be made if the same or similar matters are being made; to resort to idiom, apples can only be compared with apples, not with oranges. A minute and careful analysis though can still yield significant and useful commonalities although these should be used with caution. Subject to this caveat, the general discussion below is made.

A rough survey of jurisprudence shows that the Court has generally used three considerations to justify the exercise of liberality. The first relates to the peculiar circumstances of the respondent judge’s/justice’s position (highlighted in the Plana, the Britanico, the Escolin and the Martin cases). Apparently, because the Justices involved in the three cases came from the Court itself, the Court could easily appreciate their respective situations. Appreciation by the Court of peculiar circumstances might not have been as easy to make in the cases where lower court magistrates were involved. A naughty observer may even note, given the different treatment between High Court Justices and lower court judges that the Court is always partial to its own, to the prejudice of lower court judges and employees. The second relates to the judge’s/justice’s performance, record or length of stay in the public service (as applied in Macarambon and in Pineda). The third, and the most important consideration, is to look at the provisions of the retirement law itself. If the language of the retirement law is clear and unequivocal, the Court found no room for interpretation and generally opted for the law’s strict application (as applied in the cases of former Chief Justice Narvasa, Justice Sarmiento, Judge Alfredo L. Noel and Judge Alejandro Galang, Jr.).

c. Liberality and former Chief Justice Panganiban’s request

With these considerations in mind, I find no basis―both legal and factual―to exercise liberality in the present case. Although former Chief Justice Panganiban has demonstrated exemplary competence in the performance of his judicial duties, competence alone does not justify the exercise of liberality since competence, even to the exemplary degree, is only to be expected among Justices of this Court and should not be considered as an exceptional consideration that should merit the exercise of liberality.

No basis also exists under jurisprudence, since we do not have any evidence before us in the present case showing the circumstances that the Court recognized in its past rulings. The weight of former Chief Justice Panganiban’s own adduced documentary evidence negates the exercise of liberality. Former Chief Justice Panganiban, in fact, did not submit the evidence the Court already expressed as material in its determination.

If equitable considerations must be made in this case, it should be to apply the rule that “he who comes to court must come with clean hands.” Several incidents, taken collectively, strongly suggest this consideration in order to avoid unfairness.

First, the consideration of the Bio Data and Personal Data Sheet on file with this Court. These documents are clear and unambiguous in what they state: former Chief Justice Panganiban, by his own claim as he entered judicial service, was a Senior Partner in a major law firm and only rendered consultancy services as a private practitioner to the BNE and to Secretary Roces. To claim at this very late stage, in order to secure additional retirement benefits, that the consultancy services should now be credited as government service meanders from the straight path of fairness.

Second, a first attempt was made to secure a recomputation and this was followed by a second attempt, with both attempts resulting in denial. That a third attempt would be made―two years after the second denial, without any real supervening fact or new evidence―also suggests lack of consideration for fairness. Notably, the Court even bent over backwards, broadly gave a hint of its thinking on the case, and gave former Chief Justice Panganiban every opportunity to adduce new evidence. No new or compelling evidence was adduced.

Lastly, the claim that the lapse of time precludes the introduction of any new evidence stretches the limits of believability and of prevailing law. Lapse of time is itself a component of the inaction that the law does not condone.

To go back to the general rule, equitable considerations are not necessary where, as in this case, an existing rule holds that consultancy service cannot be creditable government service. Where the law or jurisprudence is clear, we should likewise be clear and decisive in their application lest we be accused of favoritism in the exercise of liberality.

Thus, the invocation of liberal application of retirement laws is not a universal remedy that applies to all cases. Where it has to be applied, strict adherence to the jurisprudential standards―particularly the rule of fairness―must be followed lest we create dangerous situations that lead us to slippery adjudicatory paths. At the very least, we should take care to avoid any perception of accommodating former colleagues, or indirectly ourselves who, inevitably, will be separated from our judicial offices in the future.

d. A final caveat

A grant by this Court of former Chief Justice Panganiban’s request through an unjustified liberal approach carries far-reaching implications that may go beyond the grant’s immediate financial cost to the government.

Impact on Retired Magistrates. The ruling may open the door to similar submissions from many retired magistrates whose requests for liberality were not entertained by this Court. Our ruling may similarly affect those retiring in the future who may see in a favorable ruling in this case. These fertile possibilities may not always be consistent with the best interest of truth and fairness.

Impact on the Supreme Court itself. A pro hac vice or “for former Chief Justice Panganiban only” ruling may particularly be objectionable to other magistrates whose past applications for liberality have been strictly viewed by the Court. Whether right or wrong, such kind of ruling opens the Court itself to charges of selfishly ruling for its own interests. It may well be asked: why is this Court always liberal in cases involving themselves or former colleagues, but is very strict when considering the plight of lower court judges?

Impact on Retirement in General. A ruling that certifications alone, without more, are sufficient to establish government service leaves the door open to a possible deluge of similar claims from those who might have in the past entered into consultancy services with the government. In the Judiciary alone, those of us who were in private law practice before entering judicial service might have, at one time or another, rendered consultancy service for the government. To be sure, there are many more out there among the professionals as this kind of service is a phenomenon that is not specific to lawyers and the Judiciary. Where does the line lie now and what happens to the rule of law when stretching the interpretation of law to its limits becomes the rule? Should the Government Service Insurance System, the Social Security System, and the concerned agencies now entertain applications for crediting, without the benefit of an

appointment to public office and based solely on certifications that the applicant indeed delivered service? Should inaction now be excused by a claim of lapse of time?

Office of Administrative Services directed to recompute former Chief Justice Artemio V. Panganiban’s creditable government service and retirement benefits.

Notes.―While the Government Service Insurance System (GSIS) may have been clothed with authority to adopt an early retirement or financial assistance plan, such authority was limited by the very law it was seeking to implement. (Government Service Insurance System [GSIS] vs. Commission on Audit [COA], 658 SCRA 796 [2011])

In case of retirement, a justice or judge must show compliance with the age and service requirements as provided in RA No. 910, as amended; Strict compliance with the age and service requirements under the law is the rule and the grant of exception remains to be on a case to case basis. (Re: Application for Retirement of Judge Moslemen T. Macarambon Under Republic Act No. 910, as Amended by Republic Act No. 9946, 673 SCRA 602 [2012])

――o0o―― [Re: Request of (Ref) Chief Justice Artemio V. Panganiban for Recomputation of His Creditable Service for the Purpose of Recomputing His Retirement Benefits, 690 SCRA 242(2013)]

G.R. No. 179652. May 8, 2009.*

PEOPLE’S BROADCASTING (BOMBO RADYO PHILS., INC.), petitioner, vs. THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, respondents.

Labor Law; Department of Labor and Employment (DOLE); Visitorial and Enforcement Power; Words and Phrases; The visitorial and enforcement power of the Department of Labor and Employment (DOLE) comes into play only “in cases when the relationship of employer-employee still exists”; Department of Labor and Employment (DOLE)’s power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed.—The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only “in cases when the relationship of employer-employee still exists.” It also underscores the avowed objective underlying the grant of power to the DOLE which is “to give effect to the labor standard provision of this Code and other labor legislation.” Of course, a person’s entitlement to labor standard benefits under the labor laws presupposes the existence of employer-employee relationship in the first place. The clause “in cases where the relationship of employer-employee still exists” signifies that the employer-employee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLE’s power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed.

Same; Same; Same; National Labor Relations Commission (NLRC); Clearly the law accords a prerogative to the National Labor Relations Commission (NLRC) over the claim when the employer-employee relationship has terminated or such relationship has not arisen at all; The intricacies and implications of an employer-employee relationship demand that the level of scrutiny should be far above the cursory and the mechanical; More often than not, the question of employer-employee relationship becomes a battle of evidence,mthe determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body that is the National Labor Relations Commission (NLRC).—The law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and implications of an employer-employee relationship demand that the level of scrutiny should be far above the cursory and the mechanical. While documents, particularly documents found in the employer’s office are the primary source materials, what may prove decisive are factors related to the history of the employer’s business operations, its current state as well as accepted contemporary practices in the industry. More often than not, the question of employer-employee relationship becomes a battle of evidence, the determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body that is the NLRC.

Same; Same; Same; The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose.—The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.

Same; Same; Same; Administrative Law; It is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; A more liberal interpretative mode, “pragmatic or functional analysis,” has emerged in ascertaining the jurisdictional

boundaries of administrative agencies whose jurisdiction is established by statute.—The approach suggested by the dissent is frowned upon by common law. To wit: [I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior court. A more liberal interpretative mode, “pragmatic or functional analysis,” has also emerged in ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls within or outside that function, rather than making the provision itself the determining centerpiece of the analysis. Yet even under this more expansive approach, the dissent fails.

Same; Same; Same; Same; Due Process; The onset of arbitrariness is the advent of denial of substantive due process.—It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-judicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be “considered in the course of inspection” does not apply. It applies only to issues other than the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent of denial of substantive due process. As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings should be supported by substantial evidence from which the said tribunals can make its own independent evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the tribunals’ conclusion. In the same manner, this Court will not hesitate to set aside the labor tribunal’s findings of fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error of law.

Same; Same; Employer-Employee Relationship; Broadcast Industry; The classification as to whether one is a “station employee” and “program employee,” as lifted from Policy Instruction No. 40, dividing the workers in the broadcast industry into only two groups is not binding on this Court, especially when the classification has no basis either in law or in fact.—Respondent’s pieces of evidence—the identification card and the certification issued by petitioner’s Greman Solante—are not even determinative of an employer-employee relationship. The certification, issued upon the request of respondent, specifically stated that “MR. JANDELEON JUEZAN is a program employee of PEOPLE’S BROADCASTING SERVICES, INC. (DYMF-Bombo Radyo Cebu),” it is not therefore “crystal clear that complainant is a station employee rather than a program employee hence entitled to all the benefits appurtenant thereto,” as found by the DOLE Regional Director. Respondent should be bound by his own evidence. Moreover, the classification as to whether one is a “station employee” and “program employee,” as lifted from Policy Instruction No. 40, dividing the workers in the broadcast industry into only two groups is not binding on this Court, especially when the classification has no basis either in law or in fact.

Same; Same; Same; Quantum of Proof; Substantial evidence, which is the quantum of proof required in labor cases, is “that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.”—It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of employer-employee relationship. Substantial evidence, which is the quantum of proof required in labor cases, is “that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.” No particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. Hence, while no

particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects.

Same; Same; Same; The improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate all the subsequent orders they issued.—Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand that something more should have been proffered. Had there been other proofs of employment, such as respondent’s inclusion in petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore, committed grievous error in ordering petitioner to answer for respondent’s claims. Moreover, with the conclusion that no employer-employee relationship has ever existed between petitioner and respondent, it is crystal-clear that the DOLE Regional Director had no jurisdiction over respondent’s complaint. Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate all the subsequent orders they issued.

Same; Appeals; Procedural Rules and Technicalities; Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.—While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. Thus, in some cases, the bond requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.

Same; Same; Appeal Bond; Where from a liberal reading of certain documents submitted by the employer it is revealed that said employer did assign, as cash bond for the monetary award in favor of an employee, an amount in its bank account, with the depositary bank authorized to remit the amount to, and upon withdrawal by the employee or the Department of Labor and Employment, on the basis of the proper writ of execution, such Deed of Assignment could be considered as substantial compliance with the bond requirement.—Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the documents petitioner did assign, as cash bond for the monetary award in favor of respondent in LSED Case No RO700-2003-CI-09, the amount of P203,726.30 covered by petitioner’s PSD Account No. 010-8-00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement. The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently affirmed. The Deed of Assignment in the instant case, like a cash or surety bond, serves the same purpose. First, the Deed of Assignment constitutes not just a partial amount, but rather the entire award in the appealed Order. Second, it is clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not of petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by the same office after it had issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioner’s willingness to pay the judgment amount.

Same; Certiorari; A wide breadth of discretion is granted a court of justice in certiorari proceedings.—It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari proceedings. The Court has not too infrequently given due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations would warrant such a recourse. Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or adequateremedy, in view of the importance of the issues raised therein. The rules were also relaxed by the Court after considering the public interest involved in the case; when public welfare and the advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued are null and void; or when the questioned order amounts to an oppressive exercise of judicial authority.

Same; Same; Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the Department of Labor and Employment (DOLE) Secretary as well the Regional Director, and in so ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction.—The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as evidence by respondent. To make matters worse, DOLE denied petitioner’s appeal based solely on petitioner’s alleged failure to file a cash or surety bond, without any discussion on the merits of the case. Since the petition for certiorari before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE were supported by the evidence presented. It appears, however, that the Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy.

Same; Same; Visitorial and Enforcement Power; The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the National Labor Relations Commission’s (NLRC’s) jurisdiction and the Department of Labor and Employment’s (DOLE’s) prerogative but also the procedure when the case involves the fundamental challenge

on the Department of Labor and Employment’s (DOLE’s) prerogative based on lack of employer-employee relationship.—The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the NLRC’s jurisdiction and the DOLE’s prerogative but also the procedure when the case involves the fundamental challenge on the DOLE’s prerogative based on lack of employer-employee relationship. As exhaustively discussed here, the DOLE’s prerogative hinges on the existence of employer-employee relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates private respondent has never been petitioner’s employee. But the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition on a technicality would deprive the Court of the opportunity to resolve the novel controversy.

CARPIO-MORALES, J., Separate Dissenting Opinion:

Labor Law; The course taken by the ponencia leads labor cases to the iceberg of protracted proceedings and unsecured execution; Methinks the ponencia was too willing to give up the stability of settled doctrines like the proper mode of appeal, due process in administrative proceedings, requirement of an appeal bond, all for a porridge of “genuine doubt” in one factual finding which in this case was resolved by all public respondents in favor of labor.—The course taken by the ponencia leads labor cases to the iceberg of protracted proceedings and unsecured execution. Unless the ponencia

can justify the consequential ripples resulting from the decision that could place the whole vessel of labor rights in distress, I am constrained to drop an anchor to keep it at bay. I could not thus join the majority in charting such troubled sea. I join Justice Brion in his observation that the ponencia bends over beyond the law’s breaking point in order to accommodate the rectification of a perceiver error. Methinks the ponencia was too willing to give up the stability of settled doctrines like the proper mode of appeal, due process in administrative proceedings, requirement of an appeal bond, all for a porridge of “genuine doubt” in one factual finding which in this case was resolved by all public respondents in favor of labor. There is, therefore, utter lack of justification for this Court to excuse petitioner from hurdling the basic preliminary requirements of the remedies.

Same; Legal Research; Despite the change in the statute, current jurisprudence still relies on the rules and regulations implementing the old Article 128 (b) and still echoes the outmoded cases applying the old Article 128 (b).—Justice Brion offers an incisive and comparative analysis between the original version of Article 128 (b) of the Labor Code and the amendment introduced by Republic Act No. 7730. The changes in the phraseology and sequencing of the excepting clause are definitely not inconsequential. Of course, the removal of the P5,000 ceiling in the exercise of the visitorial power is already settled by jurisprudence. Notatu dignum is that the cause “issues which cannot be resolved without considering the evidentiary matters that are not verifiable in the normal course of inspection” was already replaced by “issues supported by documentary proofs which were not considered in the course of inspection,” not to mention the change in antecedent such that the clause previously referred to the enumerated powers but now only refers to the issuance of the writ of execution. Despite the change in the statute, current jurisprudence still relies on the rules and regulations implementing the old Article 128 (b) and still echoes the outmoded cases applying the old Article 128 (b). It is highly opportune for the Court to modify this antiquated doctrine and principle in view of the amendment of Article 128 (b) of the Labor Code.

BRION, J., Dissenting Opinion:

Labor Law; Appeals; Petitioner’s wrong mode of appeal in going to the Supreme Court cannot be glossed over and simply hidden behind general statements made by this Court in the context of the unique and appropriate factual settings of the cited cases, generally applied to the ponencia’s distorted view of the circumstances of this case.—I submit that the petitioner’s wrong mode of appeal in coming to this Court cannot be glossed over and simply hidden behind general statements made by this Court in the context of the unique and appropriate factual settings of the cited cases, generally applied to the ponencia’s distorted view of the circumstances of this case. The CA decision under review simply and plainly holds that the Secretary committed no grave abuse of discretion when she dismissed an appeal that was supported by neither a cash nor a surety bond that the law requires, and that the DOLE Director did not violate the petitioner’s right to due after it was given full and ample hearing opportunities and its submitted evidence were considered and found wanting. In fact, on its face, the petition for certiorari before the CA does not deserve any merit as it simply hid behind the magic formula—grave abuse of discretion amounting to lack or excess of jurisdiction—to justify a review of a decision that has lapsed to finality for the petitioner’s failure to perfect its appeal. Fully examined, what the petition cites are really inconsequential grounds dismissible on their face or perceived errors of law (as in fact the petition so states in its cited 2nd ground).

Same; Same; Pleadings and Practice; By accepting the present Rule 65 petition in place of a Rule 45 petition for review on certiorari without any sufficiently demonstrated meritorious ground for exceptional treatment, we are effectively negating our ruling in the recent Cecilia B. Estinozo v. Court of Appeals, et al. (544 SCRA 422 [2008]) that a petition for review on certiorari under Rule 45 and a petition for certiorari under Rule 65 are mutually exclusive.—Much harder to accept is the ponencia’s cavalier attitude towards the petitioner’s statement that there is no appeal, or any plain and adequate remedy in the ordinary course of law available to the petitioner, when a Rule 45 appeal is readily available to it and would have been the proper course since it cited errors of law against the CA. By accepting the present Rule 65 petition in place of a Rule 45 petition for review on certiorari without any sufficiently demonstrated meritorious ground

for exceptional treatment, we are effectively negating our ruling in the recent Cecilia B. Estinozo v. Court of Appeals, et al. (544 SCRA 422 [2008]) that a petition for review on certiorari under Rule 45 and a petition for certiorari under Rule 65 are mutually exclusive.

Same; Legal Research; If there is anything extraordinary about this case at this point, it is the lengths the ponencia has gone to bend over backwards and justify the grant of the petition; The ponencia grossly misinterprets Section 128(b) of the Labor Code, even citing an implementing rule that had been overtaken by the amendment of the cited section of the Code, and, for the purpose, even cited the common law.—The legal and factual circumstances the ponencia cites as justificatory reasons are in fact the issues discussed in this case; for this reason, there need not be discussed here for purposes of an orderly presentation, and will be fully discussed in their proper places below—suffice it to say for now that the proceedings below were conducted properly as the CA found. If there is anything extraordinary about this case at this point, it is the lengths the ponencia has gone to bend over backwards and justify the grant of the petition. It thus glosses over the wrong mode of appeal to this Court and the petitioner’s failure to perfect its appeal to the DOLE Secretary, and even minutely analyzes the facts before the Regional Director to show that the Regional Director’s ruling is legally incorrect. Finally, it grossly misinterprets Section 128(b) of the Labor Code, even citing an implementing rule that had been overtaken by the amendment of the cited section of the Code, and, for the purpose, even cited the common law.

Same; Visitorial and Enforcement Powers; Under the amended Article 128(b), as written, the power of the Secretary of Labor or his representative to enforce the labor standards provisions of the Labor Code and other labor legislations has been vastly expanded, being unlimited by Articles 129 and 217 of the Labor Code, provided only that employer-employee relationship still exists.—The new and amended Article 128(b) did not retain the formulation of the original as it broke up the original version into two sentences. In the first sentence, it recognized the primacy of the visitorial and enforcement powers of the Secretary of Labor over the terms of Articles 129 and 217. In other words, the Secretary or his delegate can inspect without being fettered by the limitations under these provisions. The second sentence is devoted wholly to the issuance of writs of execution to enforce the issued orders. It exists as an independent statement from what the first sentence states and is limited only by the exception—when the employer cites a documentary proof that was not considered during the inspection. Thus, under the amended Article 128(b), as written, the power of the Secretary of Labor or his representative to enforce the labor standards provisions of the Labor Code and other labor legislations has been vastly expanded, being unlimited by Articles 129 and 217 of the Labor Code, provided only that employer-employee relationship still exists. The existence of the relationship, however, is still a matter for the Secretary or the appropriate regional office to determine, unfettered by Articles 129 and 217 of the Labor Code. The mere allegation—whether prima facie or not—that employer-employee relationship exists, does not, by itself, divests the Regional Director of jurisdiction to rule on the case; the Director can at least fully determine whether or not employer-employee relationship exists.

Same; Same; There is now a window in the law for immediate execution pending appeal when the employer’s objection does not relate to documentary evidence that has not been raised in the course of inspection.—The present “excepting clause” (which refers only to the issuance of a writ of execution) suggests that after the labor employment officer has issued its inspection ruling, the Secretary may issue a writ to execute the ruling, unless the employer “contests the findings of the labor employment officer and raises issues supported by documentary evidence which were not considered in the course of inspection.” Stated otherwise, there is now a window in the law for immediate execution pending appeal when the employer’s objection does not relate to documentary evidence that has not been raised in the course of inspection.

Same; Judgments; Common Law; Why the common law approach is to be used in the Philippines’ statutory regime is puzzling.—The ponencia makes a final desperate effort to circumvent the plain import of Section 128(b) and its history by appealing to and urging the use of the common law in reading the DOLE Secretary’s visitorial and enforcement

powers under the cited Section. The ponencia suggests a “functional or pragmatic analysis” to ascertain the jurisdictional boundaries of administrative agencies. Why the common law approach is to be used in the Philippines’ statutory regime is puzzling. Why there is a need for such an analysis to understand the terms of Section 128(b) and the Labor Code, is more so. The suggested common law approach is simply irrelevant and deserves no further discussion.

Same; Appeals; Appeal Bond; The law expressly states that an appeal is perfected “only” upon the posting of a cash or surety bond; no other document or instrument is allowed.—The ponencia’s position is legally incorrect as it conveniently fails to consider both the wording of the law and the spirit that led to this wording. The law expressly states that an appeal is perfected “only” upon the posting of a cash or surety bond; no other document or instrument is allowed. What aggravates the ponencia’s disregard of the express wording of the law is the petitioner’s knowledge, on record, that a cash or surety bond is required. This knowledge is clearly demonstrated by the petitioner’s motion for extension of time to file appeal, filed on June 17, 2004, on the ground of fortuitous event. The fortuitous event referred to was the South Sea Surety and Insurance Co.’s allegedlack of the required legal forms for the bond; to support the motion, the surety company committed to issue the bond the following day, June 18, 2004.

Same; Same; Same; The lack of clear authority on the part of the station manager to commit the corporate funds as a guarantee is replete with legal implications that render the Deed of Assignment less than the cash bond that it purports to be—among others, these implications impose on the Department of Labor and Employment (DOLE) added burdens that a cash bond is designed to avoid.—How the aforequoted Deed of Assignment can satisfy the above legal requirements requires an act of bending that goes beyond the intent of the law. What the Deed extends is a guarantee using a sum of money placed with a bank, not with the DOLE. The guarantee is made by a certain Greman B. Solante, described in the Deed as Station Manager signing for and in behalf of the petitioner, a corporation. There is no indication anywhere, however, that Mr. Solante was authorized by the Board of the corporation to commit the corporate funds as a guarantee. This lack of clear authority is replete with legal implications that render the Deed of Assignment less than the cash bond that it purports to be; among others, these implications impose on the DOLE added burdens that a cash bond is designed to avoid. Under Article 1878 of the Civil Code, a special power of attorney is required to bind a principal as guarantor or surety. Under Section 23 and 35 of the Corporation Code of the Philippines, authority over corporate funds is exercised by the Board of Directors who, in the absence of an appropriate delegation of authority, are the only ones who can act for and in behalf of the corporation. Under Article 1403 of the Civil Code, a contract entered into without any legal authority or legal representation is unenforceable. To state the obvious, all these are stumbling blocks for the DOLE when enforcement against the Deed of Assignment comes.

Same; Same; Same; The determination of what satisfies the bonding requirement in labor appeals is a matter for the Secretary of Labor and Employment to determine in the first instance, and should be free from judicial interference, provided that the Secretary does not substantially depart from the letter and intent of the law.—I submit that the determination of what satisfies the bonding requirement in labor appeals is a matter for the Secretary of Labor and Employment to determine in the first instance, and should be free from judicial interference, provided that the Secretary does not substantially depart from the letter and intent of the law. Once the Secretary—the entity with primary jurisdiction over labor appeals—has ruled that a guarantee other than the strict cash and surety bonds that the law requires is not sufficient, then this Court should be bound by the determination in the absence of any attendant grave abuse of discretion on the part of the Secretary. Otherwise stated, this Court cannot and should not second guess or in hindsight control an administrative tribunal in the exercise of its powers, even “in the interest of justice,” where there is no attendant grave abuse of discretion amounting to lack or excess of jurisdiction. Only in this manner can this Court accord due respect to the constitutional separation of powers that it is duty-bound to enforce.

Same; Employer-Employee Relationship; For the ponencia to imply that the National Labor Relations Commission (NLRC) is more fitted to rule on the employment relationship issue misunderstands the power that Article 128 grants the Secretary.—That the employment relationship issue is for the Secretary or his representative to rule upon is clear from

the wording of the 1st paragraph of Article 128(b) when it defines the extent of the Secretary’s power. In this definition of authority, the issue cannot be anywhere else but with the Secretary who has been granted visitorial and enforcement power when an employment relationship exists. This grant must be read with the 2nd paragraph of the same Article that identifies an appeal as the remedy to take from an inspection decision made under the 1st paragraph. For the ponencia to imply that the NLRC is more fitted to rule on the employment relationship issue misunderstands the power that Article 128 grants the Secretary. It is a full fact-finding power that includes whatever is necessary for the enforcement of the grant, including the authority to determine when the limits of the power apply and to call the parties and hear and decide their submissions.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Redula, Sanchez, Boholst, Boholst, Borbajo, Ceniza and Boholst Law Offices for petitioner.

TINGA, J.:

The present controversy concerns a matter of first impression, requiring as it does the determination of the demarcation line between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his duly authorized representatives, on the one hand, and the jurisdiction of the National Labor Relations Commission, on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed between the parties.

I.

The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated 26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855.1

The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against People’s Broadcasting Service, Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report Form,3 the Labor Inspector wrote under the heading “Findings/Recommendations” “non-diminution of benefits” and “Note: Respondent deny employer-employee relationship with the complainant- see Notice of Inspection results.” In the Notice of Inspection Results4 also bearing the date 23 September 2003, the Labor Inspector made the following notations:

“Management representative informed that complainant is a drama talent hired on a per drama “participation basis” hence no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies of cash vouchers, billing statement, employments of specific undertaking (a contract between the talent director & the complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures into another contract w/ other broadcasting industries.

On the other hand, complainant Juezan’s alleged violation of non-diminution of benefits is computed as follows:

@ P 2,000/15 days + 1.5 mos = P 6,000

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation or whatever action deem proper.”5

Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected by petitioner; thus, summary investigations were conducted, with the parties eventually ordered to submit their respective position papers.6

In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent is an employee of petitioner, and that the former is entitled to his money claims amounting to P203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to the documents offered by respondent without examining the originals, but at the same time he missed or failed to consider petitioner’s evidence. Petitioner’s motion for reconsideration was denied.8 On appeal to the DOLE Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank Deposit.9

Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor arbiter because respondent’s claim exceeded P5,000.00.

The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic Act No. 7730.10

Petitioner sought reconsideration of the decision but its motion was denied.11

Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE Sec-retary, has jurisdiction over respondent’s claim, in view of Articles 217 and 128 of the Labor Code.12 It adds that the Court of Appeals committed grave abuse of discretion when it dismissed petitioner’s appeal without delving on the issues raised therein, particularly the claim that no employer-employee relationship had ever existed between petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law available to it.

On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act No. 7730, which “removes the jurisdiction of the Secretary of Labor and Employment or his duly authorized representatives, from the effects of the restrictive provisions of Article 129 and 217 of the Labor Code, regarding the confinement of jurisdiction based on the amount of claims.”13 Respondent also claims that petitioner was not denied due process since even when the case was with the Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by the propriety of the Court of Appeals’ ruling that there exists an employer-employee relationship between him and petitioner. Finally, respondent argues that the instant petition for certiorari is a wrong mode of appeal considering that petitioner had earlier filed a Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals; petitioner, instead, should have filed a Petition for Review.14

II.

The significance of this case may be reduced to one simple question—does the Secretary of Labor have the power to determine the existence of an employer-employee relationship?

To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE found in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:

“Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall 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 employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection. (emphasis supplied)

x x x”

The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only “in cases when the relationship of employer-employee still exists.” It also underscores the avowed objective underlying the grant of power to the DOLE which is “to give effect to the labor standard provision of this Code and other labor legislation.” Of course, a person’s entitlement to labor standard benefits under the labor laws presupposes the existence of employer-employee relationship in the first place.

The clause “in cases where the relationship of employer-employee still exists” signifies that the employer-employee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLE’s power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed.

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases15 issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM

COMPLAINT/ROUTINE INSPECTION

“Sec. 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. Accordingly, if on the face of the complaint, it can be ascertained that employer-employee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC).”

In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and accordingly ruled that a complainant’s allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor Code.17

In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view of the termination of the employer-employee relationship. The same procedure has to be followed in the second situation since it is the NLRC that has jurisdiction in view of the absence of employer-employee relationship between the evidentiary parties from the start.

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

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely preliminary, incidental and collateral to the DOLE’s primary function of enforcing labor standards provisions. The determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause “in cases where the relationship of employer-employee still exists” in Art. 128(b).

Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1) Does the employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and (2) Are there violations of the Labor Code or of any labor law?

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.

The approach suggested by the dissent is frowned upon by common law. To wit:

“[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior court.”18

A more liberal interpretative mode, “pragmatic or functional analysis,” has also emerged in ascertaining the jurisdictional boundaries of administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines the intended function of the tribunal and decides whether a particular provision falls within or outside that function, rather than making the provision itself the determining centerpiece of the analysis.19 Yet even under this more expansive approach, the dissent fails.

A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was granted visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual existence of an employer-employee relationship affects the complexion of the putative findings that the Secretary of Labor may determine, since employees are entitled to a different set of rights under the Labor Code from the employer as opposed to non-employees. Among these differentiated rights are those accorded by the “labor standards” provisions of the Labor Code, which the Secretary of Labor is mandated to enforce. If there is no employer-employee relationship in the first place, the duty of the employer to adhere to those labor standards with respect to the non-employees is questionable.

This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of visitorial and enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition of the statutory limitations thereon. A mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The Secretary of Labor would not have been precluded from exercising the powers under Article 128 (b) over petitioner if another person with better-grounded claim of employment than that which respondent had. Respondent, especially if he were an employee, could have very well enjoined other employees to complain with the DOLE, and, at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its aegis.

Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor Inspector during the inspection as well as submitted during the proceedings before the Regional Director puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on the part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims. Furthermore, as discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot be relied upon as proof of employer-employee relationship.

III.

Aside from lack of jurisdiction, there is another cogent reason to set aside the Regional Director’s 27 February 2004 Order. A careful study of the case reveals that the said Order, which found respondent as an employee of petitioner and directed the payment of respondent’s money claims, is not supported by substantial evidence, and was even made in disregard of the evidence on record.

It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-judicial agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be “considered in the course of inspection” does not apply. It applies only to issues other than the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent of denial of substantive due process.

As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings should be supported by substantial evidence from which the said tribunals can make its own independent evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the tribunals’ conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunal’s findings of fact when it is

clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error of law.21

At the onset, it is the Court’s considered view that the existence of employer-employee relationship could have been easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at the records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had noted petitioner’s manifestation and documents in the Notice of Inspection Results, it is clear that he did not give much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings evidencing payment to the alleged real employer of respondent, letter-contracts denominated as “Employment for a Specific Undertaking,” prima facie negate the existence of employer-employee relationship, the labor inspector could have exerted a bit more effort and looked into petitioner’s payroll, for example, or its roll of employees, or interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given “access to employer’s records and premises at any time of 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 which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations pursuant thereto.”22 Despite these far-reaching powers of labor regulation officers, records reveal that no additional efforts were exerted in the course of the inspection.

The Court further examined the records and discovered to its dismay that even the Regional Director turned a blind eye to the evidence presented by petitioner and relied instead on the self-serving claims of respondent.

In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio talent/spinner, working from 8:00 am until 5 p.m., six days a week, on a gross rate of P60.00 per script, earning an average of P15,0000.00 per month, payable on a semi-monthly basis. He added that the payment of wages was delayed; that he was not given any service incentive leave or its monetary commutation, or his 13th month pay; and that he was not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the number of radio programs of which respondent was a talent/spinner was reduced, resulting in the reduction of his monthly income from P15,000.00 to only P4,000.00, an amount he could barely live on. Anent the claim of petitioner that no employer-employee relationship ever existed, respondent argued that that he was hired by petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and its agents, and it was petitioner who had the power to dismiss him from his employment.23 In support of his position paper, respondent attached a photocopy of an identification card purportedly issued by petitioner, bearing respondent’s picture and name with the designation “Spinner”; at the back of the I.D., the following is written: “This certifies that the card holder is a duly Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES … THE NO.1 Radio Network in the Country ***BASTA RADYO BOMBO***”24 Respondent likewise included a Certification which reads:

“This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLE’S BROADCASTING SERVICES, INC. (DYMF-Bombo Radyo Cebu) since 1990 up to the present.

Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (P15,000.00) PESOS.

This certification is issued upon the request of the above stated name to substantiate loan requirement.

Given this 18th day of April 2000, Cebu City , Philippines.

(signed)

GREMAN B. SOLANTE

Station Manager

On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached as annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as letters of employment captioned “Employment for a Specific Undertaking,” wherein respondent was appointed by different drama directors as spinner/narrator for specific radio programs.25

In his Order, the Regional Director merely made a passing remark on petitioner’s claim of lack of employer-employee relationship—a token paragraph—and proceeded to a detailed recitation of respondent’s allegations. The documents introduced by petitioner in its position paper and even those presented during the inspection were not given an iota of credibility. Instead, full recognition and acceptance was accorded to the claims of respondent—from the hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged “evidence.” In fact, the findings are anchored almost verbatim on the self-serving allegations of respondent.

Furthermore, respondent’s pieces of evidence—the identification card and the certification issued by petitioner’s Greman Solante— are not even determinative of an employer-employee relationship. The certification, issued upon the request of respondent, specifically stated that “MR. JANDELEON JUEZAN is a program employee of PEOPLE’S BROADCASTING SERVICES, INC. (DYMF-Bombo Radyo Cebu),” it is not therefore “crystal clear that complainant is a station employee rather than a program employee hence entitled to all the benefits appurtenant thereto,”26 as found by the DOLE Regional Director. Respondent should be bound by his own evidence. Moreover, the classification as to whether one is a “station employee” and “program employee,” as lifted from Policy Instruction No. 40,27 dividing the workers in the broadcast industry into only two groups is not binding on this Court, especially when the classification has no basis either in law or in fact.28

Even the identification card purportedly issued by petitioner is not proof of employer-employee relationship since it only identified respondent as an “Authorized Representative of Bombo Radyo…,” and not as an employee. The phrase gains significance when compared vis a vis the following notation in the sample identification cards presented by petitioner in its motion for reconsideration:

1. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo Radio Philippines.

2. This ID must be worn at all times within Bombo Radyo Philippines premises for proper identification and security. Furthermore, this is the property of Bombo Radyo Philippines and must be surrendered upon separation from the company.

HUMAN RESOURCE DEPARMENT

(Signed)

JENALIN D. PALER

HRD HEAD

Respondent tried to address the discrepancy between his identification card and the standard identification cards issued by petitioner to its employees by arguing that what he annexed to his position paper was the old identification card issued to him by petitioner. He then presented a photocopy of another “old” identification card, this time purportedly issued to one of the employees who was issued the new identification card presented by petitioner.29 Respondent’s

argument does not convince. If it were true that he is an employee of petitioner, he would have been issued a new identification card similar to the ones presented by petitioner, and he should have presented a copy of such new identification card. His failure to show a new identification card merely demonstrates that what he has is only his “Media” ID, which does not constitute proof of his employment with petitioner.

It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of employer-employee relationship. Substantial evidence, which is the quantum of proof required in labor cases, is “that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.”30 No particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted.31 Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as its qualitative aspects.32

In the instant case, save for respondent’s self-serving allegations and self-defeating evidence, there is no substantial basis to warrant the Regional Director’s finding that respondent is an employee of petitioner. Interestingly, the Order of the Secretary of Labor denying petitioner’s appeal dated 27

January 2005, as well as the decision of the Court of Appeals dismissing the petition for certiorari, are silent on the issue of the existence of an employer-employee relationship, which further suggests that no real and proper determination the existence of such relationship was ever made by these tribunals. Even the dissent skirted away from the issue of the existence of employer-employee relationship and conveniently ignored the dearth of evidence presented by respondent.

Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand that something more should have been proffered.33 Had there been other proofs of employment, such as respondent’s inclusion in petitioner’s payroll, or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore, committed grievous error in ordering petitioner to answer for respondent’s claims. Moreover, with the conclusion that no employer-employee relationship has ever existed between petitioner and respondent, it is crystal-clear that the DOLE Regional Director had no jurisdiction over respondent’s complaint. Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate all the subsequent orders they issued.

IV.

The records show that petitioner’s appeal was denied because it had allegedly failed to post a cash or surety bond. What it attached instead to its appeal was the Letter Agreement34 executed by petitioner and its bank, the cash voucher,35 and the Deed of Assignment of Bank Deposits.36 According to the DOLE, these documents do not constitute the cash or surety bond contemplated by law; thus, it is as if no cash or surety bond was posted when it filed its appeal.

The Court does not agree.

The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last paragraph of Art. 128 (b) of the Labor Code, which reads:

“An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary

of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.” (emphasis supplied)

While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.37 Thus, in some cases, the bond requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.38

A review of the documents submitted by petitioner is called for to determine whether they should have been admitted as or in lieu of the surety or cash bond to sustain the appeal and serve the ends of substantial justice.

The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT

WITH SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLE’S BROADCASTING SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending appeal.

That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLE’S BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) payable to Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City.

It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the Plaintiff-Appellee/ Department of Labor and Employment Regional Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office.

FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit will be for the account holder.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day of June, 2004, in the City of Cebu, Philippines.

PEOPLE’S BROADCASTING SERVICES, INC.

By:

(Signed)

GREMAN B. SOLANTE

Station Manager

As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,39 and a Cash Voucher issued by petitioner showing the amount of P203,726.30 deposited at the said bank.

Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the documents petitioner did assign, as cash bond for the monetary award in favor of respondent in LSED Case NO. RO700-2003-CI-09, the amount of P203,726.30 covered by petitioner’s PSD Account No. 010-8-00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the basis of the proper writ of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement.

The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish recovery by the aggrieved employees under the judgment if subsequently affirmed.40 The Deed of Assignment in the instant case, like a cash or surety bond, serves the same purpose. First, the Deed of Assignment constitutes not just a partial amount, but rather the entire award in the appealed Order. Second, it is clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not of petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by the same office after it had issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioner’s willingness to pay the judgment amount.

The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova v. Keysa’s Boutique,41 wherein this Court found that such bank certification did not come close to the cash or surety bond required by law. The bank certification in Cordova merely stated that the employer maintains a depository account with a balance of P23,008.19, and that the certification was issued upon the depositor’s request for whatever legal purposes it may serve. There was no indication that the said deposit was made specifically for the pending appeal, as in the instant case. Thus, the Court ruled that the bank certification had not in any way ensured that the award would be paid should the appeal fail. Neither was the appellee in the case prevented from making withdrawals from the savings account. Finally, the amount deposited was measly compared to the total monetary award in the judgment.42

V.

Another question of technicality was posed against the instant petition in the hope that it would not be given due course. Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant petition must be dismissed. Once more, the Court is not convinced.

A petition for certiorari is the proper remedy when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any plain speedy, and adequate remedy at law. There is “grave abuse of discretion” when respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.43

Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as indeed the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a general proposition, that the availability of an appeal does not foreclose recourse to the extraordinary remedies, such as certiorari and prohibition, where appeal is not adequate or equally beneficial, speedy and sufficient, as where the orders of the trial court were issued in excess of or without jurisdiction, or there is need to promptly relieve the aggrieved party from the injurious effects of the acts of an inferior court or tribunal, e.g., the court has authorized execution of the judgment.44 This Court has even recognized that a recourse to certiorari is proper not only where there is a clear deprivation of petitioner’s fundamental right to due process, but so also where other special circumstances warrant immediate and more direct action.45

In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy,46 and if it is shown that the refusal to allow a Rule 65 petition would result in the infliction of an injustice on a party by a judgment that evidently was rendered whimsically and capriciously, ignoring and disregarding uncontroverted facts and familiar legal principles without any valid cause whatsoever.47

It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari proceedings.48 The Court has not too infrequently given due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations wouldwarrant such a recourse.49 Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or adequate remedy, in view of the importance of the issues raised therein.50 The rules were also relaxed by the Court after considering the public interest involved in the case;51 when public welfare and the advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued are null and void; or when the questioned order amounts to an oppressive exercise of judicial authority.52

“The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107 SCRA 504, 524, the ‘exercise once more of our exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as in x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: ‘x x The Rules have been drafted with the primary objective of enhancing fair trials and expediting justice. As a corollary, if their applications and operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified.”53

The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as evidence by respondent. To make matters worse, DOLE denied petitioner’s appeal based solely on petitioner’s alleged failure to file a cash or surety bond, without any discussion on the merits of the case. Since the petition for certiorari before the Court of Appeals sought the reversal of the two aforesaid orders, the appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE were supported by the evidence presented. It appears, however, that the Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy.54

The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the NLRC’s jurisdiction and the DOLE’s prerogative but also the procedure when the case

involves the fundamental challenge on the DOLE’s prerogative based on lack of employer-employee relationship. As exhaustively discussed here, the DOLE’s prerogative hinges on the existence of employer-employee relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates private respondent has never been petitioner’s employee. But the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition on a technicality would deprive the Court of the opportunity to resolve the novel controversy.

WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the Court of Appeals in C.A.-G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioner’s appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner is DISMISSED.

SO ORDERED.

Velasco, Jr., J., concurs.

Carpio-Morales (Actg. Chairperson), I join the dissent of J. Brion. Please see my Separate Opinion.

Leonardo-De Castro,** J., In the result.

Brion, J., I Dissent.

SEPARATE DISSENTING OPINION

CARPIO-MORALES, J.:

I join the dissent of Justice Arturo Brion in pointing out the obvious: the petition is wrecked beyond salvage.

The course taken by the ponencia leads labor cases to the iceberg of protracted proceedings and unsecured execution. Unless the ponencia can justify the consequential ripples resulting from the decision that could place the whole vessel of labor rights in distress, I am constrained to drop an anchor to keep it at bay. I could not thus join the majority in charting such troubled sea.

I join Justice Brion in his observation that the ponencia bends over beyond the law’s breaking point in order to accommodate the rectification of a perceiver error. Methinks the ponencia was too willing to give up the stability of settled doctrines like the proper mode of appeal, due process in administrative proceedings, requirement of an appeal bond, all for a porridge of “genuine doubt” in one factual finding which in this case was resolved by all public respondents1 in favor of labor. There is, therefore, utter lack of justification for this Court to excuse petitioner from hurdling the basic preliminary requirements of the remedies.

Let me add a few points for the further illumination of the principal issue on the exercise of the visitorial and enforcement power of the Labor Secretary under Article 128 (b) of the Labor Code, as amended by Republic Act No. 7730 which legislated the expanded power of the Labor Secretary.

In complaints such as that filed by private respondent for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day, illegal diminution of benefits, delayed payment of wages, and non-coverage of SSS, Pag-ibig and Philhealth, it becomes commonly convenient for the employer to immediately raise the defense of the absence of an employer-employee relationship.

Although the ponencia contends that the Labor Secretary is empowered to preliminary determine the presence or absence of an employer-employee relationship, it is quick to add that such preliminary determination may be clipped by a mere prima facie showing of the absence of an employer-employee relationship. This position, however, effectively dilutes the expanded power emanating from the spirit of the amendatory law, for it limits the exercise of the visitorial and enforcement power to cases where the relationship of employer-employee is not contested. In such scenario, the employer could, by a quantum of proof lower than substantial evidence, oust the Labor Secretary of jurisdiction and have the case thrown to the more tedious and docket-clogged process of arbitration.

Justice Brion correctly opines that the Labor Secretary or his authorized representative is competent to fully determine whether an employer-employee relationship exists, which, in turn, must “always be open to inquiry in the superior court,” as proffered this time by the ponente, subject only, of course, to the usual conditions for the availment of the remedy.

Justice Brion offers an incisive and comparative analysis between the original version of Article 128 (b) of the Labor Code and the amendment introduced by Republic Act No. 7730. The changes in the phraseology and sequencing of the excepting clause are definitely not inconsequential. Of course, the removal of the P5,000 ceiling in the exercise of the visitorial power is already settled by jurisprudence.

Notatu dignum is that the cause “issues which cannot be resolved without considering the evidentiary matters that are not verifiable in the normal course of inspection” was already replaced by “issues supported by documentary proofs which were not considered in the course of inspection,” not to mention the change in antecedent such that the clause previously referred to the enumerated powers but now only refers to the issuance of the writ of execution. Despite the change in the statute, current jurisprudence still relies on the rules and regulations implementing the old Article 128 (b) and still echoes the outmoded cases applying the old Article 128 (b). It is highly opportune for the Court to modify this antiquated doctrine and principle in view of the amendment of Article 128 (b) of the Labor Code.

I, therefore, vote to dismiss the petition.

DISSENTING OPINION

BRION, J.:

I dissent and vote for the dismissal of the petition.

This case originated from a Department of Labor and Employment (DOLE) inspection conducted pursuant to Article 128 of the Labor Code.1 The DOLE Regional Director (Director), the DOLE Secretary (Secretary), and the Court of Appeals (CA) consistently ruled that an employer-employee relationship existed between petitioner Bombo Radyo and the respondent, and that the petitioner is liable for the payment of the respondent’s monetary claims. The ponencia, repetitively bending over backwards, reverses all these rulings and holds that the result should be otherwise.

I. Grounds for Dissent

I vote to dismiss the petition for the following reasons:

1. The petitioner chose the wrong recourse in seeking the review by this Court of the CA’s decision on the petitioner’s Rule 65 petition for certiorari; the petitioner came to us via another petition for certiorari under Rule 65 when the appropriate mode is a petition for review on certiorari under Rule 45. The ponencia bends over backwards to

accommodate Bombo Radyo’s legally erroneous petition to open the way for its review of the administrative (DOLE) decisions and the support the CA gave these decisions.

2. The Director originally ordered the payment of the respondent’s monetary claim in his Order of February 27, 2004.

a.The petitioner was given all the opportunity to present evidence to oppose the Labor Inspector’s findings; hence, it cannot plead lack of due process for lack of opportunity to be heard.

b. The Director duly considered the evidence on the issue of employer-employee relationship in both his initial decision2 and in his resolution of May 24, 2004.3 The ponencia, nitpicking the Director’s decision for not stating how each piece of evidence was ruled upon, charges that the decision disregarded the petitioner’s evidence. This stance ignores the legal reality that the Constitution only requires the factual and legal bases for the decision to be stated,4 and that the decision maker is not under any obligation to state in its decision every fact and bit of evidence the parties submitted.5

c. The nature of the proceedings, level of evidence required, and level of expertise between Labor Arbiters and the Regional Director are not different and one tribunal holds no primacy over the other in the determination of the employment relationship issue. The terms and structure of Article 128(b), as amended by R.A. 7730, are clear and need not give rise to the ponencia’s fear of confusion in determining the employment relationship issue.

3. The Secretary has expanded visitorial and enforcement powers under Article 128 of the Labor Code, as amended by R.A. 7730;6 he or his representative has full authority under the amended Article 128 to determine whether employer-employee relationship exists.

4. Article 128 of the Labor Code clearly provides that an appeal is perfected “only” by the posting of cash or surety bond; the Deed of Assignment the petitioner submitted to the DOLE is neither a cash nor a surety bond, and the Secretary correctly dismissed the petitioner’s appeal because it was not duly perfected. The ponencia bends over beyond the law’s breaking point to admit the petitioner’s appeal despite its infirmity under the clear terms and intent of the law.

a. The Secretary fully explained the reasons for the non-perfection of appeal in an original Order dated January 29, 2005 and in her subsequent Order dated May 23, 2005 on the petitioner’s motion for reconsideration. The ponencia sees not only legal error but grave abuse of discretion although the Secretary followed the letter and intent of the law, as plainly stated in the law itself and as interpreted by this Court in its rulings.

b. Petitioners have only themselves to blame for their lost appeal to the Labor Secretary for their failure to post the required bond for the perfection of their appeal.

c. The Director’s Order lapsed to finality when the petitioner failed to perfect its appeal to the DOLE Secretary. The ponencia digs deep into this Court’s review power, effectively bending established rules and jurisprudence, to reach and nullify the effects of this first level decision.

5. The Court of Appeals correctly dismissed the petitioner’s petition for certiorari for lack of merit.

a. The CA cannot be wrong when it refused to recognize that no grave abuse of discretion attended the Secretary’s dismissal of an appeal that was never perfected based on the letter and intent of the law;

b. The CA cannot be wrong in its conclusion that no violation of due process attended the Director’s ruling, as stated above;

c. The CA could not have ruled on other issues after it recognized that no appeal was perfected and no abuse of discretion attended the assailed decisions; likewise, it could not have recognized any legal error on the part of the Secretary for not discussing other issues after recognizing that the petitioner did not perfect its appeal.

6. The petitioner’s evidence, at the most, established a doubt on the employer-employee relationship issue, which doubt should be resolved in favor of the respondent-worker.7

II. Background

DOLE Regional Office No. VII conducted an inspection of the premises of the petitioner resulting in an inspection report/recommendation ordering Bombo Radyo to rectify/restitute, within five (5) days from notice, the violation discovered during the inspection. Radyo Bombo failed to undertake any rectification so that a summary investigation ensued where the parties were required to submit their respective position papers. Radyo Bombo reiterated its position, made during inspection, that the respondent was not an employee; he was a drama talent hired on a per drama “participation basis.” Both parties presented evidence in support of their respective positions.

DOLE Director Rodolfo M. Sabulao, in an order dated February 27, 2004, required Bombo Radyo to pay the respondent P203,726.30 in satisfaction of his money claims. To directly cite the Director’s ruling to avoid the ponencia’s selectively chosen presentation, we quote:

“A careful perusal of the records of this case showed that complainant Jandeleon Juezan was hired by the respondent as a radio talent/spinner and work six (6) days a week from 8:00 A.M. to 5:00 P.M., Monday thru Saturday. It was the respondent who paid complainant’s salary every quincena and was required by the former to sign payrolls. Notwithstanding the employment contract stipulating herein complainant as a program employee, his actual duty pertains to that of a station employee. Moreover, respondent failed to register said employment contract with the Broadcast Media Counsel as required. He is required to observe normal working hours that deductions are made for tardiness. Therefore, it is crystal clear that complainant is a station employee rather than a program employee hence entitled to all benefits appurtenant thereto.”

In doing so, the Director upheld the existence of employer-employee relationship between the broadcasting station and the respondent. Bombo Radyo moved for reconsideration, attaching additional evidence to his motion, but the Director denied the motion.

Bombo Radyo appealed to the DOLE Secretary, mainly contending that the respondent was not its employee, pursuant to Rule X-A of the Implementing Rules of the Labor Code8 in relation with the Rules on Disposition of Labor Standards Cases in the Regional Office.9 The appeal was dismissed in an order dated January 27, 2005 by the Acting DOLE Secretary due to Bombo Radyo’s failure to post a cash or surety bond as required by Article 128 of the Labor Code. The petitioner’s next recourse was to go to the Court of Appeals (CA).

The petitioner filed with the CA a petition for certiorari under Rule 65 of the Rules of Court alleging grave abuse of discretion. The petition cited the following grounds, which I quote for purposes of certainty—

1. The public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction when it denied due course to the petition;

2. The public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction when it assumed jurisdiction over the claim of the private respondent even as under R.A. 6715 jurisdiction lies with the NLRC, hence, clearly, the Honorable Secretary of Labor and Employment, with due respect, committed errors of law;

3.  The public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the appeal by the respondent without delving on the issues raised by the petitioner;

4. There is no appeal or any claim, speedy and adequate remedy in the ordinary course of law available to the petitioner.

The CA duly considered the points raised, but ultimately dismissed the petition for lack of merit. Petitioner now comes to the Court, again under Rule 65 of the Rules of Court alleging the following grounds:

1. The Honorable Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it rules that the Secretary of Labor and Employment has jurisdiction over the claim of the private respondent even as under R.A. 6715 jurisdiction over it lies with the NLRC, hence, clearly, the Honorable Court Appeals committed errors of law.

2. The Honorable Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it upheld the Order of the Secretary of Labor and Employment despite the patent lack of due process.

3.  The Honorable Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the appeal without delving on the issues raised by the petitioner. Its decision dated October 26, 2006 did not even rule on the issue raised by the petition that there is no employer-employee relationship between it and respondent Juezan.

4. There is no appeal or any plain and adequate remedy in the ordinary course of law available to the petition.

III. Discussion

These discussions address the above grounds for dissent, not necessarily in the order posed above in light of the inter-relationships of these grounds with one another.

Propriety of a Rule 65 Petition for Certiorari

The ponencia justifies the grant of extraordinary treatment to the petitioner’s Rule 65 petition for certiorari: (1) by general statements, supported by cited jurisprudence, on when a Rule 65 petition for certiorari may be admitted in lieu of the Rule 45 petition for review on certiorari that is the required mode of review from a ruling of the Court of Appeals; and (2) by urging a relaxation of the rules in view of the attendant legal and factual circumstances of the present case.10 It thereafter urges the suspension of the applicable rule on mode of review, as follows:

“The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107 SCRA 504, 524, the exercise once more of our exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as in x x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: x x x the rules have been drafted with the primary objective of enhancing fair trials and expediting justice. As corollary, if their application and operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified.”

With these general statements, as premises, the ponencia generally adverts to the Regional Director’s alleged irregular handling of the case and misinterpretation of the respondent’s documents; the DOLE Secretary’s failure to discuss the merits of the case after she found the appeal to have failed for failure to post the required bond; and the alleged failure of the CA to examine the records and its focus on the discussion of due process and the jurisdiction of the Regional Director.

Under these terms, the ponencia hopes to open the door for the admission of the petition, thereby giving its imprimatur to the petitioner’s claim that it resorted to a Rule 65 petition because it had no appeal, or any plain and adequate remedy in the ordinary course of law.

I submit that the petitioner’s wrong mode of appeal in coming to this Court cannot be glossed over and simply hidden behind general statements made by this Court in the context of the unique and appropriate factual settings of the cited cases, generally applied to the ponencia’s distorted view of the circumstances of this case.

The CA decision under review simply and plainly holds that the Secretary committed no grave abuse of discretion when she dismissed an appeal that was supported by neither a cash nor a surety bond that the law requires, and that the DOLE Director did not violate the petitioner’s right to due after it was given full and ample hearing opportunities and its submitted evidence were considered and found wanting. In fact, on its face, the petition for certiorari before the CA does not deserve any merit as it simply hid behind the magic formula—grave abuse of discretion amounting to lack or excess of jurisdiction—to justify a review of a decision that has lapsed to finality for the petitioner’s failure to perfect its appeal. Fully examined, what the petition cites are really inconsequential grounds dismissible on their face or perceived errors of law (as in fact the petition so states in its cited 2nd ground).11

A comparison of the grounds cited in the present petition and the petition before the CA shows that in coming to this Court, the petitioner simply repeated the same issues it submitted to the Court of Appeals. The only difference is that it now cites the CA as the tribunal committing the grave abuse of discretion amounting to lack or excess of jurisdiction. In coming to this Court, on the same grounds cited before and ruled upon by the CA, the petitioner is merely asking this Court to review the CA ruling on the “grave abuse of discretion” issues the petitioner raised before the CA. Such a review is an appeal that, under our Rules, should fall under Rule 45—a petition for review on certiorari. It is not accurate therefore for the petitioner to say that there is no remedy available to it in the ordinary course of law. Neither is it correct to characterize this situation as an extraordinary one that merits the suspension of the Rules. The appropriate remedy is a Rule 45 petition for review on certiorari which is envisioned to correct errors of law,12 precisely the errors cited by the petitioner as having been committed by the CA.

Much harder to accept is the ponencia’s cavalier attitude towards the petitioner’s statement that there is no appeal, or any plain and adequate remedy in the ordinary course of law available to the petitioner, when a Rule 45 appeal is readily available to it and would have been the proper course since it cited errors of law against the CA. By accepting the present Rule 65 petition in place of a Rule 45 petition for review on certiorari without any sufficiently demonstrated meritorious ground for exceptional treatment, we are effectively negating our ruling in the recent Cecilia B. Estinozo v. Court of Appeals, et al.13 that a petition for review on certiorari under Rule 45 and a petition for certiorari under Rule 65 are mutually exclusive.

The legal and factual circumstances the ponencia cites as justificatory reasons are in fact the issues discussed in this case; for this reason, there need not be discussed here for

purposes of an orderly presentation, and will be fully discussed in their proper places below—suffice it to say for now that the proceedings below were conducted properly as the CA found. If there is anything extraordinary about this case at this point, it is the lengths the ponencia has gone to bend over backwards and justify the grant of the petition. It thus glosses over the wrong mode of appeal to this Court and the petitioner’s failure to perfect its appeal to the DOLE Secretary, and even minutely analyzes the facts before the Regional Director to show that the Regional Director’s ruling is legally incorrect. Finally, it grossly misinterprets Section 128(b) of the Labor Code, even citing an implementing rule that had been overtaken by the amendment of the cited section of the Code, and, for the purpose, even cited the common law.

I cite all these to stress that we should examine the ponencia carefully, particularly its justifications for the grant of extraordinary treatment to the petitioner, before joining the ponencia.

The Secretary’s Visitorial Powers

A major issue for the ponencia is the Director’s determination that employer-employee relationship existed between the petitioner and the respondent at the time of the inspection. Citing mainly Section 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases,14 the ponencia rationalizes:

“The clause “in cases where the relationship of employer-employee still exists” signifies that the employer-employee relationship must have existed even before the emergence of the controversy. Necessarily, the DOLE’s power does not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has ever existed.

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases issued by the DOLE Secretary. It reads:

Sec. 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. Accordingly, if on the face of the complaint, it can be ascertained that employer-employee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC).

x x x   x x x   x x x

In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view of the termination of the employer-employee relationship. The same procedure has to be followed in the second situation since it is the NLRC that has jurisdiction in view of the absence of employer-employee relationship between the evidentiary parties from the start.

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

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot be coextensive with the visitorial and enforcement power itself. Indeed, such determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause “in cases where the relationship of employer-employee still exists” in Art. 128 (b).”

This approach is a legally incorrect due mainly to the ponencia’s lack of appreciation of the extent of the DOLE Secretary’s visitorial and enforcement powers under the Labor Code, as amended, and a mis-reading of the current law

and the applicable implementing rules. The present law gives the Secretary or his representative the authority to fully determine whether employer-employee relationship exists; only upon a showing that it does not, is the DOLE divested of jurisdiction over the case.

In the first place, the ponencia is fixated on the application of the Rules on the Disposition of Labor Standards Cases in the Regional Offices which cannot now be cited and used in their totality in light of the amendment of the Article 128(b) by Republic Act No. 7730.15 Prior to the amendment, Section 128(b) stated that—

“Art. 128(b). The provisions of Article 217 of this Code to the contrary notwithstanding and in cases where the relationship of employer-employee still exist, 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 relation 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.

As amended, Section 128(b) now states:

“Art. 128. Visitorial and Enforcement Power.—

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall 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 employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.”

This amendment is critical in viewing the Secretary’s visitorial and enforcement powers as they introduced new features that expanded these powers, thereby affecting the cited Rules as well as the process of referring an inspection case to the NLRC.

A first distinction between the original and the amended Article 128(b) is the reference to Article 217 of the Labor Code in the “notwithstanding” clause. As amended, Article 129 is also referred to. Read in relation with Article 217, the effect is the removal of the P5,000.00 ceiling in the Secretary’s visitorial powers—a conclusion that the ponencia fully supports.

Another distinction relates to the present clause “except in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection” (the “excepting clause”). In the original version of Article 128(b), this clause states—“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.” Thus,

previously, the law referred to matters that the labor regulation officer could not have ruled upon because they are not verifiable in the normal course of inspection. Under the present formulation, reference is only to “documentary proofs which were not considered in the course of inspection” used in a different context explained below. Textually, the present formulation refers only to documentary evidence that might or might not have been available during inspection but were not considered.

The difference can be explained by the new and unique formulation of the whole Article 128(b). In the original provision, the visitorial and enforcement power of the Minister of Labor and Employment generally prevailed over the jurisdiction over arbitration cases granted to Labor Arbiters and the Commission under Article 217. Excepted from this rule is what the original and unamended excepting clause, quoted above, provides—i.e., when inspection would not suffice because of evidentiary matters that have to be threshed out at an arbitration hearing.

The new and amended Article 128(b) did not retain the formulation of the original as it broke up the original version into two sentences. In the first sentence, it recognized the primacy of the visitorial and enforcement powers of the Secretary of Labor over the terms of Articles 129 and 217. In other words, the Secretary or his delegate can inspect without being fettered by the limitations under these provisions. The second sentence is devoted wholly to the issuance of writs of execution to enforce the issued orders. It exists as an independent statement from what the first sentence states and is limited only by the exception—when the employer cites a documentary proof that was not considered during the inspection.

Thus, under the amended Article 128(b), as written, the power of the Secretary of Labor or his representative to enforce the labor standards provisions of the Labor Code and other labor legislations has been vastly expanded, being unlimited by Articles 129 and 217 of the Labor Code, provided only that employer-employee relationship still exists. The existence of the relationship, however, is still a matter for the Secretary or the appropriate regional office to determine, unfettered by Articles 129 and 217 of the Labor Code. The mere allegation—whether prima facie or not—that employer-employee relationship exists, does not, by itself, divests the Regional Director of jurisdiction to rule on the case;16 the Director can at least fully determine whether or not employer-employee relationship exists.

The present “excepting clause” (which refers only to the issuance of a writ of execution) suggests that after the labor employment officer has issued its inspection ruling, the Secretary may issue a writ to execute the ruling, unless the employer “contests the findings of the labor employment officer and raises issues supported by documentary evidence which were not considered in the course of inspection.” Stated otherwise, there is now a window in the law for immediate execution pending appeal when the employer’s objection does not relate to documentary evidence that has not been raised in the course of inspection. What happens to the inspection ruling itself is governed by the next paragraph of Article 128(b) which expressly provides for an appeal to the Secretary of Labor, with the requirement for the filing of a cash or surety bond to perfect the appeal. This requirement, stated without distinctions or qualifications, should apply to all issues, whether on the employer-employee issue or on the inspection findings.

A necessary question that arises is the status of the current rule implementing Article 128(b) as amended, which is an exact copy of the law except for the addition of a new sentence—“. . In such cases the Regional Director shall endorse the dispute to the appropriate regional branch of the National Labor Relations Commission for proper action.” This rule antedates the R.A. 7730 amendment but is not necessarily negated by the Secretary’s expanded powers because of the limitation that the Secretary or his representation has jurisdiction only where an employment relationship exists. Properly understood, it should now be read as a confirmation of the Secretary’s expanded power that includes the full authority to rule on whether employer-employee relationship exists. It is only upon a ruling that no such relationship exists that the Secretary and the Director are divested of jurisdiction to rule on the monetary claim. The Secretary or the Director must then endorse the monetary claim to the NLRC instead of dismissing it for lack of jurisdiction. However, whatever action the Director takes is a matter that can be appealed to the Secretary of Labor pursuant to the second

paragraph of Article 128(b). In the present case, the petitioner did appeal as allowed by Article 128(b), but unfortunately blew its chance to secure a review on appeal before the Secretary of Labor as it failed to post the cash or surety bond that the present law expressly requires.

This reading of the law totally invalidates the ponencia’s position in the present case that the Regional Director and the Secretary of Labor have no jurisdiction to issue an enforcement order and the case should have been turned over to the NLRC for compulsory arbitration after the petitioner claimed or has shown prima facie that no employer-employee relationship existed.

The ponencia makes a final desperate effort to circumvent the plain import of Section 128(b) and its history by appealing to and urging the use of the common law in reading the DOLE Secretary’s visitorial and enforcement powers under the cited Section. The ponencia suggests a “functional or pragmatic analysis” to ascertain the jurisdictional boundaries of administrative agencies. Why the common law approach is to be used in the Philippines’ statutory regime is puzzling. Why there is a need for such an analysis to understand the terms of Section 128(b) and the Labor Code, is more so. The suggested common law approach is simply irrelevant and deserves no further discussion.

Petitioner Failed to Validly

Appeal to the Secretary

The parties do not dispute that the remedy from the Regional Director’s ruling is an appeal to the Secretary, as the petitioner did indeed appeal to the Office of the Secretary of Labor. The ponencia, however, rules that the DOLE erred in declaring that the appeal was not perfected; the ponencia holds that the Deed of Assignment of Bank Deposits that the petitioner submitted in lieu of a cash or surety bond substantially satisfied the requirements of Section 128 (b) of the Labor Code. This provision states:

“x x x

An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order appealed from.”

The Deed of Assignment17 was accompanied by a Letter Agreement between Queen City Development Bank and the petitioner covering Platinum Savings Deposit (PSD) No. 010-8-00038-4,18 and a Cash Voucher19 issued by the petitioner indicating the amount of P203,726.30 deposited at the bank. The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT

WITH SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That, I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLE’S BROADCASTING SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 (Php203,726.30), Phil. Currency, CASH BOND GUARANTEE for the monetary award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. RO700-2003-09-CI-091, now pending appeal.

That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings Deposit (PSD) No. 010-8-00038-4 of PEOPLE’S BROADCASTING SERVICES, INC., in the amount of PESOS: TWO

HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY PESOS & 30/100 ONLY (Php203,726.30) payable to Plaintiff-Appellee/

Department of Labor and Employment Regional Office VII at Queen City Development Bank, Cebu Branch, Sanciangko St., Cebu City.

It is understood that the bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after this date and that said sum cannot be withdrawn by the Plaintiff-Appellee/Department of Labor and Employment Regional

Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office.

FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 from the said Deposit will be for the account holder.

IN WITNESS WHEREOF, I have hereto affixed my signature this 18th day of June, 2004, in the City of Cebu, Philippines.

PEOPLE’S BROADCASTING SERVICES, INC.

By:

(Sgd.)

GREMAN B. SOLANTE

Station Manager

The ponencia’s position is legally incorrect as it conveniently fails to consider both the wording of the law and the spirit that led to this wording. The law expressly states that an appeal is perfected “only” upon the posting of a cash or surety bond;20 no other document or instrument is allowed. What aggravates the ponencia’s disregard of the express wording of the law is the petitioner’s knowledge, on record, that a cash or surety bond is required. This knowledge is clearly demonstrated by the petitioner’s motion for extension of time to file appeal, filed on June 17, 2004, on the ground of fortuitous event.21 The fortuitous event referred to was the South Sea Surety and Insurance Co.’s alleged lack of the required legal forms for the bond; to support the motion, the surety company committed to issue the bond the following day, June 18, 2004. Further, in a submission entitled “Appeal” filed with the DOLE Regional Office on June 18, 2004, the petitioner made the following statement:

“Accompanying this APPEAL are—

1. APPEAL MEMORANDUM;

2. Cash bond pursuant to the specifications in RESOLUTION;

3. Proof of payment of required filing fee.

No cash bond was however submitted, showing that the petitioner was less than candid when it made its claim. It was under these circumstances—i.e., the petitioner’s knowledge that a cash or surety bond is required; the absence of a cash bond; and misrepresentation that a cash bond was attached when there was none—that the DOLE Secretary dismissed the appeal. The CA correctly supported the Secretary’s action and ruled that the Secretary did not act with grave abuse of discretion in dismissing the appeal.

Separately from these factual incidents are reasons proceeding from established jurisprudence as the indispensability of a bond to perfect an appeal is not a new issue for the Court. In Borja Estate, et al. v. Spouses R. Ballad and R. Ballad,22 we ruled that—

“The intention of the lawmakers to make the bond an indispensable requisite for the perfection of an appeal by the employer is underscored by the provision that an appeal may be perfected “only upon the posting of a cash bond.” The word “only” makes it perfectly clear that the LAWMAKERS intended the posting of a cash or surety bond by the employer to be the exclusive means by which an employer’s appeal may be considered complete.

x x x

Evidently, the posting of a cash or surety bond is mandatory. And the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional.” [emphasis supplied].

Interestingly, the same adverb—“only”—that this Court construed in Borja, is the very same adverb that Article 128(b) of the Labor Code contains. Thus, this Article states in part—an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and Employment. All these safeguards would be for naught if the ponencia’s understanding of the requirements for the perfection of an appeal will prevail. To reiterate, the bond must be in cash or a surety issued by a reputable bonding company, not by any bonding company. The reputation alone of the bonding company will not suffice to satisfy the law; the bonding company must be accredited by the Secretary. “Cash,” on the other hand, whether in lay or its legal signification, means a sum of money; cash bail (the sense in which a cash bond is used) is a sum of money posted by a criminal defendant to ensure his presence in court, used in place of a surety bond and real estate.23

How the aforequoted Deed of Assignment can satisfy the above legal requirements requires an act of bending that goes beyond the intent of the law. What the Deed extends is a guarantee using a sum of money placed with a bank, not with the DOLE. The guarantee is made by a certain Greman B. Solante, described in the Deed as Station Manager signing for and in behalf of the petitioner, a corporation. There is no indication anywhere, however, that Mr. Solante was authorized by the Board of the corporation to commit the corporate funds as a guarantee.24 This lack of clear authority is replete with legal implications that render the Deed of Assignment less than the cash bond that it purports to be; among others, these implications impose on the DOLE added burdens that a cash bond is designed to avoid. Under Article 1878 of the Civil Code, a special power of attorney is required to bind a principal as guarantor or surety. Under Section 23 and 35 of the Corporation Code of the Philippines, authority over corporate funds is exercised by the Board of Directors who, in the absence of an appropriate delegation of authority, are the only ones who can act for and in behalf of the corporation. Under Article 1403 of the Civil Code, a contract entered into without any legal authority or legal representation is unenforceable. To state the obvious, all these are stumbling blocks for the DOLE when enforcement against the Deed of Assignment comes.

It is noteworthy, too, that the guarantee is under the condition that “said sum cannot be withdrawn by the Plaintiff-Appellee/Department of Labor and Employment Regional Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office.” What this limitation means is not at all certain. But on its face, it means that the bond is in favor of the DOLE Regional Office, not to the Office to the DOLE Secretary where the appeal has been filed. Thus, the DOLE Secretary herself has no authority to call on the guarantee. Even Regional Office VII cannot, until a writ of execution is ordered by the Appellate Office. What this Appellate Office is, is again not certain and can mean the highest appellate levels all the way up to this Court. Another uncertainty is the bank’s commitment to the guarantee as the Deed only contains a “CONFORME” signed by the Officer-in-Charge of the Queen City Development Bank, not the exact terms of the bank’s own commitment to the DOLE in whose favor any bond should be made. What is certain about the

Deed is provided in its penultimate paragraph” “any interest to be earned from said Deposit will be for the account holder.”

The Platinum Savings Deposit mentioned in the Deed is itself very interesting as it carries the heading “Deposit Insured by PDIC Maximum Amount of Php 100,000.00. Yet, the amount of deposit is stated to be Php 203,726.30, with interest rate of 4.25%, and maturity date of July 19, 2004 (31 days). Thus, if anything happened to the depositary bank, in the way that banks under the Legacy group of banks currently has problems, the DOLE Regional Office VII would be holding an empty guarantee and would still have to file a claim with the PDIC for the maximum amount covered.

To be sure, these are not the terms the framers of the law intended when they required that perfection of appeal requires the filing “only” of a cash or surety bond. Effectively, what the Deed of Assignment and its allied documents have committed to support the perfection of the petitioner’s appeal, with the intent to pass it off as a cash bond, is an amount whose control is not clearly with the DOLE and which may require a lot of clarifications and prior actions before it can be used to pay the monetary claim secured by the bond. This is what the ponencia wishes to recognize as a substitute for the cash bond requirement of the law. To say the least, a ruling from this Court of this tenor would severely and adversely affect the effectiveness and efficiency of the DOLE’s handling of appeals before it; it would be a precedent that effectively negates the certainties the law wishes to foster, and would be a welcome development to those who would wish to submit guarantees other than the cash or surety bonds the law demands.

I submit that the determination of what satisfies the bonding requirement in labor appeals is a matter for the Secretary of Labor and Employment to determine in the first instance, and should be free from judicial interference, provided that the Secretary does not substantially depart from the letter and intent of the law. Once the Secretary—the entity with primary jurisdiction over labor appeals—has ruled that a guarantee other than the strict cash and surety bonds that the law requires is not sufficient, then this Court should be bound by the determination in the absence of any attendant grave abuse of discretion on the part of the Secretary. Otherwise stated, this Court cannot and should not second guess or in hindsight control an administrative tribunal in the exercise of its powers, even “in the interest of justice,” where there is no attendant grave abuse of discretion amounting to lack or excess of jurisdiction. Only in this manner can this Court accord due respect to the constitutional separation of powers that it is duty-bound to enforce.

Failure of the CA to review the evidence

In light of the above discussions, the CA could not have been wrong in concluding that no grave abuse of discretion attended the CA’s conclusion that the petitioner indeed failed to perfect its appeal before the Secretary. Over and above this objection, however, the ponencia, faults the CA for not examining the evidence to determine whether the conclusions of the DOLE in the assailed orders were supported by the evidence presented. It finds that the CA focused instead on a general discussion of due process and the jurisdiction of the Regional Director.

Let it be clarified that the Secretary did not need to go into a full discussion of the merits of the appeal because no appeal was ever perfected. The CA understandably focused on this aspect of the case as it renders moot all other issues. To the CA’s credit it made sure that there was no denial of due process that tainted the DOLE decisions and it found that there was none. In this light, the CA complied with what the Constitution requires as a decision maker is only duty-bound to state the facts and the law on which its decision is based.25

In this respect, it should be considered that the petitioner was given every opportunity to be heard at the DOLE Regional Office. The plant inspection was conducted at the petitioner’s own establishment where its officials were present. No complaint exists regarding this aspect of the case. A notice of inspection results was duly sent to the petitioner, which it contested. Thus, the Regional Director directed the parties to file their position papers on the inspection results. The parties duly complied, with parties both focusing on the employer-employee relationship issue. In the Order dated February 27, 2004, the Director fully considered the parties’ positions in light of the inspection results and ruled that

there was employer-employee relationship. The petitioner reactedby filing a motion for reconsideration and a supplemental motion for reconsideration, to which additional supporting exhibits were attached. These submissions were taken into account but still failed to convince the Director.

Unfortunately, the petitioner equated the Regional Director’s failure to rule in its favor to be denial of due process for the alleged failure to consider the evidence it submitted. The CA, of course, noting the above-described developments in the case saw the fallacy of the petitioner’s submission and dismissed the petition, thus affirming the DOLE level decisions.

The Director’s ruling that the ponencia now sees as objectionable states in its material portion:

“Under the said Policy Instructions, there are two (2) types of employees in the broadcast industry, namely: 1) “Station employees—are those whose services are engaged to discharge functions which are usually necessary and desirable to the operation of the station and whose usefulness is not affected by changes of programs, ratings or formats and who observe normal working hours. These shall include employees whose talents, skills or services are engaged as such by the station without particular reference to any specific program or undertaking, and are not allowed by the station to be engaged or hired by other stations or persons even if such employees do not observe normal working hours. 2) Program employees—are those whose skills, talents or services are engaged by the station for a particular or specific program or undertaking and who are not required to observe normal working hours such that on some days they work for less than eight (8) hours and on other days beyond the normal work hours observed by the station employees and are allowed to enter into employment contracts with other persons, stations, advertising agencies or sponsoring companies. The engagement of program employees, including those hired by advertising agencies or sponsoring companies, shall be under a written contract specifying, among other things, the nature of the work to be performed, rates to pay, and the programs in which they will work. The contract shall be duly registered by the station with the Broadcast Media Council within three (3) days from its consummation.”

A careful perusal of the records of this case showed that complainant Jandeleon Juezan was hired by the respondent as a radio talent/spinner and work six (6) days a week from 8:00 A.M. to 5:00 P.M., Monday thru Saturday. It was the respondent who paid complainant’s salary every quincena and was required by the former to sign payrolls. Notwithstanding the employment contract stipulating herein complainant as a program employee, his actual duty pertains to that of a station employee. Moreover, respondent failed to register said employment contract with the Broadcast Media Counsel as required. He is required to observe normal working hours that deductions are made for tardiness. Therefore, it is crystal clear that complainant is a station employee rather than a program employee hence entitled to all benefits appurtenant thereto.”

In the motion for reconsideration that followed, the Director ruled as follows:

“For resolution is the Motion for Reconsideration filed by the respondent on March 15, 2004 to the Order of this Office dated February 27, 2004 on the ground that due process is not observed.

The motion was set for clarificatory hearing on April 2, 2004 wherein the parties through their respective counsel appeared. Counsel for complaint asked for 15 days from April 2, 2004 to file its comment to the Motion for Reconsideration after which the case is submitted for resolution.

Respondent in its Motion for Reconsideration alleged to have been denied due process because it was not given the opportunity to examine the identification card which was not presented for scrutiny and verification.

The contention sought by the respondent is without merit.

The identification card presented by complainant that he was an authorized Media Representative is not material to this case nor fatal to respondent’s case. Presentation of employment records is the burden of employer and not of complaint worker.

Respondent’s passing the buck of employer-employee relationship to its drama Directors and Producers is of no moment. Granting without admitting that herein complainant is indeed under the employ of respondents’ drama directors. Such partakes of a sub-contracting relationship which will not absolve herein respondent from its solidary liability to complainant’s claims pursuant to Art. 106 to Art. 109 of the Labor Code.”

Correctly understood, these rulings do not indicate in any way that the petitioner’s evidence were not considered. To be sure, the parties’ various pieces of evidence the parties submitted were not all mentioned in these rulings. What it does mention are its findings from the parties’ conflicting factual assertions. Interestingly, it implies that, at least nominally, the respondent was a program employee. This is the ruling’s concession to the petitioner’s evidence. However, it also asserts that despite this seeming status, the respondent was in fact a station employee for the reasons the ruling outlined, namely: (1) the respondent initially hired the respondent as a radio talent/spinner; (2) his work was six [6] days a week from 8:00 A.M. to 5:00 P.M., Monday thru Saturday; (3) he is required to observe normal working hours and deductions are made for tardiness; (4) the respondent paid the complainant’s salary every quincena; (5) the petitioner required the respondent to sign payrolls; (6) notwithstanding the employment contract stipulating herein complainant as a program employee, his actual duty pertains to that of a station employee; and (7) the petitioner failed to register the respondent’s employment contract with the Broadcast Media Counsel as required.

Thus viewed, the ponencia’s conclusion that the Director did not consider the petitioner’s evidence is misplaced. In fact, the factors the Director pointed out decisively show that an employer-employee relationship existed between the petitioner and the respondent.

Confusion between the DOLE and

the NLRC in resolving employment

relationship issues.

As last point that is hard to leave alone is the ponencia’s interpretation that the standard laid down in the last sentence of Article 128 (b) of the Labor Code that the documentary proofs be “considered in the course of inspection” applies only to issues other than the fundamental issue of the existence of employer-employee relationship. A contrary rule according to the ponencia would lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship.

What the ponencia apparently refers to is that portion of Article 128(b) that was amended by R.A. 7730, heretofore discussed. To reiterate what has been stated above, the “documentary proofs which were not considered in the course of inspection” refers to the objection that a party may raise in relation with the issuance of a writ of execution, and does not relate to the extent of the visitorial and enforcement power of the Secretary defined in the first sentence of the Article. Thus, no writ may immediately issue if such objection exists. Rather, a full hearing shall ensue as in this case where the Director allowed the petitioner to submit evidence as late as the motion for reconsideration stage. After the Director shall have ruled on all the submitted issues, then a writ of execution shall issue if no appeal is taken; otherwise, an appeal may be taken to the Secretary. Under the Rules, the perfection of an appeal holds in abeyance the issuance of a writ of execution or suspends one already issued.26 R.A. 7730 effectively changes this rule by giving the authority to issue a writ of execution unless the “excepting clause” mentioned above applies.

That the employment relationship issue is for the Secretary or his representative to rule upon is clear from the wording of the 1st paragraph of Article 128(b) when it defines the extent of the Secretary’s power. In this definition of authority, the issue cannot be anywhere else but with the Secretary who has been granted visitorial and enforcement power when an employment relationship exists. This grant must be read with the 2nd paragraph of the same Article that identifies an appeal as the remedy to take from an inspection decision made under the 1st paragraph.

For the ponencia to imply that the NLRC is more fitted to rule on the employment relationship issue misunderstands the power that Article 128 grants the Secretary. It is a full fact-finding power that includes whatever is necessary for the enforcement of the grant, including the authority to determine when the limits of the power apply and to call the parties and hear and decide their submissions. For this reason, Sections 5(a) and 6 of Department Order No. 7-A, Series of 1995 states:

“Sec. 5. Field investigation and hearing.—(a) In case of complaint inspection where no proof of compliance is submitted by the employer after seven (7) calendar days from receipt of the inspection results, the Regional Director shall summon the employer and the employees/complainants to a summary hearing at the regional office.

x x x

Sec. 6. Nature of Proceedings.—The proceedings shall be summary and non-litigious in character. Subject to the requirements of due process, the technicalities of law and procedure and the rules governing admissibility and sufficiency of evidence obtaining in the courts of law shall not strictly apply. The regional director or his designated representative may, however, avail of all reasonable means to ascertain the facts of the controversy speedily and objectively, including the conduct of ocular inspection and examination of well-informed persons. Substantial evidence shall be sufficient to support a decision.”

Significantly, the nature of the proceedings before the Regional Director is not different from the proceedings before the Labor Arbiter. Section 2, Rule V of the Revised Rules of Procedure of the National Labor Relations Commission (2005) provides that:

“Section 2. Nature of Proceedings.—The proceedings before the Labor Arbiter shall be non-litigious in nature. Subject to the requirements of due process, the technicalities of law and procedure and the rules obtaining in courts of law shall not strictly apply thereto. The Labor Arbiter may avail himself of all reasonable means to ascertain the facts of the controversy speedily, including the ocular inspection and examination of well-informed persons.”

Thus, the view that one tribunal has primacy over another because of the nature of their proceedings, the quantum of evidence required, or their level of expertise, is misplaced. Properly understood, the structure that Article 128(b) provides in relation with monetary claims within and employment relationship, as well as the delineation of powers between the Secretary of Labor and Employment and the NLRC are not at all complicated nor confusing, and need not lead to controversies on the part of labor officials in resolving the issue of employer-employee relationship, as the ponencia fears.

Petition granted, judgment and resolution reversed and set aside.

Notes.—The practice of having fixed-term contracts in the broadcast industry does not automatically make all talent contracts valid and compliant with labor law—the assertion that a talent contract exists does not necessarily prevent a regular employment status. (Dumpit-Murillo vs. Court of Appeals, 524 SCRA 290 [2007])

The Court cannot at this stage posit exclusivity relative to broadcast right to a particular gameshow in the absence of evidence thereon such as expert witnesses attesting to the practice in the industry and other relevant factors such as

technical reasons. (GMA Network, Inc. vs. Viva Television Corporation, 547 SCRA 25 [2008]) [People's Broadcasting(Bombo Radyo Phils., Inc.) vs. Secretary of the Department of Labor and Employment, 587 SCRA 724(2009)]

164

SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers (Phils.), Inc. vs. Climaco

G.R. No. 146881. February 5, 2007.*

COCA-COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, petitioners, vs. DR. DEAN N. CLIMACO, respondent.

Labor Law; Employer-Employee Relationship; Four-Fold Test.—The Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test,” considered to be the most important element.

Same; Same; Physicians; Retainer Agreements; Independent Contractors; There is nothing wrong with the employment of a doctor as a company retained physician; Where there is no employeremployee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of the retained physician.—The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination. The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis. Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Lily Uy-Valencia for petitioner.

Victorio M. Torrecampo, Jr. for private respondent.

AZCUNA, J.:

This is a petition for review on certiorari of the Decision of the Court of Appeals1 promulgated on July 7, 2000, and its Resolution promulgated on January 30, 2001, denying peti-tioner’s motion for reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed.

Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:

“WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree as follows:

1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988. The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written notice to the other.

2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS: Three Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may charge professional fee for hospital services rendered in line with his specialization. All payments in connection with the Retainer Agreement shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to such laws.

3. That in consideration of the above mentioned retainer’s fee, the DOCTOR agrees to perform the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex “A” and made an integral part of this Retainer Agreement.

4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and Employment shall be followed.

5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury inflicted on, harm done against or damage caused upon the employee of the COMPANY or their dependents during the course of his examination, treatment or consultation, if such injury, harm or damage was committed through professional negligence or incompetence or due to the other valid causes for action.

6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises from Monday to Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m. to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of employees. It is further understood that the DOCTOR shall be on call at all times during the other workshifts to attend to emergency case[s];

7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee as may be due him at the time of termination.2

The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the Retainer Agreement, provided:

A. OBJECTIVE

These objectives have been set to give full consideration to [the] employees’ and dependents’ health:

1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases.

2. To protect employees from any occupational health hazard by evaluating health factors related to working conditions.

3. To encourage employees [to] maintain good personal health by setting up employee orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident prevention and personnel safety.

4. To evaluate other matters relating to health such as absenteeism, leaves and termination.

5. To give family planning motivations.

B. COVERAGE

1. All employees and their dependents are embraced by this program.

2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations, family planning, physical fitness and athletic programs and other activities such as group health education program, safety and first aid classes, organization of health and safety committees.

3. Periodically, this program will be reviewed and adjusted based on employees’ needs.

C. ACTIVITIES

1. Annual Physical Examination.

2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries.

3. Immunizations necessary for job conditions.

4. Periodic inspections for food services and rest rooms.

5. Conduct health education programs and present education materials.

6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental health hazards.

7. Give family planning motivations.

8. Coordinate with Personnel Department regarding physical fitness and athletic programs.

9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital.

The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner company concluding their retainership agreement effective 30 days from receipt thereof.

It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician,

having served the company continuously for four (4) years. He likewise stated that respondent must receive all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code.

Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an employeremployee relationship existed between petitioner and respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the “four-fold” test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact. Hence, termination disputes or money claims arising from employeremployee relations exceeding P5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.

An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular company doctor and that he was, therefore, subject to social security coverage.

Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a regular employee. The management refused to do so.

On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.

While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.

In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the power of control over respondent’s performance of his duties, and recognized as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in the first case, RAB Case No. 06-02-1013894. The dispositive portion of the Decision reads:

“WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition as a regular employee.

SO ORDERED.”11

In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-0210138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc.

Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.

In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It declared that no employer-employee relationship existed between petitioner company and respondent based on the provisions of the Retainer Agreement which contract governed respondent’s employment.

Respondent’s motion for reconsideration was denied by the NLRC in a Resolution14 promulgated on August 7, 1998. Respondent filed a petition for review with the Court of Appeals.

In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished.

The Court of Appeals held:

“The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled with the actual services rendered by the petitioner, would show that all the elements of the above test are present.

First, the agreements provide that “the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement x x x” (Rollo, page 25). This clearly shows that Coca-Cola exercised its power to hire the services of petitioner.

Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of wages.

Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. “The said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice to the other.” (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole requirement being the former’s compliance with the 30-day notice requirement.

Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that is, control, over the conduct of petitioner in the latter’s performance of his duties as a doctor for the company.

It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the petitioner must render service to the company is laid down.

We say that there exists Coca-Cola’s power to control petitioner because the particular objectives and activities to be observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and due to this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company.

In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plant’s Safety Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant physician, as among those comprising the committee.

It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter was not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying that “petitioner was not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo, page 228). We believe that if the “control test” would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we could declare that an entity exercises control over another’s activities only in instances where the

latter is directed by the former on each and every stage of performance of the particular activity. Anything less than that would be tantamount to no control at all.

To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case where the objectives and activities were laid out, and the specific time for performing them was fixed by the controlling party.”15

Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in Article 28016 of the Labor Code stating 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.” Further, it held that the termination of respondent’s services without any just or authorized cause constituted illegal dismissal.

In addition, the Court of Appeals found that respondent’s dismissal was an act oppressive to labor and was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages.

The dispositive portion of the Decision reads:

“WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in applying the law to the established facts, and are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils., Inc. is hereby ordered to:

1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the petitioner separation pay equivalent to one (1) month’s salary for every year of service rendered, computed at the rate of his salary at the time he was dismissed, plus backwages.

2. Pay petitioner moral damages in the amount of P50,000.00.

3. Pay petitioner exemplary damages in the amount of P50,000.00.

4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner became a regular employee (one year from effectivity date of employment) until the time of actual payment.

SO ORDERED.”17

Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals.

In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its Decision failed to mention whether respondent was a fulltime or part-time regular employee. It also questioned how the benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him considering that such benefits were given only to regular employees who render a full day’s work of not less that eight hours. It was admitted that respondent is only required to work for two hours per day.

The Court of Appeals clarified that respondent was a “regular part-time employee and should be accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA.” It sustained its decision on all other matters sought to be reconsidered.

Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.

The issues are:

1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER.

2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO

3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT.

4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYEREMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.

5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE.

6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.

7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.

The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The resolution of the main issue will determine whether the termination of respondent’s employment is illegal.

The Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test,” considered to be the most important element.18

The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which contains the respondent’s objectives, duties and obligations, does not tell respondent “how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients, employees of [petitioner] company, in each case.” He likened this case to that of Neri v. National Labor Relations Commission,19 which held:

“In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.”

In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was achieved, but did not control the means and methods by which respondent performed his assigned tasks.

The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power of control that the contract provides that respondent shall be directly responsible to the employee concerned and their dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes of action.

The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during emergency cases did not make him a regular employee. He explained, thus:

“Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular employee is offtangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to be at respondent company’s premises, he is not at all further required to just sit around in the premises and wait for an emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them accordingly—and if it is an employee of respondent company who is attended to by him for special treatment that needs hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to stay in the employer’s workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing situation here.”

In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not amount to such control, but are necessary incidents to the Retainership Agreement.

The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.

The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis.

Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal.

WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor Relations Commission are REINSTATED.

No costs.

SO ORDERED.

Puno (C.J., Chairperson), Sandoval-Gutierrez, Corona and Garcia, JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Notes.—Where the company and the physician practically agreed on every term and condition of the latter’s engagement, the same negates the element of control in their relationship. (Philippine Global Communications, Inc. vs. De Vera, 459 SCRA 260 [2005])

The language of a contract is not determinative of the parties’ relationship—it is the totality of the facts and surrounding circumstances of the case. (San Miguel Corporation vs. Aballa, 461 SCRA 392 [2005]) [Coca-Cola Bottlers (Phils.), Inc. vs. Climaco, 514 SCRA 164(2007)]

G.R. Nos. 146121-22. April 16, 2008.*

SAN MIGUEL CORPORATION and GERIBERN ABELLA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division), LABOR ARBITER PEDRO RAMOS and ERNESTO IBIAS, respondents.

Labor Law; Appeals; Findings of fact of the Court of Appeals, particularly where it is in absolute agreement with that of the NLRC and the Labor Arbiter, as in this case, are accorded not only respect but even finality and are deemed binding upon this Court so long as they are supported by substantial evidence.—It should be stressed that whether respondent had falsified his medical consultation card and whether he incurred unauthorized absences are questions of fact which the Court of Appeals, the NLRC, and the labor arbiter had already resolved. We see no reason to disturb the same. After all, findings of fact of the Court of Appeals, particularly where it is in absolute agreement with that of the NLRC and the Labor Arbiter, as in this case, are accorded not only respect but even finality and are deemed binding upon this Court so long as they are supported by substantial evidence. Nevertheless, while the Court subscribes to the factual findings of the lower tribunals, it finds that these tribunals misapplied the appropriate law and jurisprudence on the issue of respondent’s dismissal due to his unauthorized absences. But first the falsification issue.

Same; Termination of Employment; Administrative Law; The settled rule in administrative and quasi-judicial proceedings is that proof beyond reasonable doubt is not required in determining the legality of an employer’s dismissal of an employee, and not even a preponderance of evidence is necessary as substantial evidence is considered sufficient.—The settled rule in administrative and quasi-judicial proceedings is that proof beyond reasonable doubt is not required in determining the legality of an employer’s dismissal of an employee, and not even a preponderance of evidence is necessary as substantial evidence is considered sufficient. Substantial evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise. Thus, substantial evidence is the least demanding in the hierarchy of evidence.

Same; Same; Dismissals; An employee cannot be legally dismissed on the basis of the uncorroborated and self-serving testimonies of the employer’s employees.—The Court agrees with the tribunals below that SMC was unable to prove the falsification charge against respondent. Respondent cannot be legally dismissed on the basis of the uncorroborated and self-serving testimonies of SMC’s employees. SMC merely relied on the testimonies of Marabe and Siwa, who both stated that respondent admitted to them that he falsified his medical consultation card to cover up his excessive AWOPs. For his part, respondent denied having had any knowledge of said falsification, both in his testimony during the company-level investigation and in his handwritten explanation. He did not even claim that he had requested for, nor had been granted any sick leave for the days that the falsified entries were made. Siwa, being responsible for the medical cards, should take the blame for the loss and alleged tampering thereof, and not respondent who had no control over the same.

Same; Same; Leniency; What the lower tribunals perceived as laxity, we consider as leniency; In a world where “no work-no pay” is the rule of thumb, several days of suspension would be difficult for an ordinary working man like respondent.—The Court of Appeals, NLRC, and the labor arbiter found that respondent incurred unauthorized absences, but concluded that the penalty of discharge or determination was disproportionate to respondent’s absences in view of SMC’s inconsistent and lax implementation of its policy on employees attendance. The Court disagrees. Respondent’s dismissal was well within the purview of SMC’s management prerogative. What the lower tribunals perceived as laxity, we consider as leniency. SMC’s tendency to excuse justified absences actually redounded to the benefit of respondent since the imposition of the corresponding penalty would have been deleterious to him. In a world where “no work-no pay” is the rule of thumb, several days of suspension would be difficult for an ordinary working man like respondent. He should be thankful that SMC did not exact from him almost 70 days suspension before he was finally dismissed from work.

Same; Same; Same; Management Prerogatives; An employer has the prerogative to prescribe reasonable rules and regulations necessary for the proper conduct of its business, to provide certain disciplinary measures in order to implement said rules and to assure that the same would be complied with; An employer enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of the employees.—When SMC imposed the penalty of dismissal for the 12th and 13th AWOPs, it was acting well within its rights as an employer. An employer has the prerogative to prescribe reasonable rules and regulations necessary for the proper conduct of its business, to provide certain disciplinary measures in order to implement said rules and to assure that the same would be complied with. An employer enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of the employees.

Same; Same; Same; Same; It is axiomatic that appropriate disciplinary sanction is within the purview of management imposition.—It is axiomatic that appropriate disciplinary sanction is within the purview of management imposition. Thus, in the implementation of its rules and policies, the employer has the choice to do so strictly or not, since this is inherent in its right to control and manage its business effectively. Consequently, management has the prerogative to impose sanctions lighter than those specifically prescribed by its rules, or to condone completely the violations of its erring employees. Of course, this prerogative must be exercised free of grave abuse of discretion, bearing in mind the requirements of justice and fair play. Indeed, we have previously stated: Management also has its own rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with [fewer] privileges in life, the Supreme Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine. All told, we find that SMC acted well within its rights when it dismissed respondent for his numerous absences. Respondent was afforded due process and was validly dismissed for cause.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

De Lima-Bohol & Meñez Law Offices for petitioners.

Potenciano Flores, Jr. for private respondent.

TINGA, J.:

In this Petition for Review on Certiorari1 under Rule 45, petitioners San Miguel Corporation (SMC) and Geribern Abella, Assistant Vice President and Plant Manager of SMC’s Metal Closure and Lithography Plant, assail the Decision2 dated 28 June 2000 and the Resolution3 dated 17 November 2000, both of the Court of Appeals in the consolidated cases of Ernesto M. Ibias v. National Labor Relations Commission, et al. and San Miguel Corporation Metal Closure and Lithography Plant, et al. v. National Labor Relations Commission, et al., docketed as CA-G.R. SP No. 54684 and CA-G.R. SP No. 54709, respectively.

The factual and legal antecedents follow.

Ernesto M. Ibias (respondent) was employed by petitioner SMC on 24 December 1978 initially as a CRO operator in its Metal Closure and Lithography Plant. Respondent continuously worked therein until he advanced as Zamatic operator. He was also an active and militant member of a labor organization called Ilaw Buklod Manggagawa (IBM)-SMC Chapter.

According to SMC’s Policy on Employee Conduct,4 absences without permission or AWOPs, which are absences not covered either by a certification of the plant doctor that the employee was absent due to sickness or by a duly approved

application for leave of absence filed at least six (6) days prior to the intended leave, are subject to disciplinary action characterized by progressively increasing weight, as follows:

VIOLATIONS 1ST Offense 2ndOffense 3rd Offense 4th Offense 5th Offense

2. ABSENCE WITHOUT PERMISSION (within one calendar year)

A. Each day absent not exceeding two (2) daysWritten

warning

B. 3rd AWOP 3 Days’ suspension

C. 4th AWOP 5 Days’ suspension

D. 5th AWOP 7 Days’ suspension

E. 6th AWOP 10 Days’ suspension

F. 7th AWOP 15 Days’ suspension

G. 8th AWOP 30 Days’ suspension

H. 9th AWOP Discharge

3. ABSENCE WITHOUT PERMISSION FOR SIX (6) OR MORE CONSECUTIVE WORKING DAYS IS CONSIDERED ABANDONMENT OF WORK

Discharge5

The same Policy on Employee Conduct also punishes falsification of company records or documents with discharge or termination for the first offense if the offender himself or somebody else benefits from falsification or would have benefited if falsification is not found on time.6

It appears that per company records, respondent was AWOP on the following dates in 1997: 2, 4 and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29 May. For his absences on 2, 4 and 11 January and 28 and 29 April, he was given a written warning7 dated 9 May 1997 that he had already incurred five (5) AWOPs and that further absences would be subject to disciplinary action. For his absences on 28 and 29 April and 7 and 8 May, respondent was alleged to have falsified his medical consultation card by stating therein that he was granted sick leave by the plant clinic on said dates when in truth he was not.

In a Notice to Explain dated 20 May 1997,8 respondent was required to state in writing why he should not be subject to disciplinary action for falsifying his medical consultation card. On 29 May 1997, he was sent a telegram9 asking him to explain why he should not be disciplined for not reporting for work since 26 May 1997. Respondent did not comply with these notices. He was again issued two Notices to Explain10 both dated 3 June 1997, one for his AWOPs from 26 May to 2 June 1997 and another for falsification of medical consultation card entries for 28 April and 8 May 1997.

On 5 June 1997, respondent submitted a handwritten explanation to the charges, to wit: “Tungkol po sa ibinibintang po ninyong [sic] sa akin na falsification of medical consultation card ito po hindi ko magagawa at sa mga araw na hindi ko po ipinasok ito po ay may kaukulang supporting paper[s].”11

Not satisfied with the explanation, SMC conducted an administrative investigation on 17 and 23 June 1997.12

During the investigation, respondent admitted that he was absent on 28 and 29 April and 7 and 8 May 1997 and had not sought sick leave permission for those dates, and also denied falsifying or having had anything to do with the falsification of his medical consultation card.

Ferdinand Siwa (Siwa), staff assistant, and Dr. Angelito Marable (Marable), retainer-physician, testified for SMC.

Siwa testified that sometime in May 1997, he called respondent’s attention to AWOPs he incurred on 28 and 29 April. He admitted having given respondent a written warning for his absences on 2, 4 and 11 January and on 28 and 29 April. Respondent admitted his absences on 28 and 29 April but reasoned that he was on sick leave on those dates, producing his medical consultation card from his locker to prove the same. Siwa was surprised that the medical consultation card was in respondent’s possession since this should have been in the rack beside the plant clinic. His medical consultation showed that he was purportedly granted sick leave for 28 and 29 April. However, upon verification with the plant clinic, Siwa found that respondent was not granted sick leaves on those dates. When Siwa confronted respondent about the falsification, respondent allegedly replied that he resorted to falsification to cover up his AWOPs which he was forced to incur because of personal problems.

Marable testified that sometime in May 1997, he together with the plant nurse and Siwa counter-checked respondent’s sick leaves with the daily personnel leave authority report. The examination revealed that the clinic had not granted any sick leave on 28 and 29 April and 7 and 8 May 1997. On 16 June 1997, when respondent came to him for consultation, Marable confronted respondent about the falsified entries in his medical consultation card, but respondent only explained that he had been having a lot of problems.

After the completion of the investigation, SMC concluded that respondent committed the offenses of excessive AWOPs and falsification of company records or documents, and accordingly dismissed him.13

On 30 March 1998, respondent filed a complaint for illegal dismissal against SMC and Geribern Abella, assistant vice president and plant manager of the Metal Closure and Lithography Plant. On 2 September 1998, Acting Executive Labor Arbiter Pedro C. Ramos rendered his Decision,14 finding respondent to have been illegally dismissed and ordering his reinstatement and payment of full backwages, benefits and attorney’s fees.15

The labor arbiter believed that respondent had committed the absences pointed out by SMC but found the imposition of termination of employment based on his AWOPs to be disproportionate since SMC failed to show by clear and convincing evidence that it had strictly implemented its company policy on absences. It found nothing in the records that would show that respondent was suspended for his previous AWOPs before he was meted the maximum penalty of discharge from service and thus, it ruled that management was to be blamed for the non-implementation of and lax compliance with the policy. It also noted that termination based on the alleged falsification of company records was unwarranted in view of SMC’s failure to establish respondent’s guilt. It observed that the medical card was under the care of Siwa and thus it was he who should be responsible for its loss and the insertion of falsified entries therein.

SMC appealed the decision to the National Labor Relations Commission (NLRC) on 13 November 1998. On 31 March 1999, the NLRC First Division affirmed with modification the decision of the labor arbiter.16 The NLRC found that there was already a strained relationship between the parties such that reinstatement was no longer feasible, so instead it granted separation pay equivalent to one (1) month for every year of service. It also deleted the award of attorney’s fees.17

The NLRC, on 30 June 1999, denied the parties’ respective motions for reconsideration of its decision.

On 2 September 1999, respondent filed a special civil action for certiorari assailing the NLRC decision and resolution. SMC filed its petition for certiorari on 3 September 1999. The cases were consolidated.

On 28 June 2000, the Court of Appeals rendered its Decision affirming the findings of the labor arbiter and the NLRC relative to the illegality of respondent’s dismissal but modifying the monetary award. The dispositive portion of the decision reads:

“WHEREFORE, the decision of the public respondent modifying the decision of the labor arbiter is SET ASIDE and the decision of the labor arbiter is hereby REINSTATED with the modification that the payment of the full backwages and other benefits would be from 2 July 1997 up to 14 October 1998.

SO ORDERED.”18

The Court of Appeals believed that contrary to SMC’s claims, it was more consistent with human experience that respondent did not make an admission, especially in view of his consistent denials during the administrative investigation and of his written explanation dated 5 June 1997. The Court of Appeals also stayed firm in its determination that the testimonies of Marable and Siwa could not be given weight as they were uncorroborated, and that it was Siwa who was liable for the falsification of respondent’s consultation card.

The appellate court also held that respondent’s AWOPs did not warrant his dismissal in view of SMC’s inconsistent implementation of its company policies. It could not understand why respondent was given a mere warning for his absences on 28 and 29 April which constituted his 5th and 6th AWOPs, respectively, when these should have merited suspension under SMC’s policy. According to the appellate court, since respondent was merely warned, logically said absences were deemed committed for the first time; thus, it follows that the subject AWOPs did not justify his dismissal because under SMC’s policy, the 4th to 9th AWOPs are meted the corresponding penalty only when committed for the second time.

The Court of Appeals, however, disagreed with the NLRC’s application of the doctrine of “strained relations,” citing jurisprudence19 that the same should be strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement, and that since every labor dispute almost always results in “strained relations,” the phrase cannot be given an over-arching interpretation.20 Thus, it ordered that respondent’s backwages be computed from the date of his dismissal up to the time when he was actually reinstated. Since respondent was placed on payroll reinstatement on 15 October 1998, he should be awarded backwages from 2 July 1997 up to 14 October 1998.

Both parties separately moved for reconsideration of the decision but the Court of Appeals denied the motions for lack of merit in the Resolution dated 17 November 2000.

In this present petition for review, SMC raises the following grounds:

A.

THE COURT OF APPEALS DECIDED THE CASES IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THE SUPREME COURT, AND IN VIOLATION OF THE ACCEPTED RULES ON EVIDENCE AND USUAL COURSE OF JUDICIAL PROCEEDINGS.

B.

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE ABSENCES OF IBIAS ON 28TH AND 29TH OF APRIL 1997 “WERE COMMITTED FOR THE FIRST TIME.” SUCH FINDING IS GROUNDED ENTIRELY ON SPECULATION AND CONJECTURE AND A RESULT OF A MANIFESTLY ABSURD INFERENCE.21

On the first ground, SMC contends that the Court of Appeals allegedly disregarded the basic rule on evidence that affirmative testimony is stronger than negative testimony. It claims that the testimonies of Marable and Siwa that respondent admitted having committed the falsification should be given more weight than his mere denial. SMC adds that the falsified medical consultation card by itself proves respondent’s falsification of the card. The fact that he used the falsified consultation card to falsely represent that he had been granted sick leave on 28 and 29 April and 7 and 8 May 1997 is sufficient to hold him liable for falsification, SMC adds. Further, SMC argues that respondent’s possession of the falsified consultation card also raises the presumption that he is the author of the falsification.

On the second ground, SMC points out respondent’s absences on 28 and 29 April 1997 were his 5th and 6th AWOPs, respectively, and following the Court of Appeals’ ruling, the same should have been meted the penalty of five (5) days’ suspension for the 5th AWOP and 10 days’ suspension for the 6th AWOP under SMC’s Policy on Employee Conduct. Respondent incurred fourteen (14) AWOPs but when SMC imposed the penalty of discharge, the Court of Appeals disagreed since SMC had supposedly failed to strictly implement its company policy on attendance. Such reasoning would have respondent’s AWOPs justified by SMC’s lax implementation of disciplinary action on its employees, and would place on SMC the burden of proving strict conformity with company rules. SMC argues that this is contrary to the ruling in Cando v. NLRC22 that it should be the employee who must show proof of condonation by the employer of the offense or laxity in the enforcement of the company rules since it is he who has raised this defense.

SMC directs our attention to the Court of Appeals’ observation that Ibias’ 5th and 6th AWOPs should be considered as though “said absences were committed for the first time” since respondent “was merely given a warning” for said AWOPs. To SMC, it seems that that the appellate court would count the employee’s AWOPs not on the basis of the number of times that he had been absent, but on the basis of the penalty imposed by the employee. This is clearly contrary to the dictates of the Policy. Such a ruling also deprives SMC of its management prerogative to impose sanctions lighter than those specifically prescribed by its rules.

The issues to be resolved are whether the Court of Appeals erred in sustaining the findings of the labor arbiter and the NLRC and in dismissing SMC’s claims that respondent was terminated from service with just cause.

The petition is meritorious as regards one of the issues.

At the outset, it should be stressed that whether respondent had falsified his medical consultation card and whether he incurred unauthorized absences are questions of fact which the Court of Appeals, the NLRC, and the labor arbiter had already resolved. We see no reason to disturb the same. After all, findings of fact of the Court of Appeals, particularly where it is in absolute agreement with that of the NLRC and the Labor Arbiter, as in this case, are accorded not only respect but even finality and are deemed binding upon this Court so long as they are supported by substantial evidence.23 Nevertheless, while the Court subscribes to the factual findings of the lower tribunals, it finds that these tribunals misapplied the appropriate law and jurisprudence on the issue of respondent’s dismissal due to his unauthorized absences. But first the falsification issue.

The settled rule in administrative and quasi-judicial proceedings is that proof beyond reasonable doubt is not required in determining the legality of an employer’s dismissal of an employee, and not even a preponderance of evidence is necessary as substantial evidence is considered sufficient. Substantial evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise. Thus, substantial evidence is the least demanding in the hierarchy of evidence.24

The Court agrees with the tribunals below that SMC was unable to prove the falsification charge against respondent. Respondent cannot be legally dismissed on the basis of the uncorroborated and self-serving testimonies of SMC’s employees. SMC merely relied on the testimonies of Marabe and Siwa, who both stated that respondent admitted to

them that he falsified his medical consultation card to cover up his excessive AWOPs. For his part, respondent denied having had any knowledge of said falsification, both in his testimony during the company-level investigation and in his handwritten explanation. He did not even claim that he had requested for, nor had been granted any sick leave for the days that the falsified entries were made. Siwa, being responsible for the medical cards, should take the blame for the loss and alleged tampering thereof, and not respondent who had no control over the same.

Proof beyond reasonable doubt is not required as a basis for judgment on the legality of an employer’s dismissal of an employee, nor even preponderance of evidence for that matter, substantial evidence being sufficient. In the instant case, while there may be no denying that respondent’s medical card had falsified entries in it, SMC was unable to prove, by substantial evidence, that it was respondent who made the unauthorized entries. Besides, SMC’s (Your) Guide on Employee Conduct25 punishes the act of falsification of company records or documents; it does not punish mere possession of a falsified document.

The issue of the unauthorized absences, however, is another matter.

Respondent’s time cards showed that he was on AWOP on the dates enumerated by SMC: 2, 4 and 11 January; 26, 28 and 29 April; and 5, 7, 8, 13, 21, 22, 28 and 29 May 1997. The Labor Arbiter even found that respondent was on AWOP on all said dates.26 Respondent also admitted being absent on 28 and 29 April and 7 and 8 May 1997. For each of the periods of 1 to 15 January 1997 and 16 to 30 April 1997, respondent reported for work only for two days.27 For the month of May 1997, he reported only for one day.28

The Court observes that respondent admitted during the company-level investigation that that his absences incurred on 28 and 29 April, and 7 and 8 May 1997 were without permission.29 He explained that during those times, he had a family problem which needed his attention; he was confused and was unable to inform or seek permission from his superior.30

However, while respondent has admitted these absences, before the Court, he also seeks to belittle the plain by countering that SMC has not been too rigid in its application of company rules pertaining to leave availments. In the proceedings below he claimed that during the days that he was absent, he had attended to some family matters. Thus, he presented copies of two (2) medical certificates and a barangay certification that he attended hearings on some of the days when he was absent. These certifications, however, cannot work to erase his AWOPs; respondent had never submitted these documents to SMC and it is only when the case was pending before the Labor Arbiter that he produced the same.31

Respondent cannot feign surprise nor ignorance of the earlier AWOPs he had incurred. He was given a warning for his 2, 4, and 11 January and 26, 28, and 29 April 1997 AWOPs.32 In the same warning, he was informed that he already had six AWOPs for 1997. He admitted that he was absent on 7 and 8 May 1997.33 He was also given notices to explain his AWOPs for the period 26 May to 2 June 1997, which he received but refused to acknowledge.34 It does not take a genius to figure out that as early as June 1997, he had more than nine AWOPs.

Thus, even if he was not punished for his subsequent AWOPs, the same remained on record. He was aware of the number of AWOPs he incurred and should have known that these were punishable under company rules. The fact that he was spared from suspension cannot be used as a reason to incur further AWOPs and be absolved from the penalty therefor.

The Court of Appeals, NLRC, and the labor arbiter found that respondent incurred unauthorized absences, but concluded that the penalty of discharge or determination was disproportionate to respondent’s absences in view of SMC’s inconsistent and lax implementation of its policy on employees attendance. The Court disagrees. Respondent’s dismissal was well within the purview of SMC’s management prerogative.

What the lower tribunals perceived as laxity, we consider as leniency. SMC’s tendency to excuse justified absences actually redounded to the benefit of respondent since the imposition of the corresponding penalty would have been deleterious to him. In a world where “no work-no pay” is the rule of thumb, several days of suspension would be difficult for an ordinary working man like respondent. He should be thankful that SMC did not exact from him almost 70 days suspension before he was finally dismissed from work.

In any case, when SMC imposed the penalty of dismissal for the 12th and 13th AWOPs, it was acting well within its rights as an employer. An employer has the prerogative to prescribe reasonable rules and regulations necessary for the proper conduct of its business, to provide certain disciplinary measures in order to implement said rules and to assure that the same would be complied with.35 An employer enjoys a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of the employees.36

It is axiomatic that appropriate disciplinary sanction is within the purview of management imposition.37 Thus, in the implementation of its rules and policies, the employer has the choice to do so strictly or not, since this is inherent in its right to control and manage its business effectively. Consequently, management has the prerogative to impose sanctions lighter than those specifically prescribed by its rules, or to condone completely the violations of its erring employees. Of course, this prerogative must be exercised free of grave abuse of discretion, bearing in mind the requirements of justice and fair play. Indeed, we have previously stated:

“Management also has its own rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with [fewer] privileges in life, the Supreme Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine.”38

All told, we find that SMC acted well within its rights when it dismissed respondent for his numerous absences. Respondent was afforded due process and was validly dismissed for cause.

WHEREFORE, the instant petition is GRANTED. The challenged Decision dated 28 June 2000 and Resolution dated 17 November 2000 of the Court of Appeals in CA-G.R. SP Nos. 54684 and 54709 are REVERSED and SET ASIDE. Respondent’s complaint against petitioners is DISMISSED.

SO ORDERED.

Quisumbing (Chairperson), Austria-Martinez,** Carpio-Morales and Velasco, Jr., JJ., concur.

Petition granted, challenged decision and resolution reversed and set aside.

Notes.—As the long service of an employee has been amply compensated, her plea for leniency cannot offset her dishonesty—even government employees who are validly dismissed from the service by reason of timely covered offenses are deprived of retirement benefits. (Equitable PCIBank vs. Caguioa, 466 SCRA 686 [2005])

Too much leniency on the part of judges is frowned upon. (Concerned Litigants vs. Araya, Jr., 513 SCRA 9 [2007])

——o0o——

_______________

38 Samar II Electric Cooperative, Inc. v. National Labor Relations Commission, 337 Phil. 24, 28-29; 270 SCRA 290, 295 (1997), citing Sosito v. Aguinaldo Development Corp., 156 SCRA 392 (1987).

** As replacement of J. Arturo D. Brion who took no part due to a party being a former client per Administrative Circular No. 84-2007. [San Miguel Corporation vs. National Labor Relations Commission , 551 SCRA 410(2008)]

G.R. No. 180302. February 5, 2010.*

JIMMY ARENO, JR., petitioner, vs. SKYCABLE PCC-BAGUIO, respondent.

Remedial Law; Certiorari; Order of Court of Appeals (CA) for the parties to file responsive and other pleadings in petitions for certiorari filed before it is merely directory in nature; Rules of procedure may be relaxed in the interest of substantial justice and in order to afford litigants maximum opportunity for the proper and just determination of their causes.—A close scrutiny of Section 6, Rule 65 of the Rules of Court, which grants discretionary authority to the CA in ordering parties to file responsive and other pleadings in petitions for certiorari filed before it, will reveal that such rule is merely directory in nature. This is so because the word “may” employed by the rule shows that it is not mandatory but discretionary on the part of the CA to require the filing of pleadings which it deems necessary to assist it in resolving the controversies. In the same way, the admission of any responsive pleading filed by party-litigants is a matter that rests largely on the sound discretion of the court. At any rate, rules of procedure may be relaxed in the interest of substantial justice and in order to afford litigants maximum opportunity for the proper and just determination of their causes.

Constitutional Law; Due Process; The essence of due process is simply an opportunity to be heard, a formal or trial-type hearing is not essential as the due process requirement is satisfied where the parties are afforded fair and reasonable opportunity to explain their side.—In this case, petitioner was asked to explain and was informed of the complaint against him. A committee was formed which conducted an investigation on January 31, 2002 by exhaustively examining and questioning both petitioner and his accuser, Soriano, separately. Petitioner actively participated therein by answering the questions interposed by the panel members. The proceeding was recorded, and the correctness of which was certified by respondent thru its Regional Manager, Raul Bandonill. Undoubtedly, petitioner was given enough opportunity to be heard and defend himself. It has already been held that the essence of due process is simply an opportunity to be heard, a formal or trial-type hearing is not essential as the due process requirement is satisfied where the parties are afforded fair and reasonable opportunity to explain their side.

Labor Law; Management Prerogative; It is axiomatic that appropriate disciplinary sanctions is within the purview of management imposition.—The decision to suspend petitioner was rendered after investigation and a finding by respondent that petitioner has indeed made malicious statements against a co-employee. The suspension was imposed due to a repeated infraction within a deactivation period set by the company relating to a previous similar offense committed. It is axiomatic that appropriate disciplinary sanction is within the purview of management imposition. What should not be overlooked is the prerogative of an employer company to prescribe reasonable rules and regulations necessary for the proper conduct of its business and to provide certain disciplinary measures in order to implement said rules to assure that the same would be complied with. Respondent then acted within its rights as an employer when it decided to exercise its management prerogative to impose disciplinary measure on its erring employee.

Same; Termination of Employment; Elements for willful disobedience of the employer’s lawful orders as a just cause for dismissal.—As a just cause for dismissal of an employee under Article 282 of the Labor Code, willful disobedience of the employer’s lawful orders requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, i.e., characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. Both requisites are present in the instant case.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Ricardo N. Olairez & Nellie M. Olairez Law Office for petitioner.

Rondez and Partners Law Office for respondent.

DEL CASTILLO, J.:

Disciplinary action against an erring employee is a management prerogative which, generally, is not subject to judicial interference. However, this policy can be justified only if the disciplinary action is dictated by legitimate business reasons and is not oppressive, as in this case.

This petition for review on certiorari1 assails the Decision2 dated May 28, 2007 and the Resolution3 dated October 16, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 94485, which affirmed the February 28, 2006 Decision4 of the National Labor Relations Commission (NLRC) upholding the legality of petitioner Jimmy Areno Jr.’s suspension and subsequent termination from employment.

Factual Antecedents

On January 17, 1995, petitioner was employed as a cable technician by respondent Skycable PCC-Baguio. On January 17, 2002, an accounting clerk of respondent, Hyacinth Soriano (Soriano), sent to the human resource manager a letter-complaint5 against petitioner alleging that on two separate occasions, the latter spread false rumors about her (the first in the middle of 2001 and the second on December 22, 2001). On January 27, 2002, she was again insulted by petitioner when the latter approached her and said that she was seen going out with Aldrin Estrada, their field service supervisor, at Central Park, Baguio City. During that incident, petitioner uttered, “Ikaw lang ang nakakaalam ng totoo” with malicious intent and in a provocative manner. Soriano averred that petitioner’s unscrupulous behavior constituted serious and grave offense in violation of the company’s Code of Discipline.

On the same day, respondent issued a Memorandum6 requiring petitioner to submit an explanation within 76 hours from notice thereof. Petitioner submitted his written explanation7 dated January 23, 2002 denying all the allegations in Soriano’s letter-complaint and further denying having uttered the statement imputed on him, explaining thus:

“2. That on the 7th of January, 2002 at SkyCable office, I greeted her ‘HELLO, HYA.’ I thought she didn’t hear me greet her so I continued saying ‘NAKITA NAMIN KAYO AH…SA CENTRAL PARK.’ With that she answered, ‘KASAMA KO SI EMMAN.’ Then I added, ‘BA’T NANDOON YUNG 114?’ Then she reacted ‘TSISMOSO KA KASI!’ In that instance, I didn’t intend to insult her as she was saying because I never really implied anything with my statement nor delivered it with malicious intent. So I ended by saying, ‘BA’T DI MO SABIHIN YUNG PROBLEMA MO SA AKIN? IKAW LANG ANG NAKAKAALAM NIYAN E!’ In this statement, I was asking her to tell me frankly the reasons why she’s mad at me. I want to stress that I never delivered the statement in a provocative manner.”8

An administrative investigation was accordingly conducted on January 31, 2002. In a Memo9 dated February 6, 2002, the investigating committee found petitioner guilty of having made malicious statements against Soriano during the January 7, 2002 conversation, which is categorized as an offense under the Company Code of Discipline. Consequently, petitioner was suspended for three days without pay effective February 13-15, 2002. The Memo was allegedly served on February 7, 2002 but petitioner refused to sign it.

Notwithstanding the suspension order, however, petitioner still reported for work on February 13, 2002. By reason thereof, respondent sent petitioner a letter denominated as 1st Notice of Termination10 requiring him to explain in writing why he should not be terminated for insubordination. On February 18, 2002, petitioner inquired from respondent whether he is already dismissed or merely suspended since he was refused entry into the company premises on February 14, 2002.11 Respondent replied that petitioner was merely suspended and gave him additional time to tender his written explanation to the 1st Notice of Termination.

On March 2, 2002, petitioner again wrote to respondent, this time requesting for further investigation on his alleged act of spreading rumors against Soriano in order for him to confront his accuser and present his witnesses with the assistance of counsel. Respondent denied the request reiterating that there has been substantial compliance with due process and that a reinvestigation is moot because the suspension was already served.

Anent the new charge of insubordination, petitioner submitted to respondent his written explanation12 averring that he still reported for work on the first day of his suspension because the accusation of Soriano is baseless and her testimony is hearsay. Besides, according to petitioner, he did not defy any order related to his duties, no representative of the management prevented him from working and that reporting to work without being paid for the service he rendered on that day did not in any way affect the company’s productivity.On March 15, 2002, an investigation on the insubordination case was conducted which was attended by the parties and their respective counsels. Through a Final Notice of Termination dated April 1, 2002,13 petitioner was dismissed from service on the ground of insubordination or willful disobedience in complying with the suspension order.

Proceedings before the Labor Arbiter

On April 5, 2002, petitioner filed a complaint14 before the Arbitration Branch of the NLRC against respondent assailing the legality of his suspension and eventual dismissal. He claimed that his suspension and dismissal were effected without any basis, and that he was denied his right to due process.On July 31, 2003, the Labor Arbiter rendered a Decision15 dismissing petitioner’s complaint for lack of merit. The Labor Arbiter ruled that the act of petitioner in spreading rumors or intriguing against the honor of a co-employee was persistent and characterized by willful and wrongful intents. It thus held that the order suspending petitioner is a legitimate exercise of management prerogative and that the deliberate refusal of petitioner to comply therewith constitutes willful disobedience.

Proceedings before the NLRC

Petitioner appealed to the NLRC, which, in a Decision16 dated July 22, 2005 found his suspension and dismissal illegal. It held that the testimonies given during the January 31, 2002 administrative investigation and used as basis for petitioner’s suspension are hearsay. The NLRC likewise held that petitioner was deprived of his basic right to due process when he was not allowed to confront his accuser despite his repeated requests.

Respondent moved for reconsideration.17 Petitioner, for his part, filed a Motion for Partial Reconsideration18 with respect to the limited award of backwages and to claim payment of attorney’s fees and damages as well.

The NLRC, in its February 28, 2006 Decision,19 reconsidered its earlier Decision and reinstated the Labor Arbiter’s Decision dismissing the complaint. In reversing itself, the NLRC opined that as shown by the transcripts of the investigation conducted on January 31, 2002, the testimony of Soriano was not, after all, hearsay. The NLRC also considered the Memorandum dated December 10, 2001 which placed petitioner under deactivation for three months due to an offense he earlier committed. While under said deactivation period, the commission of any further infraction warrants the imposition of the penalty of suspension. Finally, the NLRC struck down petitioner’s claim that he has no knowledge of the suspension order since this was never raised before the Labor Arbiter but only on appeal.

Proceedings before the Court of Appeals

Aggrieved, petitioner filed with the CA a petition for certiorari.20 On May 28, 2007, the CA affirmed the findings of the NLRC, ruling that the suspension of petitioner was not predicated on hearsay evidence; that petitioner was not deprived of due process both at the company level and during the proceedings held before the NLRC; and that petitioner’s failure to comply with respondent’s suspension order, despite notice thereof, is a case of willful disobedience of a lawful order which is a valid ground for dismissal.

Petitioner moved for reconsideration.21 Before acting thereon, the CA required respondent to file its comment.22 Although 19 days late, the CA admitted respondent’s comment23 in the interest of justice.24

On October 16, 2007, the CA resolved petitioner’s Motion for Reconsideration as follows:

“Finding no cogent reason with which to modify, much less reverse Our assailed Decision dated May 28, 2007, petitioner’s Motion for Reconsideration filed on June 18, 2007 is hereby DENIED.

SO ORDERED.”25

Issues

Hence, the present petition with the following assignment of errors:

I.

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE WHIMSICAL AND CAPRICIOUS DECISION OF THE NLRC WHICH REVERSED ITS ORIGINAL DECISION FINDING THAT WITNESS HYACINTH SORIANO’S TESTIMONY IS NOT HEARSAY AFTER ALL:

A. BY MEANS OF SELECTIVE CITATION ON A PORTION ON PAGE TWO OF THE FIVE-PAGE UNSWORN TESTIMONY OF HYACINTH SORIANO THAT HER TESTIMONY IS NOT HEARSAY AFTER ALL WHEN IN ITS ENTIRETY THE TESTIMONIES ARE DOUBLE-TRIPLE-HEARSAY AS FOUND [BY] THE RESPONDENT NLRC IN ITS ORIGINAL DECISION, ASIDE FROM THE FACT THAT IN THAT JANUARY 31, 2002 HEARING WITNESS HYACINTH SORIANO DID NOT TESTIFY UNDER OATH AND THE ENTIRE PROCEEDINGS OF THE MINUTES WAS NOT SIGNED BY THE 3-MEMBER INVESTIGATION COMMITTEE, HENCE THE BASIS OF THE PETITIONER’S SUSPENSION WHICH PUBLIC RESPONDENTS FOUND TO BE A LEGAL ORDER IS NOTHING BUT A SCRAP OF PAPER.

B. BY SIMPLY STATING THAT PETITIONER WAS NOT DENIED DUE PROCESS BECAUSE HE WAS FURNISHED COPY OF THE TERMINATION NOTICE STATING THE GROUNDS THERETO ALTHOUGH IN THE PLANT LEVEL INVESTIGATION/HEARING ON JANUARY 31, 2002, PETITIONER WAS EXCLUDED OR HIS PRESENCE WAS NOT ALLOWED DURING THE GUIDED/COUCHED INTERROGATIONS FOR THE TESTIMONIES OF WITNESS HYACINTH SORIANO AND AFTER WITNESS SORIANO’S GUIDED/COUCHED TESTIMONIES ENDED, THE PANEL OF INVESTIGATORS SUBSEQUENTLY TOOK THE TESTIMONIES OF THE PETITIONER, ONE AFTER THE OTHER. IN SHORT, DESPITE HIS REPEATED DEMANDS FROM THE PRIVATE RESPONDENT MANAGEMENT THAT HE BE ALLOWED TO CONFRONT HIS ACCUSER HYACINTH SORIANO, PETITIONER WAS NOT ALLOWED TO CONFRONT HIS ACCUSER.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO CONSIDER THE UNCONTROVERTED FACT THAT THE SO-CALLED THREE-DAY SUSPENSION WAS ANCHORED ON A SCRAP OF PAPER BECAUSE IT WAS NOT SIGNED AND ISSUED BY A COMPANY OFFICIAL OF THE PRIVATE RESPONDENT AUTHORIZED TO EFFECT ANY DISMISSAL OR SUSPENSION ORDER, THUS PETITIONER DID NOT VIOLATE ANY LAWFUL ORDER.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE WHIMSICAL AND CAPRICIOUS SECOND DECISION OF THE RESPONDENT NLRC WHICH REVERSED ITS ORIGINAL DECISION ON THE ALLEGED GROUND:

A. THAT THE PETITIONER KNEW OF HIS SUSPENSION WHEN HE REPORTED FOR DUTY ON FEBRUARY 13, 2002 AS DECREED IN THE UNSIGNED SO-CALLED SUSPENSION ORDER ALLEGEDLY CONSTITUTING INSUBORDINATION WHEN THE FACTS DISCLOSE THAT PETITIONER DECLINED TO RECEIVE IT PERSONALLY AND HE ASKED THAT IT BE SENT TO HIM THROUGH REGISTERED MAIL AND THIS FACT IS ADMITTED BY PRIVATE RESPONDENT, THUS PUBLIC RESPONDENTS’ FINDINGS AND CONCLUSION ARE NOT ONLY CONTRARY TO THE ADMISSION OF BOTH PARTIES BUT BASED ON CONJECTURES AND SURMISES.

B. THAT AS FOUND BY THE COURT OF APPEALS IT IS ONLY ON APPEAL THAT PETITIONER INTERPOSES THE ARGUMENT THAT HE COULD NOT HAVE KNOWN ABOUT HIS SUSPENSION THUS HE COULD NOT VIOLATE AN ORDER WHICH HE HAD NOT KNOWN IN THE FIRST PLACE, IS NOT IN ACCORD WITH THE APPLICABLE JURISPRUDENCE, MOREOVER, UPON SCRUTINY IT WAS NOT SIGNED BY A COMPANY OFFICIAL AUTHORIZED TO EFFECT DISMISSAL OR SUSPENSION ORDER. THUS THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING ON THIS MATTER.

IV.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ADMITTING THE PRIVATE RESPONDENT’S COMMENT DESPITE x x x NON-COMPLIANCE WITH THE COURT OF APPEALS’ ORDER TO FILE COMMENT [DISREGARDING] THE STRICT OBSERVANCE OF THE RULES WHICH IS MANDATORY. FURTHERMORE, WHETHER OR NOT THE COURT OF APPEALS [VIOLATED] THE MANDATE OF SECTION 14, ARTICLE VIII OF THE CONSTITUTION IN ITS DENIAL OF PETITIONER’S MOTION FOR RECONSIDERATION WITHOUT STATING THE LEGAL BASIS THEREFOR.26

Petitioner contends that his suspension was without any basis since the testimony of Soriano is hearsay and was not made under oath. Also, the minutes of the investigative proceeding/hearing was not signed by the investigators. Petitioner likewise contends that he was denied due process as he was not given the opportunity to contest the evidence against him. He further insists that the suspension order is a scrap of paper as it was not signed and issued by an official who is authorized to effectuate such order. And even assuming that the suspension order is valid, no proof was ever presented to show that he was indeed served or that he received a copy thereof. Therefore, he could not have violated any lawful order to justify his dismissal.

Our Ruling

The petition is devoid of merit.

The CA did not err in admitting the com-

ment of respondent despite its late filing.

Petitioner argues that the CA erred in admitting respondent’s Comment to petitioner’s Motion for Reconsideration which was filed 19 days late.

A close scrutiny of Section 6, Rule 65 of the Rules of Court,27 which grants discretionary authority to the CA in ordering parties to file responsive and other pleadings in petitions for certiorari filed before it, will reveal that such rule is merely directory in nature. This is so because the word “may” employed by the rule shows that it is not mandatory but discretionary on the part of the CA to require the filing of pleadings which it deems necessary to assist it in resolving the controversies.28 In the same way, the admission of any responsive pleading filed by party-litigants is a matter that rests largely on the sound discretion of the court. At any rate, rules of procedure may be relaxed in the interest of substantial justice and in order to afford litigants maximum opportunity for the proper and just determination of their causes.29 Strict adherence to technical adjective rules should never be unexceptionally required because a contrary precept would

result in a failure to decide cases on their merits.30 The CA could not have erred in admitting the comment, albeit filed late, when it viewed that the interest of justice would be better served by the policy of liberality.

CA stated legal basis for denying petitioner’s motion for reconsideration.

Petitioner next alleges that the CA denied reconsideration without indicating its legal basis in violation of the mandate of Section 14, Article VIII of the Constitution, which provides that no petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the legal basis therefor. This requirement, however, was complied with in the instant case, when the CA, in its resolution denying petitioner’s motion for reconsideration, stated that it found no cogent reason to modify, much less reverse itself.31

Suspension validly meted out by respondent on petitioner.

Going now to the merits of the case, the 3-day suspension of petitioner is not tainted with substantive or procedural infirmities. For one, petitioner’s insistent claim that his suspension was predicated on hearsay testimony deserves scant consideration.

The NLRC initially ruled that Soriano’s testimony during the investigation on the alleged act of petitioner in spreading rumors is hearsay. Nevertheless, it reversed itself by holding that while Soriano stated that her allegation with regard to the first two instances that petitioner was spreading false information about her is based on what she heard from other people, her narration of the third instance relating to what has transpired during their January 7, 2002 conversation is not hearsay. The NLRC ruled quoting in part the relevant testimony of Soriano as recorded in the transcript of the investigation:

“x x x. Indeed, complainant had been spreading malicious information against Ms. Soriano. It appears that Ms. Soriano had averred that this happened on three (3) occasions. The first two (2) instances happened in midyear of 2001 and another in December 2001. the [sic] first two (2) instances were merely referred to by the complainant in passing. Thus, she stated:

Raul: So ang pag-uusapan natin dito ay yung number 3, yung January 7?

Hya: Opo. Kasi yung mid last year at yung December 23, iniignore ko lang hanggang nung Jan 7 harap harapan na.

Tessa: Are you considering numbers 1 and 2? Kasi dito naman nag-ugat yun e.

Hya: Ma’am kasi ang parang point ko dito is to cite na ngayon may proof na ako kasi hinarap na nya ako unlike noon napuro hearsay lang. Ngayon parang Napatunayan ko na thru’ Jan 7 na totoo nga. Parang ang ano ko kasi dito is yung intrigue. Yung 1 & 2 Rumors lang pero nung Jan 7, intrigue na un kasi may mga taong nakarinig.

Raul: So ang sinasabi mo ba is talagang ang offense is yung pag-insulto nya? Parang ang talagang intension nya is awayin ka? Parang alam nya maiinis ka.

Hya: Opo

Raul: Kasi di ba when you’re provoking a fight usually hinahamon mo? In this case ba yung sinabi ni Toto ay parang gumawa sya ng statement na hindi maganda sa iyo at yung reaction mo ay x x

Hya: Sir siguro sa part ni Toto hindi kasi he’s used to it na e. Pero on my part x x x

Raul: So yun ang interpretation mo sa offense ni x x x.

Hya: Opo.

The foregoing reveals that Ms. Soriano’s testimony is not ‘hearsay’ and neither is it ‘say-so’.”32

On appeal, the CA affirmed this ruling when it likewise found that the following statements of Soriano were limited to matters of personal knowledge:

Hya: 12:15, pagbungad ko palang, O HYA KUMAIN PALA KAYO SA CENTRAL PARK? Sabi ko OO KASAMA KO SI EMAN, sasabihin ko palang yung hindi na nakasama si May, Ang sabi niya na E NASA LABAS NAMAN YUNG SASAKYAN NI. tapos sinabi nya yung plate # ni sir Aldrin.

Tessa: Nasa labas daw yung sasakyan ni Aldrin.

Hya: Opo, e di nagtaka ako, nag-argue na kami, tinitingnan na kami ng mga Ae’s tapos iniwan ko sya.33

The CA and NLRC are in agreement with this finding and since both are supported by evidence on record, the same must be accorded due respect and finality.

Petitioner still contends that the testimonies elicited during the investigative hearing were not made under oath, that the record of the proceeding is not admissible for being unsigned, and that he was not given a chance to confront his accuser, thus, invoking denial of due process.

In this case, petitioner was asked to explain and was informed of the complaint against him. A committee was formed which conducted an investigation on January 31, 2002 by exhaustively examining and questioning both petitioner and his accuser, Soriano, separately. Petitioner actively participated therein by answering the questions interposed by the panel members. The proceeding was recorded, and the correctness of which was certified by respondent thru its Regional Manager, Raul Bandonill.34 Undoubtedly, petitioner was given enough opportunity to be heard and defend himself. It has already been held that the essence of due process is simply an opportunity to be heard, a formal or trial-type hearing is not essential as the due process requirement is satisfied where the parties are afforded fair and reasonable opportunity to explain their side.35

The decision to suspend petitioner was rendered after investigation and a finding by respondent that petitioner has indeed made malicious statements against a co-employee. The suspension was imposed due to a repeated infraction within a deactivation period set by the company relating to a previous similar offense committed. It is axiomatic that appropriate disciplinary sanction is within the purview of management imposition.36 What should not be overlooked is the prerogative of an employer company to prescribe reasonable rules and regulations necessary for the proper conduct of its business and to provide certain disciplinary measures in order to implement said rules to assure that the same would be complied with.37 Respondent then acted within its rights as an employer when it decided to exercise its management prerogative to impose disciplinary measure on its erring employee.

Petitioner was validly dismissed on the

ground of willful disobedience in refusing

to comply with the suspension order.

The CA refused to give credence to petitioner’s assertion of having no knowledge of the suspension because he refused to receive the suspension order preferring that it be sent by registered mail. The appellate court affirmed the factual finding of the NLRC that petitioner was definitely aware of his suspension but only feigned ignorance of the same. As a rule, we refrain from reviewing factual assessments of agencies exercising adjudicative functions. Factual findings of administrative agencies that are affirmed by the CA are conclusive on the parties and not reviewable by this Court so long as these findings are supported by substantial evidence.38

Anyhow, evidence on record repudiates petitioner’s pretension. His insistence that he had no notice of his suspension is belied by evidence as it shows that the suspension order was served on petitioner on February 7, 2002 by his immediate superior, Al Luzano, but petitioner declined to sign it. No acceptable reason was advanced for doing so except petitioner’s shallow excuse that it should be sent to him by registered mail.

Petitioner also challenges the validity of the suspension order for being unsigned. The same has no merit. Upon careful examination, it appears that the contention was raised for the first time in petitioner’s motion for reconsideration of the Decision of the CA. In Arceno v. Government Service Insurance System,39 the hornbook principle that new issues cannot be raised for the first time on appeal was reiterated. We emphasized therein that the rule is based on principles of fairness and due process and is applicable to appealed decisions originating from regular courts, administrative agencies or quasi-judicial bodies, whether rendered in a civil case, a special proceeding or a criminal case, citing the case of Tan v. Commission on Elections.40 Even assuming that it was raised, the same would be without merit because the suspension order bears the signature of respondent’s engineering manager and petitioner’s immediate superior, Al Luzano, who, in fact, is a member of the panel committee that conducted an investigation on the complaint of Soriano against petitioner.

As a just cause for dismissal of an employee under Article 28241 of the Labor Code, willful disobedience of the employer’s lawful orders requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, i.e., characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge.42 Both requisites are present in the instant case. It is noteworthy that upon receipt of the notice of suspension, petitioner did not question such order at the first instance. He immediately defied the order by reporting on the first day of his suspension. Deliberate disregard or disobedience of rules by the employee cannot be countenanced. It may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe.43

Petitioner was served the first notice of termination and was given time to submit his written explanation. A hearing was conducted wherein both parties with their respective counsels were present. After finding cause for petitioner’s termination, a final notice apprising him of the decision to terminate his employment was served. All things considered, respondent validly dismissed petitioner for cause after complying with the procedural requirements of the law.

The allegation of fraud should be proven.

On the last point, petitioner posits that the unfavorable Decision of the Labor Arbiter and the Decision of the NLRC were issued and obtained by means of fraud, which is a valid ground for their annulment. In our jurisdiction, however, fraud is never presumed and should be proved as mere allegations are not enough.44 The burden of proof rests on petitioner, which, in this case, he failed to discharge.

WHEREFORE, the petition is DENIED for lack of merit. The assailed May 28, 2007 Decision and October 16, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 94485 are AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Brion, Abad and Perez, JJ., concur.

Petition denied, judgment and resolution affirmed.

Note.—An employer may terminate an employment for serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; Elements of Willful Disobedience. (San Miguel Corporation vs. Pontillas, 554 SCRA 50 [2008])

——o0o——

_______________

44 Rabaja Ranch Development Corporation v. AFP Retirement and Separation Benefits System, G.R. No. 177181, July 7, 2009, 592 SCRA 201. [Areno, Jr. vs. Skycable PCC-Baguio, 611 SCRA 721(2010)]

G.R. No. 149433. December 15, 2010.*

THE COCA-COLA EXPORT CORPORATION, petitioner, vs. CLARITA P. GACAYAN, respondent.

Labor Law; Termination of Employment; Due Process; The Labor Code mandates that before an employer may validly dismiss an employee from the service, the requirement of substantial and procedural due process must be complied with.—The Labor Code mandates that before an employer may validly 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. Article 282 of the Labor Code enumerates the just causes for the termination of employment.

Same; Same; In termination cases, the burden of proof rests on the employer to show that the dismissal was for just cause.—In termination cases, the burden of proof rests on the employer to show that the dismissal was for just cause. Otherwise, an employee who is illegally dismissed “shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

Same; Same; It is important to note that the term “trust and confidence” is restricted to managerial employees.—At the outset, it is important to note that the term “trust and confidence” is restricted to managerial employees. In Samson v. National Labor Relations Commission, the Court, citing Section 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor Code, enumerated the conditions for one to be properly considered a managerial employee: (1) Their primary duty consists of the management of the establishment in which they are employed or of a department or sub-division thereof; (2) They customarily and regularly direct the work of two or more employees therein; [and] (3) They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the promotion or any other change of status of other employees are given particular weight.

Same; Same; In Nokom v. National Labor Relations Commission, 336 SCRA 97, 111-112 (2000), the Court set the guidelines for the application of the doctrine of loss of confidence.—In Nokom v. National Labor Relations Commission, 336 SCRA 97, 111-112 (2000), this Court set the guidelines for the application of the doctrine of loss of confidence—(a) Loss of confidence should not be simulated; (b) It should not be used as a subterfuge for causes which are improper, illegal or unjustified; (c) It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (d) It must be genuine, not a mere afterthought to justify earlier action taken in bad faith. In the instant case, the basis for terminating the employment of respondent was for gross violation of the company’s rules and regulations, as specified in the termination letter dated April 4, 1998.

Same; Same; Loss of Trust and Confidence; It bears emphasizing that the right of an employer to dismiss its employees on the ground of loss of trust and confidence must not be exercised arbitrarily. For loss of trust and confidence to be a valid ground for dismissal, it must be substantial and founded on clearly established facts.—It bears emphasizing that the right of an employer to dismiss its employees on the ground of loss of trust and confidence must not be exercised arbitrarily. For loss of trust and confidence to be a valid ground for dismissal, it must be substantial and founded on clearly established facts. Loss of confidence must not be used as a subterfuge for causes which are improper, illegal or unjustified; it must be genuine, not a mere afterthought, to justify earlier action taken in bad faith. Because of its subjective nature, this Court has been very scrutinizing in cases of dismissal based on loss of trust and confidence because the same can easily be concocted by an abusive employer. Thus, when the breach of trust or loss of confidence theorized upon is not borne by clearly established facts, as in the instant case, such dismissal on the ground of loss and confidence cannot be countenanced.

Same; Same; Same; Serious Misconduct; It is well to stress that in order to constitute serious misconduct which will warrant the dismissal of an employee, it is not sufficient that the act or conduct complained of has violated some

established rules or policies. It is equally important and required that the act or conduct must have been done with wrongful intent.—The alleged infractions of respondent could hardly be considered serious misconduct. It is well to stress that in order to constitute serious misconduct which will warrant the dismissal of an employee, it is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and required that the act or conduct must have been done with wrongful intent. Such is, however, lacking in the instant case.

Same; Same; Management Prerogatives; The only criterion to guide the exercise of its management prerogative is that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.—The employer’s right to conduct the affairs of its business, according to its own discretion and judgment, is well-recognized. An employer has a free reign and enjoys wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline in its employees and to impose penalties, including dismissal, upon erring employees. This is a management prerogative, where the free will of management to conduct its own affairs to achieve its purpose takes form. The only criterion to guide the exercise of its management prerogative is that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.

Same; Same; Same; The Court upholds the management’s prerogatives so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws and valid agreements.—As respondent’s employer, petitioner has the right to regulate, according to its discretion and best judgment, work assignments, work methods, work supervision, and work regulations, including the hiring, firing and discipline of its employees. Indeed, petitioner has the management prerogative to discipline its employees, like herein respondent, and to impose appropriate penalties on erring workers pursuant to company rules and regulations. This Court upholds these management prerogatives so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws and valid agreements.

Same; Same; Reinstatement; Backwages; Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.—Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. After a finding of illegal dismissal herein, we apply the foregoing provision entitling respondent Clarita P. Gacayan to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of her reinstatement. Thus, the award of backwages by the Court of Appeals is in order.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review on Certiorari filed by petitioner The Coca Cola Export Corporation against respondent Clarita P. Gacayan, assailing the Decision1 dated May 30, 2001 and the subsequent Resolution2 dated August 9, 2001 of the Court of Appeals in CA-G.R. SP No. 49192. The Court of Appeals reversed and set aside the

Resolutions dated April 14, 19983 and June 19, 19984 of the National Labor Relations Commission (NLRC), and ordered the immediate reinstatement of respondent to her former position or to a substantially equivalent position without loss of seniority rights and with full backwages.

The attendant facts are as follows:

Petitioner The Coca Cola Export Corporation, duly organized and existing under the laws of the Philippines, is engaged in the manufacture, distribution and export of beverage base, concentrate, and other products bearing its trade name.

Respondent Clarita P. Gacayan began working with petitioner on October 8, 1985. At the time her employment was terminated on April 6, 1995, for alleged loss of trust and confidence, respondent was holding the position of Senior Financial Accountant.

Under petitioner’s company policy, one of the benefits enjoyed by its employees was the reimbursement of meal and transportation expenses incurred while rendering overtime work. This reimbursement was allowed only when the employee worked overtime for at least four hours on a Saturday, Sunday or holiday, and for at least two hours on weekdays. The maximum amount allowed to be reimbursed was one hundred fifty (P150.00) pesos. It was in connection with this company policy that petitioner called the attention of respondent and required her to explain the alleged alterations in three receipts which she submitted to support her claim for reimbursement of meal expenses, to wit: 1) McDonald’s Receipt No. 875493 dated October 1, 1994 for P111.00;5 2) Shakey’s Pizza Parlor Receipt No. 122658 dated November 20, 1994 for P174.06;6 and 3) Shakey’s Pizza Parlor Receipt No. 41274 dated July 19, 1994 for P130.50.

On November 21, 1994, petitioner issued a memorandum7 to respondent informing her of the alteration in the date of the McDonald’s Receipt No. 875493, which she submitted in support of her claim for meal allowance allegedly consumed on October 1, 1994, and requiring her to explain the said alteration.

Respondent wrote her explanation on the same note and stated that the alteration may have been made by the staff from McDonald’s as they sometimes make mistakes in issuing receipts. Respondent also narrated that her sister, Odette, sometimes buys food for her and that she is not quite sure if the receipt in question was the correct one which Odette gave her.

Upon verification with the Assistant Branch Manager of the McDonald’s Makati Cinema Square outlet which issued the subject receipt, petitioner discovered that the date of issuance of the receipt was altered. The receipt was actually issued for a meal bought on October 2, 1994 and not on October 1, 1994.8

On December 9, 1994, petitioner sent another memorandum9 to respondent and required her to explain in writing why her November 21, 1994 claim for reimbursement of meal expense should not be considered fraudulent since there was an alteration in the receipt which she submitted. The second receipt contained a handwritten alteration which read “1 PF extra mojos” which was superimposed on the computer generated print-out of the food item actually purchased.

On December 19, 1994, respondent submitted her explanation10 and claimed that what she ordered for lunch was a “buddy pack and an extra mojos.” Respondent explained that the delivery staff brought a wrong receipt as it did not correspond to the food that she actually ordered. Respondent added that she asked the delivery staff to alter the receipt thinking that he could just write the correct items ordered and sign the said receipt to authenticate the alterations made thereon. She further stated that there was no intention on her part to commit fraud since she was just avoiding the hassle of waiting for a replacement receipt.

Petitioner then referred respondent’s explanation to the Assistant Manager of the Shakey’s Pizza Parlor which issued the subject receipt. Upon verification,11 it was discovered that the receipt was actually for three orders of Bunch of Lunch, and not for Buddy Pack which has an item code of CH5, not BP, as claimed by respondent. The Assistant Manager also

denied respondent’s claim that it was their representative, specifically their delivery staff, who made the alteration on the receipt.12

On January 3, 1995, petitioner sent respondent a letter13 directing her to explain why she should not be subjected to disciplinary sanctions for violating Section II, No. 15, paragraph (d) of the company’s rules and regulations which punishes with dismissal the submission of any fraudulent item of expense.

Consequently, respondent submitted her explanation14 on January 4, 1995, and denied any personal knowledge in the commission of the alterations in the subject receipts. Respondent asserted that she did not notice the alteration in the McDonald’s receipt since she “did not give close attention to it.” She further stated that her sister’s driver/messenger may have caused the alteration, but she could not be certain about it. With regard to the Shakey’s receipt, respondent maintained that what she ordered was a buddy pack with extra mojos.

On January 12, 1995, petitioner sent respondent a memorandum15 inviting her to a hearing and formal investigation on January 17, 1995, to give her an opportunity to explain the issues against her. Respondent was also advised that she was free to bring along a counsel of her choice.

On January 17, 1995, respondent appeared at the hearing. She was reminded of her right to have her own lawyer present at the proceedings of the investigation and was extensively questioned regarding the alterations on the McDonald’s and Shakey’s Pizza Parlor receipts which she submitted in support of her claim for reimbursement of meal expenses.16

On January 19, 1995, petitioner notified17 respondent that the continuation of the investigation was set on January 23, 1995 for the presentation of the delivery personnel of Shakey’s Pizza Parlor. Petitioner also informed respondent of a third receipt with an alteration which she submitted in support of her claim for reimbursement for meal allowance—Shakey’s Pizza Parlor Receipt No. 41274 dated July 19, 1994,18 which contained an annotation “w/ CAV 50% only—P130.50.” Such annotation meant that respondent was claiming only half of the total amount indicated in the receipt as the said meal was supposedly shared with another employee, Corazon A. Varona. Said employee, however, denied that she ordered and shared the food covered by the receipt in question.19

Upon verification by petitioner with the restaurant supervisor of the Las Piñas branch of the Shakey’s Pizza Parlor which issued the subject receipt, it was discovered that said receipt was issued for food purchased on July 17, 1994 and not for July 19, 1994,20 as claimed by respondent.

Respondent did not attend the January 23, 1995 hearing, citing her doctor’s advice21 to rest since she was suffering from “severe mixed migraine and muscle contraction headache.” Respondent also complained of the alleged partiality of the investigating committee against her.

At the said hearing, the delivery personnel of Shakey’s Pizza Parlor was presented. He maintained that what he delivered to respondent was her order for three Bunch of Lunch packs and not one order of Buddy Pack with extra mojos.22

On January 24, 1995, respondent filed an application for leave23 from January 13, 1995 up to February 3, 1995. Again on January 31, 1995, respondent filed another application for leave24 for the period February 6, 1995 to February 24, 1995.

On February 23, 1995, petitioner sent another notice25 to respondent informing her of the re-setting of the continuation of the formal investigation on March 15, 1995. Respondent was also advised that the said scheduled hearing was her last opportunity to fully explain her side, and that she had the option of bringing a lawyer at the hearing.

Respondent did not attend the March 15, 1995 hearing. Petitioner then concluded the formal investigation.

Thereafter, in a letter26 dated April 4, 1995, petitioner dismissed respondent for fraudulently submitting tampered and/or altered receipts in support of her petty cash reimbursements in gross violation of the company’s rules and regulations.

On June 6, 1995, respondent filed a complaint27 for illegal dismissal, non-payment of service incentive leave, sick leave and vacation leave with prayer for reinstatement, payment of backwages as well as for damages and attorney’s fees, against petitioner with the NLRC, docketed as NLRC-NCR Case No. 00-06-04000-95. After the mandatory conciliation proceedings failed, the parties were required to submit their respective position papers.

In her position paper, respondent averred that, assuming arguendo that she altered the receipts in question, dismissal was too harsh a penalty for her considering that: “(a) it was her first offense in her 9 ½ years of service; (b) the offense imputed was minor, as only the dates and items, not the amounts, were altered or the amounts involved were very minimal; (c) the company did not suffer material damage, as she was really entitled to the P150.00 allowance even without accompanying receipt; and (d) respondent acted without malice, as she really rendered (unpaid) overtime work on those three dates.”28

On the other hand, petitioner maintained in its position paper that respondent was dismissed for cause, that of “tampering official receipts to substantiate her claim for (meal) reimbursement which reflects her questionable integrity and honesty.”29 Petitioner added that in terminating the services of an employee for breach of trust, “it is enough that the misconduct of the employee tends to prejudice the employer’s interest since it would be unreasonable to require the employer to wait until he is materially injured before removing the cause of the impending evil.”30

In a Decision31 dated June 17, 1996, Labor Arbiter Ramon Valentin C. Reyes ruled in favor of petitioner and dismissed respondent’s complaint for lack of merit. The relevant portions of the Decision read:

“[T]he termination of complainant is clearly valid.

Respondent [herein petitioner] complied with the notice requirement strictly to the letter. Complainant [herein respondent] was given the first notice which the Supreme Court amply termed in the foregoing jurisprudence as the “proper charge”. This Office further notes that more than one notice was given to the complainant [respondent]. In fact, complainant [respondent] was repeatedly directed to answer the charges against her. As she in fact did.

x x x x

It was only after the evidence against complainant [respondent] was received and her fraudulent participation morally ascertained that respondent [petitioner] finally decided to terminate his (sic) services. And after arriving at a conclusion, complainant [respondent] was consequently informed of her termination which was the sanction imposed on her.

Again, following the yardstick laid down by the Tiu doctrine cited above, the procedure in terminating complainant [respondent] was definitely followed. Her termination is therefore valied (sic) and must be upheld for all intents and purposes.

x x x x

Going now to the substantive aspect of complainant’s [respondent’s] termination, this Office likewise finds that there existed just cause to terminate her services.

Complainant [Respondent] was terminated for repeatedly submitting fraudulent items of expense, clearly in violation of respondent’s [petitioner’s] company rules and regulations which consequently resulted in loss of trust and confidence.”32

Undaunted, respondent appealed the Labor Arbiter’s decision to the NLRC.

In a Resolution33 dated April 14, 1998, the NLRC affirmed the ruling of the Labor Arbiter, thus:

“After a careful review of the evidences presented before Us, including the jurisprudence cited, We decided to look deeper into what led or motivated herein complainant [respondent] to do as she did.

It had been established that three (3) receipts were altered/tampered with and were subsequently submitted by complainant [respondent] to the company so that she could claim her allowed meal allowance of P150.00 per meal on days she rendered overtime work. Complainant [Respondent] admitted the alterations were done by her but she was quick to retort and tries to justify why she should not be held guilty of a fraudulent act.

As if the company owes her so much for rendering overtime work gratuitously, she now tries to “collect”, so to speak, from the company by way of emphasizing the benefits it gets from her (in terms of the alleged savings of about more than P900.00, had it paid her overtime pay and basic and premium pay). She now hastens to conclude that since the company had greatly benefitted from her overtime services, she did not violate company rules and regulations when she tampered the receipts which she attached as her justification for reimbursement for meal allowance.

This line of reasoning is absurd, if not utterly dangerous. Admitting the commission of the act but at the same breath denying any fraudulent intent is inconsistent. Under no circumstances was her misconduct excusable. Here the amount becomes immaterial, her position irrelevant. As correctly ruled by the Labor Arbiter a quo, the disciplinary action taken by respondent company [petitioner] on complainant [respondent] applies to all employees regardless of rank. We also agree with the findings of the Labor Arbiter below that complainant [respondent] was afforded due process.

In fine, in the absence of showing that the decision was rendered whimsically and capriciously, We Affirm.

WHEREFORE, in the light of the foregoing, the assailed Decision dated 17 June 1996 is hereby AFFIRMED.”34

Respondent filed a Motion for Reconsideration which was denied in the Resolution35 dated June 19, 1998.

Aggrieved, respondent elevated the case to the Court of Appeals via certiorari in CA-G.R. SP No. 49192.

As stated at the threshold hereof, the Court of Appeals, in its assailed Decision dated May 30, 2001, reversed and set aside the Resolutions dated April 14, 1998 and June 19, 1998 of the NLRC. The Court of Appeals ruled that the penalty of dismissal imposed on respondent was too harsh and further directed petitioner to immediately reinstate respondent to her former position, if possible, or a substantially equivalent position without loss of seniority rights and with full backwages. The Court of Appeals ratiocinated thus:

“We consider the penalty of dismissal imposed on the petitioner to be too harsh.

Petitioner [Respondent] has held an unblemished record for nine-and-a-half (9 ½) years and the respondent company [petitioner], in the same period, found her performance satisfactory, as evidenced by the promotions she received over the years and her being tasked to train in other countries. The offenses she allegedly committed did not cause any prejudice or loss to the company since the amounts were actually due her as part of her compensation for overtime. On the other hand, petitioner [respondent] sufficiently explained that in submitting the falsified receipts, she was acting on the belief that the said requirement was merely for record-keeping purposes for she was already entitled to the money equivalent thereof as consideration for services already rendered. Hence, the presence of good faith on the part of petitioner [respondent], her long years of exemplary service and the absence of loss on the part of the employer, taken together, justify the application of Yap vs. NLRC, supra. In the aforecited case, the Supreme Court considered the employee’s long years of unblemished service, the return of the funds borrowed from the employer and the employee’s

lack of intent to deviate from the rules, as circumstances justifying the award of separation pay, in lieu of reinstatement. Considering however, that there was no evidence of strained relations between the parties in the case at bench precluding a harmonious working relationship should reinstatement be decreed, then the reinstatement of petitioner [respondent] is proper. With respect to the allegation of dishonesty on the part of private respondent, the Court considers the “ignominy and mental torture” suffered by petitioner throughout the proceedings, in view of her high position with respondent company, to be practically punishment for said misdeed. (Philippine Airlines vs. Philippine Air Lines Employees Association, supra.)

Finally, the private respondent [petitioner] raised in issue the timeliness of the filing of the herein petition. Based on their computation, the petition was only filed four days after [the] sixty-day period prescribed in the Section 4, Rule 65 of the Rules of Court. Considering however, that jurisprudence is replete with instances where the Supreme Court has relaxed the technical rules in the exercise of equity jurisdiction when there are strong considerations of substantial justice that are manifest in the petition, (Soriano vs. Court of Appeals, 222 SCRA 545, 553 [1993]; Orata vs. Intermediate Appellate Court, 185 SCRA 148, 152 [1990]; Laginlin vs. Workmen’s Compensation Commission, 159 SCRA 91, 96 [1988]; and, Serrano vs. Court of Appeals, 139 SCRA 179, 186 [1985]). Our finding that there was grave abuse of discretion in the issuance of the assailed resolutions of public respondent merit the allowance of the herein petition.

WHEREFORE, the petition is GRANTED and the Resolutions, dated April 14, 1998 and June 19, 1998, both issued by public respondent NLRC, are hereby SET ASIDE. Private respondent [Petitioner] Coca Cola Export Corporation is hereby directed to immediately reinstate petitioner [respondent] to her former position, if possible, otherwise, to a substantially equivalent position without loss of seniority rights and with full backwages, based on her last monthly salary, to be computed from the date of her dismissal from the service up to the date of finality of this decision, without any qualifications or deductions. No costs.”36

Its motion for reconsideration having been denied by the Court of Appeals in its second impugned Resolution dated August 9, 2001, petitioner is now before us via the present recourse with the following assignment of errors:

I

BY BEING TOO LIBERAL IN FAVOR OF THE RESPONDENT, THE COURT OF APPEALS HAD DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW.

II

IN DOING SO, THE COURT OF APPEALS DEVIATED FROM ESTABLISHED DOCTRINES LONG SETTLED BY CONSISTENT JURISPRUDENCE ENUNCIATED BY THIS HONORABLE COURT.

On the procedural issue, petitioner asserts that the Court of Appeals should have dismissed outright the petition for certiorari for being filed out of time and for failure to comply with the requirements set forth in Rule 42 of the Rules of Civil Procedure mandating that the petition be accompanied by clear copies of “all pleadings and other material portions of the record as would support the material allegations of the petition.”

Moreover, petitioner contends that the Court of Appeals gave due course to respondent’s petition purely on the basis of liberality, and that it anchored its decision on the general principle that doubts must be interpreted in favor of labor.

In her Comment dated February 10, 2002, respondent alleges that the Court of Appeals correctly gave due course to her petition as it was actually filed on time. Respondent states that when her petition was still pending with the Court of Appeals, Section 4, Rule 65 of the Rules of Court was amended by Supreme Court Resolution A.M. No. 00-2-03-SC, which took effect on September 1, 2000, whereby the 60-day period within which to file a petition for certiorari shall now be counted from receipt of the notice of the denial of the motion for reconsideration. According to respondent, she

received the Order denying her motion for reconsideration on August 10, 1998, thus, her filing of the petition with the Court of Appeals on October 2, 1998, was well within the 60-day period.

The Court agrees with respondent.

At the time of the filing of the petition for certiorari before the Court of Appeals on September 1, 1998, Supreme Court Circular No. 39-98, which amended Section 4, Rule 65 of the 1997 Rules of Civil Procedure, had already taken effect on September 1, 1998, after publication in several newspapers of general circulation. The amended provision reads:

“SEC. 4. Where and when petition to be filed.—The petition may be filed not later than sixty (60) days from notice of the judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.

If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution, the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days.” (Emphasis supplied.)

The records of the instant case show that respondent timely filed on June 8, 1998, a motion for reconsideration of the NLRC Resolution dated April 14, 1998, which respondent received on May 28, 1998. A copy of the Resolution dated June 19, 1998 on the denial of the said motion for reconsideration was received by respondent on August 10, 1998. Applying the aforequoted amendment to the given set of dates, 11 days had already elapsed from the date when respondent received the NLRC Resolution dated June 19, 1998. Thus, respondent had a remaining period of 49 days reckoned from August 11, 1998 or until September 28, 1998 within which to file the petition for certiorari.

The Court, however, takes note that further amendments were made on the reglementary period for filing a petition for certiorari under Rule 65. On September 1, 2000, Supreme Court Circular No. 56-200037 took effect. The latest amendment of Section 4, Rule 65 of the 1997 Rules of Civil Procedure reads:

“SEC. 4. When and where petition filed.—The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of the said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in the aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15) days.” (Emphasis supplied.)

From the foregoing, it is clear that the 60-day period to file a petition for certiorari should be reckoned from the date of receipt of the notice of the denial of the motion for reconsideration or new trial, if one was filed.

In a number of cases,38 this Court applied retroactively Circular No. 56-2000. We ruled that a petition for certiorari which had been filed past the 60-day period under Section 4 of Rule 65, as amended by Circular No. 39-98, was deemed seasonably filed provided it was filed within the 60-day period counted from the date of receipt of the notice of the denial of the motion for reconsideration or new trial.Instructive on this point is the discussion of the Court in Narzoles v. National Labor Relations Commission,39 viz.:

“The Court has observed that Circular No. 39-98 has generated tremendous confusion resulting in the dismissal of numerous cases for late filing. This may have been because, historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from receipt of the order denying the motion for reconsideration to file a petition for certiorari. Were it not for the amendments brought about by Circular No. 39-98, the cases so dismissed would have been resolved on the merits. Hence, the Court deemed it wise to revert to the old rule allowing a party a fresh 60-day period from notice of the denial of the motion for reconsideration to file a petition for certiorari. Earlier this year, the Court resolved, in A.M. No. 00-2-03-SC, to further amend Section 4, Rule 65 x x x.

x x x x

The latest amendments took effect on September 1, 2000, following its publication in the Manila Bulletin on August 4, 2000 and in the Philippine Daily Inquirer on August 7, 2000, two newspapers of general circulation.

In view of its purpose, the Resolution further amending Section 4, Rule 65 can only be described as curative in nature, and the principles governing curative statutes are applicable.

Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain legal requirements. They are intended to supply defects, abridge superfluities and curb certain evils. They are intended to enable persons to carry into effect that which they have designed or intended, but has failed of expected legal consequence by reason of some statutory disability or irregularity in their own action. They make valid that which, before the enactment of the statute was invalid. Their purpose is to give validity to acts done that would have been invalid under existing laws, as if existing laws have been complied with. Curative statutes, therefore, by their very essence, are retroactive.

Accordingly, while the Resolution states that the same “shall take effect on September 1, 2000, following its publication in two (2) newspapers of general circulation,” its retroactive application cannot be denied. In short, the filing of the petition for certiorari in this Court on 17 December 1998 is deemed to be timely, the same having been made within the 60-day period provided under the curative Resolution. We reach this conclusion bearing in mind that the substantive aspects of this case involves the rights and benefits, even the livelihood, of petitioner-employees.”

Given the above, respondent had a fresh 60-day period from August 10, 1998, the date she received a copy of the NLRC Resolution dated June 19, 1998, denying her motion for reconsideration. Accordingly, respondent had 60 days from August 10, 1998 within which to file the petition for certiorari. Thus, when respondent filed the petition with the Court of Appeals on October 2, 1998, said petition was seasonably filed within the reglementary period provided by the latest amendment to Section 4, Rule 65 of the 1997 Rules of Civil Procedure.

We now proceed to the main issue for resolution in this case, which is whether the Court of Appeals committed a reversible error in reversing and setting aside the Resolutions dated April 14, 1998 and June 19, 1998 of the NLRC.

According to the petitioner, respondent’s repeated submission of altered or tampered receipts to support her claim for reimbursement constitutes a betrayal of the employer’s trust and confidence and a serious misconduct, thus, giving cause for the termination of her employment with petitioner.

Petitioner also questions the Court of Appeals’ finding that the termination of respondent was too harsh. Petitioner maintains that respondent “had clearly been established to have authored and caused the submission of not only one but three different receipts which she intentionally altered to justify her claimed reimbursement,” thus warranting her dismissal from the company.

We are not convinced.

The Labor Code mandates that before an employer may validly 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. Article 282 of the Labor Code enumerates the just causes for the termination of employment, thus:

“ART. 282. Termination by employer.—An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

(d)  Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.”

In termination cases, the burden of proof rests on the employer to show that the dismissal was for just cause. Otherwise, an employee who is illegally dismissed “shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”40

After examining the records of the case, this Court finds that respondent’s dismissal from employment was not grounded on any of the just causes enumerated under Article 282 of the Labor Code.

At the outset, it is important to note that the term “trust and confidence” is restricted to managerial employees.41 In Samson v. National Labor Relations Commission,42 the Court, citing Section 2(b), Rule I, Book III of the Omnibus Rules Implementing the Labor Code, enumerated the conditions for one to be properly considered a managerial employee:

“(1) Their primary duty consists of the management of the establishment in which they are employed or of a department or sub-division thereof;

(2) They customarily and regularly direct the work of two or more employees therein; [and]

(3)  They have the authority to hire or fire other employees of lower rank; or their suggestions and recommendations as to the hiring and firing and as to the promotion or any other change of status of other employees are given particular weight.”

In the instant case, respondent was the Senior Financial Accountant with the Job Description of a Financial Project Analyst. Respondent, among others, “provides support in the form of financial analyses and evaluation of alternative strategies or action plans to assist management in strategic and operational decision-making, x x x liaises with the

Bottler to comply with Corporate Bottler financial reporting requirements and to ensure Bottler’s plans are aligned with TCCEC’s, x x x and assists management on various initiatives on ad hoc basis.”43

In Nokom v. National Labor Relations Commission,44 this Court set the guidelines for the application of the doctrine of loss of confidence—

(a) Loss of confidence should not be simulated;

(b) It should not be used as a subterfuge for causes which are improper, illegal or unjustified;

(c) It may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and

(d) It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

In the instant case, the basis for terminating the employment

of respondent was for gross violation of the company’s rules and regulations, as specified in the termination letter dated April 4, 1998, to wit:

“Based on the facts gathered during the investigation vis-avis (sic) the contradictory explanations you have given when you testified, the testimony of the person who delivered the Shakey’s products you ordered as well as McDonald’s and Shakey’s certifications to the effect that the items and the dates appearing on the receipt/invoices issued to you were the actual items and dates of said invoices and that the alteration on the face of said invoice were not done at their respective establishments or by any of their employees, morally convinced us that you were the one who caused such alterations for personal gain. You have thereby knowingly, willingly, deliberately and fraudulently submitted tampered and/or altered receipts to support your petty cash reimbursements in gross violation of the company’s rules and regulations which punishes with immediate dismissal the “fraudulent submission of any item of expense” (Rule II, No. 15(d).”45

Evidently, no mention was made regarding petitioner’s alleged loss of trust and confidence in respondent. Neither was there any explanation nor discussion of the alleged sensitive and delicate position of respondent requiring the utmost trust of petitioner.

It bears emphasizing that the right of an employer to dismiss its employees on the ground of loss of trust and confidence must not be exercised arbitrarily. For loss of trust and confidence to be a valid ground for dismissal, it must be substantial and founded on clearly established facts. Loss of confidence must not be used as a subterfuge for causes which are improper, illegal or unjustified; it must be genuine, not a mere afterthought, to justify earlier action taken in bad faith. Because of its subjective nature, this Court has been very scrutinizing in cases of dismissal based on loss of trust and confidence because the same can easily be concocted by an abusive employer.46 Thus, when the breach of trust or loss of confidence theorized upon is not borne by clearly established facts, as in the instant case, such dismissal on the ground of loss and confidence cannot be countenanced.

In the instant case, it was only in the Reply to Respondent’s Comment47 dated October 11, 2002, that petitioner made mention of another ground for the dismissal of respondent, that of serious misconduct, when she submitted altered or tampered receipts to support her claim for reimbursement. Such allegation appears to be a mere afterthought, being tardily raised only in the Reply.

In Marival Trading, Inc. v. National Labor Relations Commission,48 we held, thus:

“Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful character, and implies wrongful intent and not mere error of

judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. Such misconduct, however serious, must nevertheless be in connection with the employee’s work to constitute just cause for his separation. Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must relate to the performance of the employee’s duties; and (c) must show that the employee has become unfit to continue working for the employer. Indeed, an employer may not be compelled to continue to employ such person whose continuance in the service would be patently inimical to his employer’s business.”49

In this light, the alleged infractions of respondent could hardly be considered serious misconduct. It is well to stress that in order to constitute serious misconduct which will warrant the dismissal of an employee, it is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and required that the act or conduct must have been done with wrongful intent. Such is, however, lacking in the instant case.

While this Court does not condone respondent’s act of submitting altered and/or tampered receipts to support her claim for reimbursement, we nevertheless agree with the finding of the Court of Appeals that, under the attendant facts, the dismissal meted out on respondent appears to be too harsh a penalty.

The employer’s right to conduct the affairs of its business, according to its own discretion and judgment, is well-recog -nized. An employer has a free reign and enjoys wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline in its employees and to impose penalties, including dismissal, upon erring employees. This is a management prerogative, where the free will of management to conduct its own affairs to achieve its purpose takes form. The only criterion to guide the exercise of its management prerogative is that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.50

As respondent’s employer, petitioner has the right to regulate, according to its discretion and best judgment, work assignments, work methods, work supervision, and work regulations, including the hiring, firing and discipline of its employees. Indeed, petitioner has the management prerogative to discipline its employees, like herein respondent, and to impose appropriate penalties on erring workers pursuant to company rules and regulations.51 This Court upholds these management prerogatives so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws and valid agreements.52

In the instant case, petitioner alleged that under its rules and regulations, respondent’s submission of fraudulent items of expense is punishable by dismissal. However, petitioner’s rules cannot preclude the State from inquiring whether the strict and rigid application or interpretation thereof would be harsh to the employee. Even when an employee is found to have transgressed the employer’s rules, in the actual imposition of penalties upon the erring employee, due consideration must still be given to his length of service and the number of violations committed during his employ.53 Respondent had no previous record in her 9½ years of service; this would have been her first offense. Respondent had also been a recipient of various commendations attesting to her competence and diligence in the performance of her duties, not only from petitioner, but also from petitioner’s counterparts in Poland54 and Thailand.55 Respondent also countered that she acted in good faith and with no wrongful intent when she submitted the receipts in support of her claim for reimbursement of meal allowance. According to respondent, only the dates or items were altered on the receipts. She did not claim more than what was allowed as meal expense for the days that she rendered overtime work. She believed that the submission of receipts was simply for records-keeping, since she actually rendered overtime work on the dates that she claimed for meal allowance. All told, this Court holds that the penalty of dismissal imposed on respondent is unduly oppressive and disproportionate to the infraction which she committed. A lighter penalty would have been more just.

As correctly held by the Court of Appeals, by mandate of the law itself, the provisions of the Labor Code are to be construed liberally in favor of labor. Thus, in Fujitsu Computer Products Corporation of the Phils. v. Court of Appeals,56 we held:

“The Court is wont to reiterate that while an employer has its own interest to protect, and pursuant thereto, it may terminate a managerial employee for a just cause, such prerogative to dismiss or lay-off an employee must be exercised without abuse of discretion. Its implementation should be tempered with compassion and understanding. The employer should bear in mind that, in the execution of the said prerogative, what is at stake is not only the employee’s position, but his very livelihood. The Constitution does not condone wrongdoing by the employee; nevertheless, it urges moderation of the sanction that may be applied to him. Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker ought not be visited with a consequence so severe as dismissal from employment. Indeed, the consistent rule is that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for justifiable cause.”

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

After a finding of illegal dismissal herein, we apply the foregoing provision entitling respondent Clarita P. Gacayan to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of her reinstatement. Thus, the award of backwages by the Court of Appeals is in order. However, the Court of Appeals’ period of computation of the award of backwages must be modified. The Court of Appeals ruled that:

“WHEREFORE, the petition is GRANTED and the Resolutions, dated April 14, 1998 and June 19, 1998, both issued by public respondent NLRC, are hereby SET ASIDE. [Petitioner] Coca Cola Export Corporation is hereby directed to immediately reinstate [respondent] to her former position, if possible, otherwise, to a substantially equivalent position without loss of seniority rights and with full backwages, based on her last monthly salary, to be computed from the date of her dismissal from the service up to the date of finality of this decision, without any qualifications or deductions. No costs.”57

In line with Article 279 of the Labor Code and prevailing jurisprudence,58 the award of backwages should be modified in the sense that backwages should be computed from the time the compensation was not paid up to the time of reinstatement.

WHEREFORE, the petition is hereby DENIED. The Decision dated May 30, 2001 and subsequent Resolution dated August 9, 2001 of the Court of Appeals are hereby AFFIRMED WITH MODIFICATION that backwages be awarded from the time the compensation was not paid up to the time of her actual reinstatement.

SO ORDERED.

Corona (C.J., Chairperson), Velasco, Jr., Peralta** and Perez, JJ., concur.

Petition denied, judgment and resolution affirmed with modification.

Note.—An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement, but if reinstatement is not viable, separation pay is awarded to the employee in an amount equivalent to one (1) month salary

for every year of service. (RBC Cable Master System vs. Baluyot, 576 SCRA 668 [2009]) [The Coca-Cola Export Corporation vs. Gacayan, 638 SCRA 377(2010)]

G.R. No. 163554.  April 23, 2010.*

DANNIE M. PANTOJA, petitioner, vs. SCA HYGIENE PRODUCTS CORPORATION, respondent.

Labor Law; Termination of Employment; Retrenchment; Management Prerogative; The determination of the need to phase out a particular department and consequent reduction of personnel and reorganization as a labor and cost saving device is a recognized management prerogative which the courts will not generally interfere with.—As held in International Harvester Macleod, Inc. v. Intermediate Appellate Court, 149 SCRA 641 (1987), the determination of the need to phase out a particular department and consequent reduction of personnel and reorganization as a labor and cost saving device is a recognized management prerogative which the courts will not generally interfere with.

Same; Same; Same; Same; Giving the workers an option to be transferred without any diminution in rank and pay specifically belie petitioner’s allegation that the alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the absence of bad faith.—As can be seen, retrenchment was utilized by respondent only as an available option in case the affected employee would not want to be transferred. Respondent did not proceed directly to retrench. This, to our mind, is an indication of good faith on respondent’s part as it exhausted other possible measures other than retrenchment. Besides, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting. Giving the workers an option to be transferred without any diminution in rank and pay specifically belie petitioner’s allegation that the alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the absence of bad faith. Apparently, respondent implemented its streamlining or reorganization plan with good faith, not in an arbitrary manner and without prejudicing the tenurial rights of its employees.

Same; Same; Same; Same; As long as no arbitrary or malicious action on the part of an employer is shown, the wisdom of a business judgment to implement a cost saving device is beyond this court’s determination.—The resumption of its industrial paper manufacturing operations does not, however, make respondent’s streamlining/

reorganization plan illegal because, again, the abolishment of Paper Mill No. 4 in 1999 was a business judgment arrived at to prevent a possible financial drain at that time. As long as no arbitrary or malicious action on the part of an employer is shown, the wisdom of a business judgment to implement a cost saving device is beyond this court’s determination. After all, the free will of management to conduct its own business affairs to achieve its purpose cannot be denied.

Management Prerogative; Reassignment; Work reassignment of an employee as a genuine business necessity is a valid management prerogative.—We held that work reassignment of an employee as a genuine business necessity is a valid management prerogative. After being given an option to be transferred, petitioner rejected the offer for reassignment to Paper Mill No. 5 even though such transfer would not involve any diminution of rank and pay. Instead, he opted and preferred to be separated by executing a release and quitclaim in consideration of which he received separation pay in the amount of P356,335.20 equal to two months pay for every year of service plus other accrued benefits. Clearly, petitioner freely and voluntarily consented to the execution of the release and quitclaim.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Federation of Free Workers FFW Legal Center for petitioner.

Platon, Martinez, Flores, San Pedro & Leaño for respondent.

DEL CASTILLO, J.:

Once again, we uphold the employer’s exercise of its management prerogative because it was done for the advancementof its interest and not for the purpose of defeating the lawful rights of an employee.

This petition for review on certiorari1 assails the Decision2 dated January 30, 2004 and Resolution3 dated May 13, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 73076, which affirmed the May 30, 2002 Decision4 of the National Labor Relations Commission (NLRC) and reinstated the Labor Arbiter’s dismissal of the illegal dismissal complaint filed by petitioner Dannie M. Pantoja against respondent SCA Hygiene Products Corporation.

Factual Antecedents

Respondent, a corporation engaged in the manufacture, sale and distribution of industrial paper and tissue products, employed petitioner as a utility man on March 15, 1987. Petitioner was eventually assigned at respondent’s Paper Mill No. 4, the section which manufactures the company’s industrial paper products, as a back tender in charge of the proper operation of the section’s machineries.

In a Notice of Transfer dated March 27, 1999,5 respondent informed petitioner of its reorganization plan and offered him a position at Paper Mill No. 5 under the same terms and conditions of employment in anticipation of the eventual closure and permanent shutdown of Paper Mill No. 4 effective May 5, 1999. The closure and concomitant reorganization is in line with respondent’s decision to streamline and phase out the company’s industrial paper manufacturing operations due to financial difficulties brought about by the low volume of sales and orders for industrial paper products.

However, petitioner rejected respondent’s offer for his transfer. Thus, a notice of termination6 of employment effective May 5, 1999 was sent to petitioner as his position was declared redundant by the closure of Paper Mill No. 4. He then received his separation pay equivalent to two months pay for every year of service in the amount of P356,335.20 and thereafter executed a release and quitclaim7 in favor of respondent. On April 5, 1999, respondent informed the Department of Labor and Employment (DOLE) of its reorganization and partial closure by submitting with the said office an Establishment Termination Report8 together with the list9 of 31 terminated employees.

On June 20, 2000, petitioner filed a complaint for illegal dismissal against respondent assailing his termination as without any valid cause. He averred that the alleged redundancy never occurred as there was no permanent shutdown of Paper Mill No. 4 due to its continuous operation since his termination. A co-employee, Nestor Agtang, confirmed this fact and further attested that several contractual workers were employed to operate Paper Mill No. 4.10 Petitioner also presented in evidence documents pertaining to the actual and continuous operation of Paper Mill No. 4 such as the Paper Mill Personnel Schedule for July 2-8, 200011 and 23-29, 200012 and Paper Machine No. 4 Production Report and Operating Data dated April 28, 200013 and May 18, 2000.14

In its defense, respondent refuted petitioner’s claim of illegal dismissal. It argued that petitioner has voluntarily separated himself from service by opting to avail of the separation benefits of the company instead of accepting reassignment/transfer to another position of equal rank and pay. According to respondent, petitioner’s discussion on the alleged resumption of operation of Paper Mill No. 4 is rendered moot by the fact of petitioner’s voluntary separation.

Ruling of the Labor Arbiter

On March 23, 2001, the Labor Arbiter rendered a Decision15 dismissing petitioner’s complaint for lack of merit. The Labor Arbiter ruled that inasmuch as petitioner rejected the position offered to him, opted to receive separation pay and executed a release and quitclaim releasing the company from any claim or demand in connection with his employment, petitioner’s claim that he was illegally dismissed must perforce fail.

Ruling of the National Labor Relations Commission

Upon appeal by petitioner, the NLRC reversed the Labor Arbiter’s Decision by finding petitioner’s separation from employment illegal. The NLRC gave credence to petitioner’s evidence of Paper Mill No. 4’s continuous operation and consequently opined that the feigned shutdown of operations renders respondent’s redundancy program legally infirm. According to the NLRC, petitioner’s refusal to be transferred to an equal post in Paper Mill No. 5 is of no consequence since he would not have had the need to make a choice where the situation, in the first place, never called for it. The NLRC further disregarded the validity of the quitclaim because its execution cannot be considered as having been done voluntarily by petitioner there being fraud and misrepresentation on the part of respondent. The dispositive portion of the NLRC Decision reads:

“WHEREFORE, premises considered, the decision under review is hereby REVERSED and SET ASIDE, and another entered, declaring complainant’s dismissal from employment as ILLEGAL.

Accordingly, respondent is ordered to REINSTATE the complainant to his former position without loss of seniority rights and pay him FULL BACKWAGES in the amount corresponding to the period when he was actually dismissed until actual reinstatement, less the sum of THREE HUNDRED FIFTY SIX THOUSAND THREE HUNDRED THIRTY FIVE & 20/100 Pesos (P356,335.20) representing his separation pay.

Respondent is further ordered to pay the complainant, by way of attorney’s fees, ten percent (10%) of the total net amount due as backwages.

SO ORDERED.”16

Respondent sought reconsideration of the NLRC’s ruling. It denied the fact that Paper Mill No. 4 continued to be fully operational in 1999. Respondent asseverated that when Paper Mill No. 4 was shut down in 1999 due to its low production output as certified in an affidavit17 executed by SCA’s VP-Tissue Manufacturing Director, there was a necessity to occasionally run from time to time the machines in Paper Mill No. 4 only for the purpose of maintaining and preserving the same and does not mean that Paper Mill No. 4 continued to be operational. It was only in 2000 that Paper Mill No. 4 was subsequently reopened due to a more favorable business climate, which decision is recognized as a rightful exercise of management prerogative. Moreover, respondent maintained that this is a case of voluntary separation and not illegal dismissal.

In a Resolution18 dated August 22, 2002, respondent’s motion was denied.

Ruling of the Court of Appeals

Aggrieved, respondent filed a petition for certiorari with the CA. On January 30, 2004, the CA reversed the NLRC’s Decision and reinstated the Labor Arbiter’s Decision dismissing the compliant. It ruled that there was no illegal dismissal as the act of petitioner in rejecting the transfer and accepting the separation pay constitutes a valid basis for the separation from employment. Respondent’s Motion to Annul the NLRC’s Entry of Judgment was granted by the CA.

Petitioner filed a motion for reconsideration but it was denied.

Issue

The lone issue in this petition for review on certiorari is whether or not respondent is guilty of illegal dismissal.

Petitioner contends that respondent’s streamlining of operations which resulted in the reduction of personnel was a mere scheme to get rid of regular employees whose security of tenure is protected by law. As there was evident bad faith in the implementation of a flawed retrenchment program, petitioner argued that his separation from employment due to his decision to accept separation pay is illegal since respondent has no valid basis to give him an option either to be transferred or be separated. Further, neither can the quitclaim he executed stamp legality to his precipitate separation.

Our Ruling

The petition lacks merit.

Respondent’s right of management prer-

ogative was exercised in good faith.

Respondent presented evidence of the low volume of sales and orders for the production of industrial paper in 1999 which inevitably resulted to the company’s decision to streamline its operations. This fact was corroborated by respondent’s VP-Tissue Manufacturing Director and was not disputed by petitioner. Exercising its management prerogative and sound business judgment, respondent decided to cut down on operational costs by shutting down one of its paper mill. As held in International Harvester Macleod, Inc. v. Intermediate Appellate Court,19 the determination of the need to phase out a particular department and consequent reduction of personnel and reorganization as a labor and cost saving device is a recognized management prerogative which the courts will not generally interfere with.

In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business judgment arrived at in the face of the low demand for the production of industrial paper at the time. Despite an apparent reason to implement a retrenchment program as a cost-cutting measure, respondent, however, did not outrightly dismiss the workers affected by the closure of Paper Mill No. 4 but gave them an option to be transferred to posts of equal rank and pay. As can be seen, retrenchment was utilized by respondent only as an available option in case the affected employee would not want to be transferred. Respondent did not proceed directly to retrench. This, to our mind, is an indication of good faith on respondent’s part as it exhausted other possible measures other than retrenchment. Besides, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting. Giving the workers an option to be transferred without any diminution in rank and pay specifically belie petitioner’s allegation that the alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the absence of bad faith. Apparently, respondent implemented its streamlining or reorganization plan with good faith, not in an arbitrary manner and without prejudicing the tenurial rights of its employees.

Petitioner harps on the fact that there was no actual shutdown of Paper Mill No. 4 but that it continued to be operational. No evidence, however, was presented to prove that there was continuous operation after the shutdown in the year 1999. What the records reveal is that Paper Mill No. 4 resumed its operation in 2000 due to a more favorable business climate. The resumption of its industrial paper manufacturing operations does not, however, make respondent’s streamlining/reorganization plan illegal because, again, the abolishment of Paper Mill No. 4 in 1999 was a business judgment arrived at to prevent a possible financial drain at that time. As long as no arbitrary or malicious action on the part of an employer is shown, the wisdom of a business judgment to implement a cost saving device is beyond this court’s determination. After all, the free will of management to conduct its own business affairs to achieve its purpose cannot be denied.20

Petitioner’s voluntary separation from

employment renders his claim of illegal

dismissal unfounded and baseless.

Petitioner claims that he had no choice but to resign on the belief that Paper Mill No. 4 will be permanently closed as misrepresented by respondent and thus can invalidate the release and quitclaim executed by him.

We find this contention untenable.

We held that work reassignment of an employee as a genuine business necessity is a valid management prerogative.21 After being given an option to be transferred, petitioner rejected the offer for reassignment to Paper Mill No. 5 even though such transfer would not involve any diminution of rank and pay. Instead, he opted and preferred to be separated by executing a release and quitclaim in consideration of which he received separation pay in the amount of P356,335.20 equal to two months pay for every year of service plus other accrued benefits. Clearly, petitioner freely and voluntarily consented to the execution of the release and quitclaim. Having done so apart from the fact that the consideration for the quitclaim is credible and reasonable, the waiver represents a valid and binding undertaking.22 As aptly concluded by the CA, the quitclaim was not executed under force or duress and that petitioner was given a separation pay more than what the law requires from respondent.

WHEREFORE, the petition is DENIED. The assailed January 30, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 73076 dismissing petitioner Dannie M. Pantoja’s complaint for illegal dismissal and the May 13, 2004 Resolution denying the Motion for Reconsideration are AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Abad, Perez and Mendoza,** JJ., concur.

Petition denied, judgment and resolution affirmed.

_______________

21 Merck Sharp and Dohme (PHIL.) v. Robles, G.R. No. 176506, November 25, 2009, 605 SCRA 488.

22 San Miguel Corp. v. Teodosio, G.R. No. 163033, October 2, 2009, 602 SCRA 197.

**  In lieu of Justice Arturo D. Brion, per Raffle dated April 19, 2010. [Pantoja vs. SCA Hygiene Products Corporation, 619 SCRA 216(2010)]

G.R. No. 184885. March 7, 2012.*

ERNESTO G. YMBONG, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, VENERANDA SY AND DANTE LUZON, respondents.

Labor Law; Termination of Employment; Resignation; Although §11(b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy.—This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting Company v. NLRC, 294 SCRA 486 (1998), this Court ruled: What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any elective or local office as resigned from the company. Although §11(b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following grounds: Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the government and the private employer. In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect, thus readily eroding and adversely affecting the confidence and trust of the listening public to employer’s station.

Same; Same; Management Prerogative; So long as a company’s management prerogatives are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, the Supreme Court will uphold them.—We have consistently held that so long as a company’s management prerogatives are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them. In the instant case, ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.

Same; Same; Ymbong’s overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was separated from ABS-CBN not because he was dismissed but because he resigned.—As Policy No. HR-ER-016 is the subsisting company policy and not Luzon’s March 25, 1998 Memorandum, Ymbong is deemed resigned when he ran for councilor. We find no merit in Ymbong’s argument that “[his] automatic termination x x x was a blatant [disregard] of [his] right to due process” as he was “never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject company policy].” Ymbong’s overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Espedido & Famador Law Firm for petitioner.

Sobrevinas, Hayudini, Bodegon, Navarro & San Juan for respondent.

VILLARAMA, JR., J.:

Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision1 and September 18, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner to have resigned from work and not illegally dismissed.

The antecedent facts follow:

Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation (ABS-CBN) in 1993 at its regional station in Cebu as a television talent, co-anchoring Hoy Gising and TV Patrol Cebu. His stint in ABS-CBN later extended to radio when ABS-CBN Cebu launched its AM station DYAB in 1995 where he worked as drama and voice talent, spinner, scriptwriter and public affairs program anchor.

Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked as talent, director and scriptwriter for various radio programs aired over DYAB.

On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or the “Policy on Employees Seeking Public Office.” The pertinent portions read:

1. Any employee who intends to run for any public office position, must file his/her letter of resignation, at least thirty (30) days prior to the official filing of the certificate of candidacy either for national or local election.

  x x x x

3. Further, any employee who intends to join a political group/party or even with no political affiliation but who intends to openly and aggressively campaign for a candidate or group of candidates (e.g. publicly speaking/endorsing candidate, recruiting campaign workers, etc.) must file a request for leave of absence subject to management’s approval. For this particular reason, the employee should file the leave request at least thirty (30) days prior to the start of the planned leave period.

  x x x x3 [Emphasis and underscoring supplied.]

Because of the impending May 1998 elections and based on his immediate recollection of the policy at that time, Dante Luzon, Assistant Station Manager of DYAB issued the following memorandum:

TO     :  ALL CONCERNED

FROM    :  DANTE LUZON

DATE    :  MARCH 25, 1998

SUBJECT  :  AS STATED

Please be informed that per company policy, any employee/talent who wants to run for any position in the coming election will have to file a leave of absence the moment he/she files his/her certificate of candidacy.

The services rendered by the concerned employee/talent to this company will then be temporarily suspended for the entire campaign/election period.

For strict compliance.”4 [Emphasis and underscoring supplied.]

Luzon, however, admitted that upon double-checking of the exact text of the policy and subsequent confirmation with the ABS-CBN Head Office, he saw that the policy actually required suspension for those who intend to campaign for a political party or candidate and resignation for those who will actually run in the elections.5

After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch with Luzon. Luzon claims that Ymbong approached him and told him that he would leave radio for a couple of months because he will campaign for the administration ticket. It was only after the elections that they found out that Ymbong actually ran for public office himself at the eleventh hour. Ymbong, on the other hand, claims that in accordance with the March 25, 1998 Memorandum, he informed Luzon through a letter that he would take a few months leave of absence from March 8, 1998 to May 18, 1998 since he was running for councilor of Lapu-Lapu City.

As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as councilor for Naga, Cebu. According to Luzon, he clarified to Patalinghug that he will be considered resigned and not just on leave once he files a certificate of candidacy. Thus, Patalinghug wrote Luzon the following letter on April 13, 1998:

Dear Mr. Luzon,

I’m submitting to you my letter of resignation as your Drama Production Chief and Talent due to your company’s policy that every person connected to ABS-CBN that should seek an elected position in the government will be forced to resigned (sic) from his position. So herewith I’m submitting my resignation with a hard heart. But I’m still hoping to be connected again with your prestigious company after the election[s] should you feel that I’m still an asset to your drama production department. I’m looking forward to that day and I’m very happy and proud that I have served for two and a half years the most stable and the most prestigious Radio and TV Network in the Philippines.

As a friend[,] wish me luck and Pray for me. Thank you.

Very Truly Yours,

(Sgd.)

Leandro “Boy” Patalinghug6

Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections.

Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu. According to Luzon, he informed them that they cannot work there anymore because of company policy. This was stressed even in subsequent meetings and they were told that the company was not allowing any exceptions. ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their participation in the radio drama, Nagbabagang Langit, since it was rating well and to avoid an abrupt ending. The agreed winding-up, however, dragged on for so long prompting Luzon to issue to Ymbong the following memorandum dated September 14, 1998:

TO : NESTOR YMBONG

FROM : DANTE LUZON

SUBJECT : AS STATED

DATE : 14 SEPT. 1998

Please be reminded that your services as drama talent had already been automatically terminated when you ran for a local government position last election.

The Management however gave you more than enough time to end your drama participation and other involvement with the drama department.

It has been decided therefore that all your drama participation shall be terminated effective immediately. However, your involvement as drama spinner/narrator of the drama “NAGBA[BA]GANG LANGIT” continues until its writer/director Mr. Leandro Patalinghug wraps it up one week upon receipt of a separate memo issued to him.7

Ymbong in contrast contended that after the expiration of his leave of absence, he reported back to work as a regular talent and in fact continued to receive his salary. On September 14, 1998, he received a memorandum stating that his services are being terminated immediately, much to his surprise. Thus, he filed an illegal dismissal complaint8 against ABS-CBN, Luzon and DYAB Station Manager Veneranda Sy. He argued that the ground cited by ABS-CBN for his dismissal was not among those enumerated in the Labor Code, as amended. And even granting without admitting the existence of the company policy supposed to have been violated, Ymbong averred that it was necessary that the company policy meet certain requirements before willful disobedience of the policy may constitute a just cause for termination. Ymbong further argued that the company policy violates his constitutional right to suffrage.9

Patalinghug likewise filed an illegal dismissal complaint10 against ABS-CBN.

ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-employee relationship between the company and Ymbong and Patalinghug. ABS-CBN contended that they are not employees but talents as evidenced by their talent contracts. However, notwithstanding their status, ABS-CBN has a standing policy on persons connected with the company whenever they will run for public office.11

On July 14, 1999, the Labor Arbiter rendered a decision12 finding the dismissal of Ymbong and Patalinghug illegal, thus:

“WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal of the two complainants illegal. An order is issued directing respondent ABS[-]CBN to immediately reinstate complainants to their former positions without loss of seniority rights plus the payment of backwages in the amount of P200,000.00 to each complainant.

All other claims are dismissed.

SO ORDERED.”13

The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN and Ymbong and Patalinghug considering the stipulations in their appointment letters/talent contracts. The Labor Arbiter noted particularly that the appointment letters/talent contracts imposed conditions in the performance of their work, specifically on attendance and punctuality, which effectively placed them under the control of ABS-CBN. The Labor Arbiter likewise ruled that although the subject company policy is reasonable and not contrary to law, the same was not made known to Ymbong and Patalinghug and in fact was superseded by another one embodied in the March 25, 1998 Memorandum issued by Luzon. Thus, there is no valid or authorized cause in terminating Ymbong and Patalinghug from their employment.

In its memorandum of appeal14 before the National Labor Relations Commission (NLRC), ABS-CBN contended that the Labor Arbiter has no jurisdiction over the case because there is no employer-employee relationship between the company and Ymbong and Patalinghug, and that Sy and Luzon mistakenly assumed that Ymbong and Patalinghug could just file a leave of absence since they are only talents and not employees. In its Supplemental Appeal,15 ABS-CBN insisted that Ymbong and Patalinghug were engaged as radio talents for DYAB dramas and personality programs and

their contract is one between a self-employed contractor and the hiring party which is a standard practice in the broadcasting industry. It also argued that the Labor Arbiter should not have made much of the provisions on Ymbong’s attendance and punctuality since such requirement is a dictate of the programming of the station, the slating of shows at regular time slots, and availability of recording studios – not an attempt to exercise control over the manner of his performance of the contracted anchor work within his scheduled spot on air. As for the pronouncement that the company policy has already been superseded by the March 25, 1998 Memorandum issued by Luzon, the latter already clarified that it was the very policy he sought to enforce. This matter was relayed by Luzon to Patalinghug when the latter disclosed his plans to join the 1998 elections while Ymbong only informed the company that he was campaigning for the administration ticket and the company had no inkling that he will actually run until the issue was already moot and academic. ABS-CBN further contended that Ymbong and Patalinghug’s “reinstatement” is legally and physically impossible as the talent positions they vacated no longer exist. Neither is there basis for the award of back wages since they were not earning a monthly salary but paid talent fees on a per production/per script basis. Attached to the Supplemental Appeal is a Sworn Statement16 of Luzon.

On March 8, 2004, the NLRC rendered a decision17 modifying the labor arbiter’s decision. The fallo of the NLRC decision reads:

“WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C. Aninon dated 14 July 1999 is MODIFIED, to wit:

Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong and to pay his full backwages computed from 15 September 1998 up to the time of his actual reinstatement.

SO ORDERED.”18

The NLRC dismissed ABS-CBN’s Supplemental Appeal for being filed out of time. The NLRC ruled that to entertain the same would be to allow the parties to submit their appeal on piecemeal basis, which is contrary to the agency’s duty to facilitate speedy disposition of cases. The NLRC also held that ABS-CBN wielded the power of control over Ymbong and Patalinghug, thereby proving the existence of an employer-employee relationship between them.

As to the issue of whether they were illegally dismissed, the NLRC treated their cases differently. In the case of Patalinghug, it found that he voluntarily resigned from employment on April 21, 1998 when he submitted his resignation letter. The NLRC noted that although the tenor of the resignation letter is somewhat involuntary, he knew that it is the policy of the company that every person connected therewith should resign from his employment if he seeks an elected position in the government. As to Ymbong, however, the NLRC ruled otherwise. It ruled that the March 25, 1998 Memorandum merely states that an employee who seeks any elected position in the government will only merit the temporary suspension of his services. It held that under the principle of social justice, the March 25, 1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing the September 14, 1998 memorandum issued to Ymbong stating that his services had been automatically terminated when he ran for an elective position.

ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution dated June 21, 2004.19

Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for certiorari20 before the CA alleging that:

I.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY MISAPPRECIATED THE FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A FREELANCE RADIO TALENT AND MEDIA PRACTITIONER—NOT A “REGULAR EMPLOYEE” OF PETITIONER—TO WHOM CERTAIN PRODUCTION WORK HAD BEEN OUTSOURCED BY ABS-CBN CEBU

UNDER AN INDEPENDENT CONTRACTORSHIP SITUATION, THUS RENDERING THE LABOR COURTS WITHOUT JURISDICTION OVER THE CASE IN THE ABSENCE OF EMPLOYMENT RELATIONS BETWEEN THE PARTIES.

II.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING RESPONDENT YMBONG TO BE A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A CONTRACTUAL EMPLOYMENT RELATION BETWEEN THEM WHEN NONE EXISTS OR HAD BEEN AGREED UPON OR OTHERWISE INTENDED BY THE PARTIES.

III.

EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF ARGUMENT, RESPONDENT NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF DISCRETION IN NOT SIMILARLY UPHOLDING AND APPLYING COMPANY POLICY NO. HR-ER-016 IN THE CASE OF RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED AND DISQUALIFIED FROM FURTHER ENGAGEMENT AS A RADIO TALENT IN ABS-CBN CEBU AS A CONSEQUENCE OF HIS CANDIDACY IN THE 1998 ELECTIONS, AS RESPONDENT NLRC HAD DONE IN THE CASE OF PATALINGHUG.

IV.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE PROCESS TO PETITIONER IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL, DATED OCTOBER 18, 1999, “FOR BEING FILED OUT OF TIME” CONSIDERING THAT THE FILING OF SUCH A PLEADING IS NOT IN ANY CASE PROSCRIBED AND RESPONDENT NLRC IS AUTHORIZED TO CONSIDER ADDITIONAL EVIDENCE ON APPEAL; MOREOVER, TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR CASES.

V.

RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE RELIEF OF REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE NEVER OCCUPIED ANY “REGULAR” POSITION IN PETITIONER FROM WHICH HE COULD HAVE BEEN “ILLEGALLY DISMISSED,” NOR ARE ANY OF THE RADIO PRODUCTIONS IN WHICH HE HAD DONE TALENT WORK FOR PETITIONER STILL EXISTING. INDEED, THERE IS NO BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO RESPONDENT YMBONG IN THE AMOUNT OF P200,000.00 CONSIDERING THAT, AS SHOWN BY THE UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A MONTHLY “SALARY” OF “P20,000.00,” AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A “PER PRODUCTION/PER SCRIPT” BASIS WHICH AVERAGED LESS THAN P10,000.00 PER MONTH IN TALENT FEES ALL IN ALL.21

On August 22, 2007, the CA rendered the assailed decision reversing and setting aside the March 8, 2004 Decision and June 21, 2004 Resolution of the NLRC. The CA declared Ymbong resigned from employment and not to have been illegally dismissed. The award of full back wages in his favor was deleted accordingly.

The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after applying the provisions of Policy No. HR-ER-016 to him. It noted that said policy is entitled “Policy on Employees Seeking Public Office” and the guidelines contained therein specifically pertain to employees and did not even mention talents or independent contractors. It held that it is a complete turnaround on ABS-CBN’s part to later argue that Ymbong is only a radio talent or independent contractor and not its employee. By applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him to be an employee and not merely an independent contractor.

The CA likewise held that the subject company policy is the controlling guideline and therefore, Ymbong should be considered resigned from ABS-CBN. While Luzon has policy-making power as assistant radio manager, he had no authority to issue a memorandum that had the effect of repealing or superseding a subsisting policy. Contrary to the

findings of the Labor Arbiter, the subject company policy was effective at that time and continues to be valid and subsisting up to the present. The CA cited Patalinghug’s resignation letter to buttress this conclusion, noting that Patalinghug openly admitted in his letter that his resignation was in line with the said company policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug, there is no reason not to apply the same regulation to Ymbong who was on a similar situation as the former. Thus, the CA found that the NLRC overstepped its area of discretion to a point of grave abuse in declaring Ymbong to have been illegally terminated. The CA concluded that there is no illegal dismissal to speak of in the instant case as Ymbong is considered resigned when he ran for an elective post pursuant to the subject company policy.

Hence, this petition.

Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in upholding the validity of the termination of Ymbong’s services; and (3) when it reversed the decision of the NLRC 4th Division of Cebu City which affirmed the decision of Labor Arbiter Nicasio C. Aniñon.22

Ymbong argues that the subject company policy is a clear interference and a gross violation of an employee’s right to suffrage. He is surprised why it was easy for the CA to rule that Luzon’s memorandum ran counter to an existing policy while on the other end, it did not see that it was in conflict with the constitutional right to suffrage. He also points out that the issuance of the March 25, 1998 Memorandum was precisely an exercise of the management power to which an employee like him must respect; otherwise, he will be sanctioned for disobedience or worse, even terminated. He was not in a position to know which between the two issuances was correct and as far as he is concerned, the March 25, 1998 Memorandum superseded the subject company policy. Moreover, ABS-CBN cannot disown acts of its officers most especially since it prejudiced his property rights.23

As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-CBN is not among the just and authorized causes provided in the Labor Code, as amended. And even assuming the subject company policy passes the test of validity under the pretext of the right of the management to discipline and terminate its employees, the exercise of such right is not without bounds. Ymbong avers that his automatic termination was a blatant disregard of his right to due process. He was never asked to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy.24

Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent in their findings that he was illegally dismissed. It is settled that factual findings of labor administrative officials, if supported by substantial evidence, are accorded not only great respect but even finality.25

ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016 has long been upheld by this Court which has ruled that a media company has a right to impose a policy providing that employees who file their certificates of candidacy in any election shall be considered resigned.26 Moreover, case law has upheld the validity of the exercise of management prerogatives even if they appear to limit the rights of employees as long as there is no showing that management prerogatives were exercised in a manner contrary to law.27 ABS-CBN contends that being the largest media and entertainment company in the country, its reputation stems not only from its ability to deliver quality entertainment programs but also because of neutrality and impartiality in delivering news.28

ABS-CBN further argues that nothing in the company policy prohibits its employees from either accepting a public appointive position or from running for public office. Thus, it cannot be considered as violative of the constitutional right of suffrage. Moreover, the Supreme Court has recognized the employer’s right to enforce occupational qualifications as long as the employer is able to show the existence of a reasonable business necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 itself states that it was issued “to protect the company from any public misconceptions” and

“[t]o preserve its objectivity, neutrality and credibility.” Thus, it cannot be denied that it is reasonable under the circumstances.29

ABS-CBN likewise opposes Ymbong’s claim that he was terminated. ABS-CBN argues that on the contrary, Ymbong’s unilateral act of filing his certificate of candidacy is an overt act tantamount to voluntary resignation on his part by virtue of the clear mandate found in Policy No. HR-ER-016. Ymbong, however, failed to file his resignation and in fact misled his superiors by making them believe that he was going on leave to campaign for the administration candidates but in fact, he actually ran for councilor. He also claims to have fully apprised Luzon through a letter of his intention to run for public office, but he failed to adduce a copy of the same.30

As to Ymbong’s argument that the CA should not have reversed the findings of the Labor Arbiter and the NLRC, ABS-CBN asseverates that the CA is not precluded from making its own findings most especially if upon its own review of the case, it has been revealed that the NLRC, in affirming the findings of the Labor Arbiter, committed grave abuse of discretion amounting to lack or excess of jurisdiction when it failed to apply the subject company policy in Ymbong’s case when it readily applied the same to Patalinghug.31

Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No. HR-ER-016 is valid; (2) whether the March 25, 1998 Memorandum issued by Luzon superseded Policy No. HR-ER-016; and (3) whether Ymbong, by seeking an elective post, is deemed to have resigned and not dismissed by ABS-CBN.

Policy No. HR-ER-016 is valid.

This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting Company v. NLRC,32 this Court ruled:

“What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any elective or local office as resigned from the company. Although §11(b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following grounds:

Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the government and the private employer.

In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect, thus readily eroding and adversely affecting the confidence and trust of the listening public to employer’s station.33

ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its rationale is embodied in the policy itself, to wit:

Rationale:

ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest of the company to continuously remain apolitical. While it encourages and supports its employees to have greater political awareness and for them to exercise their right to suffrage, the company, however, prefers to remain politically independent and unattached to any political individual or entity.

Therefore, employees who [intend] to run for public office or accept political appointment should resign from their positions, in order to protect the company from any public misconceptions. To preserve its objectivity, neutrality and credibility, the company reiterates the following policy guidelines for strict implementation.

x x x x34 [Emphasis supplied.]

We have consistently held that so long as a company’s management prerogatives are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them.35 In the instant case, ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.36

It is worth noting that such exercise of management prerogative has earned a stamp of approval from no less than our Congress itself when on February 12, 2001, it enacted Republic Act No. 9006, otherwise known as the “Fair Election Act.” Section 6.6 thereof reads:

6.6. Any mass media columnist, commentator, announcer, reporter, on-air correspondent or personality who is a candidate for any elective public office or is a campaign volunteer for or employed or retained in any capacity by any candidate or political party shall be deemed resigned, if so required by their employer, or shall take a leave of absence from his/her work as such during the campaign period: Provided, That any media practitioner who is an official of a political party or a member of the campaign staff of a candidate or political party shall not use his/her time or space to favor any candidate or political party. [Emphasis and underscoring supplied.]

Policy No. HR-ER-016 was not

superseded by the March 25,

1998 Memorandum

The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-CBN, has policy-making powers in relation to his principal task of administering the network’s radio station in the Cebu region, the exercise of such power should be in accord with the general rules and regulations imposed by the ABS-CBN Head Office to its employees. Clearly, the March 25, 1998 Memorandum issued by Luzon which only requires employees to go on leave if they intend to run for any elective position is in absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in Manila which requires the resignation, not only the filing of a leave of absence, of any employee who intends to run for public office. Having been issued beyond the scope of his authority, the March 25, 1998 Memorandum is therefore void and did not supersede Policy No. HR-ER-016.

Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his recollection of the company policy when he issued the March 25, 1998 Memorandum and stated therein that upon double-checking of the exact text of the policy statement and subsequent confirmation with the ABS-CBN Head Office in Manila, he learned that the policy required resignation for those who will actually run in elections because the company wanted to maintain its independence. Since the officer who himself issued the subject memorandum acknowledged that it is not in harmony with the Policy issued by the upper management, there is no reason for it to be a source of right for Ymbong.

Ymbong is deemed resigned when he ran for councilor.

As Policy No. HR-ER-016 is the subsisting company policy and not Luzon’s March 25, 1998 Memorandum, Ymbong is deemed resigned when he ran for councilor.

We find no merit in Ymbong’s argument that “[his] automatic termination x x x was a blatant [disregard] of [his] right to due process” as he was “never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject company policy].”37 Ymbong’s overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy.

In addition, we do not subscribe to Ymbong’s claim that he was not in a position to know which of the two issuances was correct. Ymbong most likely than not, is fully aware that the subsisting policy is Policy No. HR-ER-016 and not the March 25, 1998 Memorandum and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told the latter that he will only campaign for the administration ticket and not actually run for an elective post. Ymbong claims he had fully apprised Luzon by letter of his plan to run and even filed a leave of absence but records are bereft of any proof of said claim. Ymbong claims that the letter stating his intention to go on leave to run in the election is attached to his Position Paper as Annex “A,” a perusal of said pleading attached to his petition before this Court, however, show that Annex “A” was not his letter to Luzon but the September 14, 1998 Memorandum informing Ymbong that his services had been automatically terminated when he ran for a local government position.

Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have been able to clarify to him the prevailing company policy and inform him of the consequences of his decision in case he decides to run, as Luzon did in Patalinghug’s case.

WHEREFORE, the petition for review on certiorari is DENIED for lack of merit.

With costs against petitioner.

SO ORDERED.

Corona (C.J., Chairperson), Leonardo-De Castro, Bersamin and Perlas-Bernabe,** JJ., concur.

_______________

** Designated additional member per Special Order No. 1207 dated February 23, 2012.

703

VOL. 667, MARCH 7, 2012

703

Ymbong vs. ABS-CBN Broadcasting Corporation

Petition denied.

Notes.—Resignation is the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and that he has no other choice but to dissociate himself from employment; It is the acceptance of an employee’s resignation that renders it operative. (Magis Young

Achievers’ Learning Center vs. Manalo, 579 SCRA 421; Virjen Shipping Corporation vs. Barraquio, 585 SCRA 541; Payno vs. Orizon Trading Corporation, 596 SCRA 460 [2009]).

Managerial prerogatives are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice. (Supreme Steel Corporation vs. Nagkakaisang Manggagawa ng Supreme Independent Union (NMS-IND-APL), 646 SCRA 501 [2011]).

——o0o— [Ymbong vs. ABS-CBN Broadcasting Corporation, 667 SCRA 682(2012)]

VOL. 524, JUNE 8, 2007

533

Tinio vs. Court of Appeals

G.R. No. 171764. June 8, 2007.*

ALBERT O. TINIO, petitioner, vs. COURT OF APPEALS, SMART COMMUNICATIONS, INC., ALEX O. CAEG and ANASTACIO MARTIREZ, respondents.

Labor Law; Management Prerogatives; Labor laws discourage interference with an employer’s judgment in the conduct of his business.—This Court has consistently recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment, provided there is no demotion in rank or a diminution of salary, benefits and other privileges. As a rule, the Court will not interfere with an employer’s prerogative to regulate all aspects of employment which include among others, work assignment, working methods and place and manner of work. Labor laws discourage interference with an employer’s judgment in the conduct of his business. The doctrine is well-settled that it is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. This is a privilege inherent in the employer’s right to control and manage his enterprise effectively. The freedom of management to conduct its business operations to achieve its purpose cannot be denied.

Same; Same; Security of Tenure; An employee’s right to security of tenure does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful.—An employee’s right to security of tenure does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a constructive dismissal.

Same; Same; Same; The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play—having the right should not be confused with the manner in which the right is exercised.—Like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which the right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. The employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges, and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution of pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego his continued employment.

Same; Same; Same; Transfers; Words and Phrases; “Promotion,” and “Demotion,” Explained; A transfer is a “movement from one position to another which is of equivalent rank, level or salary, without break in service.”—A transfer is a “movement from one position to another which is of equivalent rank, level or salary, without break in service.” Promotion, on the other hand, is the “advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary.” Conversely, demotion involves a

situation where an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.

Same; Same; Same; Same; Constructive Dismissals; A transfer is deemed to be constructive dismissal when three conditions concur: first, when the transfer is unreasonable, inconvenient or prejudicial to the employee; second, when the transfer involves a demotion in rank or diminution of salaries, benefits and other privileges; and third, when the employer performs a clear act of discrimination, insensibility, or disdain towards the employee, which forecloses any choice by the latter except to forego his continued employment.—The burden of proof in constructive dismissal cases is on the employer to establish that the transfer of an employee is for valid and legitimate grounds, i.e., that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of salaries, privileges and other benefits. Hence, it may be gleaned from the foregoing discourse that a transfer is deemed to be constructive dismissal when three conditions concur: first, when the transfer is unreasonable, inconvenient or prejudicial to the employee; second, when the transfer involves a demotion in rank or diminution of salaries, benefits and other privileges; and third, when the employer performs a clear act of discrimination, insensibility, or disdain towards the employee, which forecloses any choice by the latter except to forego his continued employment.

Same; Same; Same; Same; Same; Mere title or position held by an employee in a company does not determine whether a transfer constitutes a demotion—rather, it is the totality of the following circumstances, to wit: economic significance of the work, the duties and responsibilities conferred, as well as the same rank and salary of the employee, among others, that establishes whether a transfer is a demotion.—The transfer from Cebu to Makati does not represent a demotion in rank or diminution of salaries, benefits and other privileges. It was a lateral transfer with the same salaries, benefits and privileges. The title of Corporate Sales Manager, as correctly pointed out by the appellate court, is not derogatory to the petitioner considering that he will still receive the same benefits and salary he received as Senior Manager. The position is deemed in the level of Senior Manager considering that the skills and competencies required involve handling the accounts of top corporate clients of the company, representing some of the largest corporations in the Philippines. Mere title or position held by an employee in a company does not determine whether a transfer constitutes a demotion. Rather, it is the totality of the following circumstances, to wit: economic significance of the work, the duties and responsibilities conferred, as well as the same rank and salary of the employee, among others, that establishes whether a transfer is a demotion.

Same; Same; Same; Same; An employee has no valid reason to disobey the order of transfer given by management, especially if he has tacitly given his consent thereto when he acceded to the company’s policy of hiring sales staff who are willing to be assigned anywhere in the Philippines which is demanded by the employer’s business; By the very nature of their employment, sales executives are expected to travel.—We held in Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, 154 SCRA 713 (1987), that an employee has no valid reason to disobey the order of transfer given by management, especially if he has tacitly given his consent thereto when he acceded to the company’s policy of hiring sales staff who are willing to be assigned anywhere in the Philippines which is demanded by the employer’s business. By the very nature of their employment, sales executives are expected to travel. They should anticipate re-assignment according to the demands of the employer’s business. Companies which rely heavily on sales such as private respondent SMART are expected to assign their employees to areas where markets may be expanded or places where their sales could be improved. The right to transfer or reassign an employee is thus a reasonable exercise of management prerogatives and is recognized as an employer’s exclusive right in running its company.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Juan G. De Ocampo and Teodoro M. Martija II for petitioner.

Siguion Reyna, Montecillo and Ongsiako for respondent.

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 25, 20051 and March 2, 2006,2 respectively, in CA-G.R. SP No. 90677 which reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated July 30, 2004,3 and its Resolution dated April 20, 2005,4 for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. The appellate court reinstated the Decision of the Labor Arbiter dated December 9, 20035 which dismissed petitioner’s complaint for lack of merit.

On December 1, 2002, Smart Communications, Inc. (SMART) employed petitioner Albert O. Tinio as its General Manager for Visayas/Mindanao (VISMIN) Sales and Operations based in Cebu.6

On May 14, 2003, private respondent Alex O. Caeg, Group Head, Sales and Distribution of SMART, under the supervision of co-respondent Anastacio Martirez, informed petitioner of his new assignment as Sales Manager for Corporate Sales in SMART’s Head Office in Makati City, effective June 1, 2003. However, petitioner deferred action on his assignment until he had been apprised of the duties and responsibilities of his new position and the terms and conditions of his relocation. In a memorandum dated May 26, 2003, Caeg informed petitioner that his transfer was for the greater business interest of the company; that petitioner is expected to meet at least 80% of his sales and collection targets; and that financial assistance shall be provided for his physical transfer to Manila.

On June 2, 2003, petitioner reported to SMART’s Head Office in Makati and discussed with Ann Margaret V. Santiago, HRD Group Head, his job description, functions, responsibilities, salary and benefits, as well as options for relocation/ transfer of his family to Manila. The Department Head for

Corporate Business Group, VIP Accounts Management and Marketing PR, Julie C. Carceller, likewise explained to him details of his new assignment such as job description, scope of the position, objectives and goals of the department, key responsibilities as well as targets and expectations of SMART from the Corporate Business Group. The next day, June 3, 2003, petitioner and Caeg met to discuss further details of petitioner’s new position.7

Thereafter, petitioner did not report for work. He instead filed a complaint for constructive dismissal with claims for moral and exemplary damages and attorney’s fees against SMART and private respondents Caeg and Martirez. On June 16, 2003, Caeg required petitioner to explain his continuing refusal to transfer to his new assignment, but instead of giving an explanation, petitioner referred Caeg to his complaint for constructive dismissal.8 Private respondents also scheduled a hearing on June 23, 2003 but petitioner failed to attend. Thus, private respondents terminated petitioner’s employment effective June 25, 2003 for insubordination.9

On December 9, 2003, the Labor Arbiter rendered judgment finding that petitioner was not constructively or illegally dismissed; hence, the complaint was ordered dismissed. But the Labor Arbiter awarded financial assistance to petitioner in the amount of P235,400.00.10

On appeal, the NLRC reversed the Labor Arbiter’s decision and declared that petitioner was illegally dismissed, awarded him full backwages, including the corresponding 13th month pay, moral and exemplary damages, as well as attorney’s fees. Private respondents’ motion for reconsideration was denied.11

On a petition for certiorari under Rule 65 to the Court of Appeals, private respondents alleged that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in ruling that: (1) the transfer of Tinio resulted in a demotion in rank; (2) the transfer was not a valid exercise of management prerogative; (3) SMART did not comply with the procedural requirements of due process, and Tinio’s termination was made with malice and in bad faith; and (4) Tinio is entitled to reinstatement and full backwages.12

On October 25, 2005, the Court of Appeals reversed and set aside the Decision of the NLRC and reinstated the Decision of the Labor Arbiter dismissing the complaint for lack of merit.13 Petitioner’s motion for reconsideration was denied; hence, this appeal.14

The twin issues for resolution are: (1) whether private respondents’ act of transferring petitioner to its Head Office in Makati was a valid exercise of management prerogative; and (2) whether petitioner was constructively dismissed.

This Court has consistently recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment, provided there is no demotion in rank or a diminution of salary, benefits and other privileges.15 As a rule, the Court will not interfere with an employer’s prerogative to regulate all aspects of employment which include among others, work assignment, working methods and place and manner of work. Labor laws discourage interference with an employer’s judgment in the conduct of his business.16

The doctrine is well-settled that it is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company.17 This is a privilege inherent in the employer’s right to control and manage his enterprise effectively. The freedom of management to conduct its business operations to achieve its purpose cannot be denied.18

An employee’s right to security of tenure does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a constructive dismissal.19

But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which the right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. The employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges, and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution of pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego his continued employment.20

A transfer is a “movement from one position to another which is of equivalent rank, level or salary, without break in service.” Promotion, on the other hand, is the “advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary.”21 Conversely, demotion involves a situation where an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.

The burden of proof in constructive dismissal cases is on the employer to establish that the transfer of an employee is for valid and legitimate grounds, i.e., that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of salaries, privileges and other benefits.

Hence, it may be gleaned from the foregoing discourse that a transfer is deemed to be constructive dismissal when three conditions concur: first, when the transfer is unreasonable, inconvenient or prejudicial to the employee; second, when the transfer involves a demotion in rank or diminution of salaries, benefits and other privileges; and third, when the employer performs a clear act of discrimination, insensibility, or disdain towards the employee, which forecloses any choice by the latter except to forego his continued employment.

In the instant case, the transfer from Cebu to Makati was not unreasonable, inconvenient or prejudicial to the petitioner considering that it was a transfer from the provincial office to the main office of SMART. The position would entail greater responsibilities because it would involve corporate accounts of top establishments in Makati which are significantly greater in value than the individual accounts in Visayas and Mindanao. In terms of career advancement, the transfer was even beneficial and advantageous since he was being assigned the corporate accounts of the choice clients of SMART. Moreover, the transfer was not economically inconvenient because all expenses relative thereto were to be borne by SMART.

Also, the transfer from Cebu to Makati does not represent a demotion in rank or diminution of salaries, benefits and other privileges. It was a lateral transfer with the same salaries, benefits and privileges. The title of Corporate Sales Manager, as correctly pointed out by the appellate court, is not derogatory to the petitioner considering that he will still receive the same benefits and salary he received as Senior Manager.22 The position is deemed in the level of Senior Manager considering that the skills and competencies required involve handling the accounts of top corporate clients of the company, representing some of the largest corporations in the Philippines.

Mere title or position held by an employee in a company does not determine whether a transfer constitutes a demotion. Rather, it is the totality of the following circumstances, to wit: economic significance of the work, the duties and responsibilities conferred, as well as the same rank and salary of the employee, among others, that establishes whether a transfer is a demotion.

We find that petitioner was not demoted since his transfer from Cebu to Makati was being implemented due to a valid corporate reorganization to streamline management operations. The act of management in reorganizing as well as transferring its employees to achieve its stated objectives is a legitimate exercise of their management prerogatives, barring any showing of bad faith which is absent in the instant case. Despite the change of petitioner’s title from “Senior Manager” to “Corporate Sales Manager,” he still enjoyed the same rank and salary. Although Cebu operations of SMART constitute a large individual client base representing both Visayas and Mindanao, the Makati operations deal with higher corporate or business sales due to the larger concentration of top Philippine and multinational corporations. In other words, petitioner will be managing the select client base that produces the bulk of the corporate sales income of SMART. We ruled in Philippine Wireless Inc. v. National Labor Relations Commission23 that there is no demotion where there is no reduction in position, rank or salary as a result of the transfer.24

Moreover, private respondents did not act with discrimination, insensibility, or disdain towards petitioner, which foreclosed any choice by the latter except to forego his continued employment. SMART, through its representatives, attempted to address petitioner’s grievances by meeting with the latter on several occasions thus addressing this internal problem utilizing the proper corporate channels. Several meetings were held between petitioner and private respondents with a view to clarifying the details of petitioner’s new assignment, such as job description, relation to corporate structure, functions, responsibilities, salary and benefits. Meetings were ongoing when petitioner opted to file a complaint for constructive dismissal.

We agree with the Court of Appeals’ ruling that private respondent SMART exercised its management prerogative in transferring petitioner from Cebu to Makati as the person in charge of the post-paid sales accounts. SMART management has the prerogative to transfer or re-assign its employees to a position where they can contribute significantly to the company objectives in line with its corporate reorganization. Petitioner’s argument that the transfer was hastily arrived at, considering that he was being ordered to transfer within 15 days from notice and that the Makati head office personnel were unaware thereof is untenable. Moreover, petitioner knew of the management prerogative to re-assign its employees as expressly stipulated in petitioner’s employment contract.

No evidence was presented to substantiate petitioner’s claim that the transfer was punitive or that private respondents were in bad faith. The failure of private respondent Caeg to directly address the supposed “punitive” nature of the transfer cannot establish bad faith, without independent evidence to prove this allegation.

We held in Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,25 that an employee has no valid reason to disobey the order of transfer given by management, especially if he has tacitly given his consent thereto when he acceded to the company’s policy of hiring sales staff who are willing to be assigned anywhere in the Philippines which is demanded by the employer’s business.26

By the very nature of their employment, sales executives are expected to travel. They should anticipate re-assignment according to the demands of the employer’s business. Companies which rely heavily on sales such as private respondent SMART are expected to assign their employees to areas where markets may be expanded or places where their sales could be improved. The right to transfer or reassign an employee is thus a reasonable exercise of management prerogatives and is recognized as an employer’s exclusive right in running its company.27

In the instant case, petitioner premised his deliberate and unjustified refusal to return to work on the belief that he had been constructively dismissed, despite attempts by SMART to accommodate his demands. Petitioner’s deliberate and unjustified refusal to resume his employment, a form of neglect of duty, despite attempts by the company to hear out his grievances, constitutes abandonment. Petitioner’s failure to report for work, or absence without valid or justifiable reason, coupled with a clear intention to sever employer-employee relationship, leads us to no other conclusion than that he abandoned his work. As such, the award of financial assistance in the amount of P235,400 given by the Labor Arbiter and affirmed by the appellate court must be deleted for lack of basis.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated October 25, 2005 and March 2, 2006, respectively, in CA-G.R. SP No. 90677, dismissing the complaint for constructive dismissal against private respondents Smart Communications, Inc., Alex O. Caeg and Anastacio Martirez are AFFIRMED with the MODIFICATION that the award of financial assistance be DELETED for lack of basis. No pronouncement as to costs.

SO ORDERED.

Austria-Martinez, Chico-Nazario and Nachura, JJ., concur.

Petition denied, judgment and resolution affirmed with modification.

Notes.—The right to demote an employee also falls within the category of management prerogatives. (Leonardo vs. National Labor Relations Commission, 333 SCRA 589 [2000])

While the Court recognizes the exercise of management prerogatives and often declines to interfere with the legitimate business decisions of the employer, this privilege is not absolute but subject to exceptions, such as when the Secretary of Labor assumes jurisdiction over labor disputes involving industries indispensable to the national interest. (University of Immaculate Concepcion, Inc. vs. Secretary of Labor, 448 SCRA 190 [2005])

——o0o—— [Tinio vs. Court of Appeals, 524 SCRA 533(2007)]

G.R. No. 161615. January 30, 2009.*

ARNULFO O. ENDICO, petitioner, vs. QUANTUM FOODS DISTRIBUTION CENTER, respondent.

Labor Law; Management Prerogatives; Jurisprudence recognizes the exercise of management prerogatives—labor laws also discourage interference with an employer’s judgment in the conduct of its business.—Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer’s judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business decisions of employers. The law must protect not only the welfare of employees, but also the right of employers.

Same; Same; This privilege is inherent in the right of employers to control and manage their enterprises effectively—the right of employees to security of tenure does not give them vested right to their position so the extent of depriving management of its prerogative to change their assignments to transfer them.—In the pursuit of its legitimate business interests, especially during adverse business conditions, management has the prerogative to transfer or assign employees from one office or area of operation to another—provided there is no demotion in rank or diminution of salary, benefits and other privileges and the action is not motivated by discrimination, bad faith, or effected as a form of punishment or demotion without sufficient cause. This privilege is inherent in the right of employers to control and manage their enterprises effectively. The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.

Same; Same; The test for determining the validity of the transfer of the employees was explained in Blue Dairy Corporation vs. NLRC, 314 SCRA 401 (1999) as follows “x x x. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee, nor does it involve a demotion in rank or a diminution of his salaries, privileges and other

benefits x x x.—Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice The test for determining the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC, 314 SCRA 401 (1999), as follows: Like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.

Same; Same; Reassignments made by management pending investigation of violation of company policies and procedure allegedly committed by an employee fall within the ambit of management prerogative.—In this case, we find no reason to disturb the conclusion of the Court of Appeals that there was no constructive dismissal. Reassignments made by management pending investigation of violations of company policies and procedures allegedly committed by an employee fall within the ambit of management prerogative. The decision of Quantum Foods to transfer Endico pending investigation was a valid exercise of management prerogative to discipline its employees. The transfer, while incidental to the charges against Endico, was not meant as a penalty, but rather as a preventive measure to avoid

further loss of sales and the destruction of Quantum Foods’ image and goodwill. It was not designed to be the culmination of the then on-going administrative investigation against Endico.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Gonzalo D. Malig-on, Jr. for petitioner.

Glenn R. Subia for respondent.

CARPIO,** J.:

The Case

This is a petition for review1 of the 23 December 2003 Decision2 of the Court of Appeals in CA-G.R. SP No. 69929. The Court of Appeals reversed the 31 August 2001 Decision3 and the 28 November 2001 Resolution4 of the National Labor Relations Commission (NLRC). The NLRC affirmed with modification the 17 January 2000 Decision5 of the Labor Arbiter which held that Quantum Foods Distribution Center (Quantum Foods) constructively dismissed Arnulfo O. Endico (Endico). The NLRC awarded Endico separation pay, backwages, moral and exemplary damages, and other amounts totaling P559,021.65.6 The NLRC also affirmed the transfer of possession and ownership of the service vehicle but ordered Endico to pay Quantum Foods 10% of its purchase price.

The Facts

On 2 January 1995, Quantum Foods hired Endico as Field Supervisor of Davao City. Quantum Foods provided Endico with a service vehicle on the understanding that after five years of continuous service to the company and upon payment of 10% of the vehicle’s book value, Quantum Foods would turn over possession and ownership of the vehicle to Endico.

In June 1995, Endico was transferred to Cebu. On 2 January 1996, Endico was promoted as Area Manager of Cebu. In 1997, in recognition of Endico’s achievements and contributions to Quantum Foods, he was awarded “Master Awards for Sales Excellence” as the most outstanding Area Manager and was also rewarded with an all-expense paid trip to Thailand. In the same year, Endico was also given a plaque of recognition for the elite 100% Achiever’s Award. In 1998, Endico was again rewarded with an all-expense paid trip to Hong Kong for his very good performance that year.

In 1999, due to the economic slowdown and to save on operational costs, Quantum Foods streamlined its operations through the reduction of the company’s contractual merchandisers. Endico’s merchandisers were reduced from twelve to five.

In a fax message7 dated 11 June 1999, Edred Almero, National Sales Manager of Quantum Foods, instructed Pol H. Acuros (Acuros), Regional Sales Manager and Endico’s immediate supervisor, to immediately relieve Endico from his position. Acuros was also instructed to handle the vacated position and to be responsible in the turn over of all company properties issued to Endico including the service vehicle. Acuros was likewise ordered to advise Endico to report to the head office on 14 June 1999. Endico complied with the order and proceeded to the head office in Parañaque.

In the show cause memorandum8 dated 14 June 1999, Quantum Foods asked Endico to explain in writing, within 24 hours, why no administrative action should be taken against him because of “serious misconduct due to mismanagement of sales area resulting to lost sales and goodwill with number one major account.” The memorandum stated that, from 1 May to 11 June 1999 at Shoemart Supermarket, Cebu (SM account), Endico violated Rules 169 and 1710 of Quantum Foods’ general policies and procedure.

On the same day, Endico filed an application for leave of absence11 effective 17 June to 2 July 1999.

In his answer12 dated 16 June 1999, Endico denied that there was serious misconduct and mismanagement in his area as far as the deployment of merchandisers was concerned. Endico said that he properly coordinated all his actions with Acuros. Endico presented a letter13 dated 3 May 1999, where he informed Acuros and the head office that the SM account wanted a merchandiser assigned to it for a whole day coverage and rejected the merchandiser assigned to it with a half-day schedule. In another letter14 dated 7 May 1999, Endico gave the head office an update on the status of the SM account. Endico added that Quantum Foods did not accord him due process because he was immediately relieved without being given the opportunity to explain his side. On the same day, Endico also withdrew his application for leave of absence.15

On 17 June 1999, Quantum Foods recalled Endico’s application for leave of absence and required him to report to the head office.16 Quantum Foods also issued a Personnel Action Request17 dated 11 June 1999, which provided for Endico’s transfer as Area Sales Manager of Cebu to Area Sales Manager of the head office effective 14 June 1999. However, Endico failed to report for work. In telegrams dated 30 June18 and 6 July 1999,19 Quantum Foods reiterated its directive for Endico to report to the head office.

Also on 17 June 1999, Endico, believing that Quantum Foods intended to ease him out of the company, filed a complaint20 for constructive illegal dismissal. Endico also prayed for the payment of separation pay, backwages, other monetary benefits, damages, attorney’s fees and recovery of the service vehicle.

Ruling of the Labor Arbiter

On 17 January 2000, the Labor Arbiter rendered a decision in Endico’s favor. The dispositive portion of the 17 January 2000 Decision provides:

“WHEREFORE, premises considered, judgment is hereby rendered declaring as illegal the constructive dismissal of complainant and ordering the respondent Quantum Foods, Inc. to pay him as follows:

1) Separation Pay Php 121,800.00

2) Backwages 176,136.00

3) Proportionate 13th month pay 13,038.00

4) Unused sick leave 42,120.00

5) Unused vacation leave 42,120.00

6) Performance bonus 10,150.00

7) Productivity bonus 22,837.50

8) Moral and exemplary damages 50,000.00

9) Attorney’s fees (10%) 50,820.15

   Total Php 559,021.6521

The respondent Quantum Foods, Inc. or its authorized representative is hereby ordered to transfer to complainant the possession and ownership of one (1) motor vehicle, a Mitsubishi L-200 with plate no. TTC 934 in a running and serviceable condition together with its accessories.

The other claims and the case against respondents Cesar Lota, Edred Almero and Rogelio de la Cruz are dismissed for lack of merit.

SO ORDERED.”22

The Labor Arbiter ruled that Quantum Foods constructively dismissed Endico because its actions made Endico’s continued employment impossible, unreasonable and unlikely. The Labor Arbiter said that Endico was the subject of a “highhanded transfer of assignment” because Endico was given neither a copy of the order for his relief nor the reason for his immediate relief. The Labor Arbiter added that Endico was relieved not because the head office needed his services but as a form of disciplinary action for some baseless charges. According to the Labor Arbiter, the loss of the SM account was due to the decision of Quantum Foods to reduce the number of merchandisers and its inaction when Endico raised this concern.

Quantum Foods appealed to the NLRC.

Ruling of the National Labor Relations Commission

In its 31 August 2001 Decision, the NLRC affirmed the Labor Arbiter’s decision with modification that Endico pay 10% of the purchase price of the service vehicle. The dipositive portion of the 31 August 2001 Decision provides:

“WHEREFORE, in view of the foregoing, the decision of the Labor Arbiter dated January 17, 2000 is hereby AFFIRMED with a modification on the order to transfer the possession and ownership of the service vehicle, Mitsubishi L-200 with plate no. TCC 934 to complainant, as such complainant is likewise directed to pay respondent ten percent (10%) of the purchase price thereof.

SO ORDERED.”23

The NLRC agreed with the Labor Arbiter that Quantum Foods constructively dismissed Endico. The NLRC said that Endico was not just recalled but was immediately transferred to the head office, which was tantamount to dismissal. The NLRC ruled that Quantum Foods failed to observe the twin requirements of notice and hearing. The NLRC declared that Endico was immediately relieved from his functions and was given the opportunity to explain his side only three days after the order for his relief was issued. The NLRC also ruled that the Labor Arbiter did not err in awarding separation pay to Endico since reinstatement was no longer possible due to strained relations. With respect to the award of unused vacation and sick leave credits, performance bonus, and productivity bonus, the NLRC said that these should be granted because they had become company policy or practice which could not just be withdrawn.

Quantum Foods filed a motion for reconsideration. In its 28 November 2001 Resolution,24 the NLRC denied the motion.

Quantum Foods filed a petition for certiorari before the Court of Appeals.

Ruling of the Court of Appeals

In its 23 December 2003 Decision, the Court of Appeals ruled in favor of Quantum Foods. The dispositive portion of the 23 December 2003 Decision provides:

“WHEREFORE, the petition is GRANTED. The Decision of the NLRC dated August 31, 2002 as well as its Resolution dated November 28, 2001 are hereby REVERSED AND SET ASIDE. The complaint for illegal dismissal filed by private respondent is DISMISSED.

SO ORDERED.”25

The Court of Appeals declared that the NLRC gravely abused its discretion when it ruled that Endico was constructively dismissed. The Court of Appeals found nothing in the 11 June 1999 fax message and the show-cause memorandum that supported the NLRC’s conclusion that Endico was outrightly dismissed. The Court of Appeals noted that Quantum Foods even approved Endico’s application for leave of absence and, after Endico recalled his leave application, ordered Endico to report to the head office for his new job assignment.

The Court of Appeals said that it is settled that the employer has the prerogative to transfer and reassign employees for valid reasons and according to the requirements of its business, provided that there is no demotion in rank or diminution of his salary, benefits and other privileges. The Court of Appeals declared that Quantum Foods acted in good faith and was in the legitimate pursuit of its best interests when it transferred Endico from Cebu to the head office. The Court of Appeals maintained that Endico’s claim that the transfer would result in a diminution of his pay or benefits was unsubstantiated. The Court of Appeals added that Quantum Foods had yet to decide on the administrative case when Endico immediately filed the complaint for constructive dismissal. The Court of Appeals concluded that Endico filed the complaint in anticipation of what he perceived to be the final outcome of the administrative investigation.

Hence, this petition.

The Issues

Endico raises the following issues:

1. Whether he was constructively dismissed;

2. Whether he is entitled to separation pay, backwages, other monetary benefits, damages and attorney’s fees; and

3. Whether he is entitled to acquire the service vehicle.

The Ruling of the Court

The petition has no merit.

As a general rule, a petition for review on certiorari under Rule 45 of the Rules of Court is limited to questions of law. However, this rule admits of exceptions, such as in this case where the findings of the Labor Arbiter and the NLRC vary from the findings of the Court of Appeals.26

Endico maintains that he was constructively dismissed because he did not commit any offense that would justify his relief. Endico adds that his transfer was intended to unreasonably inconvenience him and his family because of its substantial effect on their finances and quality of family life, which would ultimately force him to quit.

On the other hand, Quantum Foods insists that Endico was not transferred but was only temporarily recalled to the head office pending investigation. Quantum Foods argues that if it did transfer Endico, it was merely exercising a management prerogative.

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer’s judgment in the conduct of its business.27 For this reason, the Court often declines to interfere in legitimate business decisions of employers.28 The law must protect not only the welfare of employees, but also the right of employers.29

In the pursuit of its legitimate business interests, especially during adverse business conditions, management has the prerogative to transfer or assign employees from one office or area of operation to another—provided there is no demotion in rank or diminution of salary, benefits and other privileges and the action is not motivated by discrimination, bad faith, or effected as a form of punishment or demotion without sufficient cause.30 This privilege is inherent in the right of employers to control and manage their enterprises effectively.31 The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.32

Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.33 The test for determining the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC34 as follows:

“Like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.”35

In this case, we find no reason to disturb the conclusion of the Court of Appeals that there was no constructive dismissal. Reassignments made by management pending investigation of violations of company policies and procedures allegedly committed by an employee fall within the ambit of management prerogative.36 The decision of Quantum Foods to transfer

Endico pending investigation was a valid exercise of management prerogative to discipline its employees. The transfer, while incidental to the charges against Endico, was not meant as a penalty, but rather as a preventive measure to avoid further loss of sales and the destruction of Quantum Foods’ image and goodwill. It was not designed to be the culmination of the then on-going administrative investigation against Endico.

Neither was there any demotion in rank or any diminution of Endico’s salary, privileges and other benefits. Endico was being transferred to the head office as area sales manager, the same position Endico held in Cebu.37 There was also no proof that the transfer involved a diminution of Endico’s salary, privileges and other benefits.

On the alleged inconvenience on Endico and his family because of the transfer from Cebu to the head office in Parañaque, we rule that the transfer is valid, there being no showing that there was bad faith on the part of Quantum Foods.38 Moreover, we find that Quantum Foods, considering the declining sales and the loss of a major account in Cebu, was acting in the legitimate pursuit of what it considered its best interest in deciding to transfer Endico to the head office.

Since we have ruled that Quantum Foods did not constructively dismiss Endico, there is no need to discuss the other issues raised by Endico.

WHEREFORE, we DENY the petition. We AFFIRM the 23 December 2003 Decision of the Court of Appeals in CA-G.R. SP No. 69929.

SO ORDERED.

Austria-Martinez,*** Corona, Carpio-Morales*** and Leonardo-De Castro, JJ., concur.

Petition denied, judgment affirmed.

Note.—An employer has a free reign and enjoys wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline in its employees and to impose penalties, including dismissal, upon erring employees. (Torreda vs. Toshiba Information Equipment [Phils.], Inc., 515 SCRA 133 [2007]) [Endico vs. Quantum Foods Distribution Center, 577 SCRA 299(2009)]

G.R. No. 173882. February 15, 2012.*

JULIE’S BAKESHOP and/or Edgar Reyes, petitioners, vs. Henry Arnaiz, EDGAR NAPAL,** and Jonathan Tolores, respondents.

Labor Law; Appeals; Findings of facts of the National Labor Relations Commission (NLRC), affirming those of the Labor Arbiter, are accorded respect and due consideration when supported by substantial evidence.—Indeed, “factual findings of labor officials who are deemed to have acquired expertise in matters within their respective jurisdictions are generally accorded not only respect, but even finality.” It is a well-entrenched rule that findings of facts of the NLRC, affirming those of the Labor Arbiter, are accorded respect and due consideration when supported by substantial evidence. We, however, find that the doctrine of great respect and finality has no application to the case at bar. As stated, the Labor Arbiter dismissed respondents’ complaints on mere technicality. The NLRC, upon appeal, then came up with three divergent rulings. At first, it remanded the case to the Labor Arbiter. However, in a subsequent resolution, it decided to resolve the case on the merits by ruling that respondents were constructively dismissed. But later on, it again reversed itself in its third and final resolution of the case and ruled in petitioners’ favor. Therefore, contrary to Reyes’s claim, the NLRC did not, on any occasion, affirm any factual findings of the Labor Arbiter. The CA is thus correct in reviewing the entire records of the case to determine which findings of the NLRC is sound and in accordance with law. Besides, the CA, at any rate, may still resolve factual issues by express mandate of the law despite the respect given to administrative findings of fact.

Same; Management Prerogative; Management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers.—We have held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor.

Same; Termination of Employment; Constructive Dismissal; The employer must demonstrate that the transfer is not unreasonable, inconvenient, or prejudicial to the employee and that the transfer does not involve a demotion in rank or a diminution in salary and other benefits. If the employer fails to overcome this burden of proof, the employee’s transfer is tantamount to unlawful constructive dismissal.—In constructive dismissal cases, the employer has the burden of proving that the transfer of an employee is for just or valid ground, such as genuine business necessity. The employer must demonstrate that the transfer is not unreasonable, inconvenient, or prejudicial to the employee and that the transfer does not involve a demotion in rank or a diminution in salary and other benefits. “If the employer fails to overcome this burden of proof, the employee’s transfer is tantamount to unlawful constructive dismissal.”

Same; Same; Same; Demotion; Demotion involves a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.—“[D]emotion involves a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.” When there is a demotion in rank and/or a diminution in pay; when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee; or when continued employment is rendered impossible, unreasonable or unlikely, the transfer of an employee may constitute constructive dismissal.

Same; Same; Same; Abandonment; A charge of abandonment is inconsistent with the filing of a complaint for constructive dismissal.—Petitioners’ claim that respondents abandoned their job stands on shallow grounds. Respondents cannot be faulted for refusing to report for work as they were compelled to quit their job due to a demotion without any just cause. Moreover, we have consistently held that a charge of abandonment is inconsistent with the filing of a complaint for constructive dismissal. Respondents’ demand to maintain their positions as chief bakers by filing a case and asking for the relief of reinstatement belies abandonment. As the transfer proves unbearable to respondents as to foreclose any choice on their part except to forego continued employment, same amounts to constructive dismissal for which reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the time their compensation was withheld up to the time of their actual reinstatement, should be granted. The CA, therefore, did not err in awarding the reliefs prayed for by the respondents as they were, without a doubt, constructively dismissed.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Pacificador Law Office for petitioners.

Mariano R. Pefianco for respondents.

DEL CASTILLO, J.:

Management has a wide latitude to conduct its own affairs in accordance with the necessities of its business. This so-called management prerogative, however, should be exercised in accordance with justice and fair play.

By this Petition for Review on Certiorari,1 petitioners Julie’s Bakeshop and/or Edgar Reyes (Reyes) assail the September 23, 2005 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 86257, which reversed the Resolutions dated December 18, 20033 and April 19, 20044 of the National Labor Relations Commission (NLRC) and ordered petitioners to reinstate respondents Henry Arnaiz (Arnaiz), Edgar Napal (Napal) and Jonathan Tolores (Tolores) and to pay them their backwages for having been constructively dismissed, as well as their other monetary benefits.

Factual Antecedents

Reyes hired respondents as chief bakers in his three franchise branches of Julie’s Bakeshop in Sibalom and San Jose, Antique. On January 26, 2000, respondents filed separate complaints against petitioners for underpayment of wages, payment of premium pay for holiday and rest day, service incentive leave pay, 13th month pay, cost of living allowance (COLA) and attorney’s fees. These complaints were later on consolidated.

Subsequently, in a memorandum dated February 16, 2000, Reyes reassigned respondents as utility/security personnel tasked to clean the outside vicinity of his bakeshops and to maintain peace and order in the area. Upon service of the memo, respondents, however, refused to sign the same and likewise refused to perform their new assignments by not reporting for work.

In a letter-memorandum dated March 13, 2000, Reyes directed respondents to report back for work and to explain why they failed to assume their duties as utility/security personnel. A second letter-memorandum of the same tenor dated March 28, 2000 was also sent to respondents. Respondents did not heed both memoranda.

Proceedings before the Labor Arbiter

Meanwhile, in the preliminary conference set on February 21, 2000, respondents with their counsel, Atty. Ronnie V. Delicana (Atty. Delicana), on one hand, and Reyes on the other, appeared before the Labor Arbiter to explore the

possibility of an amicable settlement. It was agreed that the parties would enter into a compromise agreement on March 7, 2000. However, on February 29, 2000, respondents, who were then represented by a different counsel, Atty. Mariano R. Pefianco (Atty. Pefianco), amended their complaints by including in their causes of action illegal dismissal and a claim for reinstatement and backwages.

The supposed signing of the compromise agreement (which could have culminated in respondents receiving the total amount of P54,126.00 as payment for their 13th month pay and separation pay) was reset to March 28, 2000 because of respondents’ non-appearance in the hearing of March 7, 2000. On March 28, 2000, Atty. Pefianco failed to appear despite due notice. On the next hearing scheduled on April 24, 2000, both Atty. Delicana and Atty. Pefianco appeared but the latter verbally manifested his withdrawal as counsel for respondents. Thus, respondents, through Atty. Delicana, and Reyes, continued to explore the possibility of settling the case amicably. Manifesting that they need to sleep on the proposed settlement, respondents requested for continuance of the hearing on April 26, 2000. Come said date, however, respondents did not appear.

Realizing the futility of further resetting the case to give way to a possible settlement, the Labor Arbiter ordered the parties to file their respective position papers.

Despite his earlier withdrawal as counsel, Atty. Pefianco filed a Joint Position Paper5 on behalf of respondents alleging that they were dismissed from employment on February 21, 2000 without valid cause. As for petitioners, they stated in their position paper6 that respondents were never dismissed but that they abandoned their jobs after filing their complaints. Petitioners denied that Reyes is the employer of Arnaiz and Napal but admitted such fact insofar as Tolores is concerned.

In his Decision7 dated August 25, 2000, the Labor Arbiter expressed dismay over respondents’ lack of good faith in negotiating a settlement. The Labor Arbiter denounced the way respondents dealt with Atty. Delicana during their discussions for a possible settlement since respondents themselves later on informed the said tribunal that at the time of the said discussions, they no longer considered Atty. Delicana as their counsel. Despite this, the Labor Arbiter still required the parties to submit their respective position papers. And as respondents’ position paper was filed late and no evidence was attached to prove the allegations therein, the Labor Arbiter resolved to dismiss the complaints, thus:

“WHEREFORE, premises considered the above-entitled cases should be, as they are hereby dismissed without prejudice.

SO ORDERED.”8

Proceedings before the National Labor

Relations Commission

Respondents filed a joint appeal9 with the NLRC. In a Decision10 dated January 17, 2002, the NLRC overruled the Decision of the Labor Arbiter and held that the burden of proof lies on herein petitioners as Reyes admitted being the employer of Tolores. Hence, petitioners not Tolores, had the duty to advance proof. With respect to Arnaiz and Napal, the NLRC noted that since their alleged employer was not impleaded, said respondents’ cases should be remanded to the Labor Arbiter, and tried as new and separate cases. The dispositive portion of the NLRC’s Decision reads:

“WHEREFORE, the case is REMANDED for purposes of identifying the real respondents, to be separated as discussed, if warranted, and for further proceedings to be conducted.

SO ORDERED.”11

Respondents filed a Motion for Reconsideration,12 alleging that the NLRC Decision violated their right to speedy disposition of their cases. They also insisted that Reyes is their employer as shown by his letter-memorandum dated March 13, 2000 which directed all of them to report back for work. In addition, the fact that Reyes was willing to pay all the respondents the amount of P54,126.00 as settlement only proves that there is an employer-employee relationship between them and Reyes.

In a Resolution13 dated September 23, 2003, the NLRC found merit in respondents’ Motion for Reconsideration. It held that Reyes failed to present concrete proof of his allegation that a certain Rodrigo Gandiongco is the employer of Arnaiz and Napal; hence, Reyes is still presumed to be their employer as franchise owner of the branches where these employees were assigned. The NLRC further ruled that respondents’ demotion in rank from chief bakers to utility/security personnel is tantamount to constructive dismissal which entitles them to the reliefs available to illegally dismissed employees. As for the money claims, the NLRC granted respondents their salary differentials, premium pay for rest day, holiday pay, service incentive leave pay, 13th month pay and COLA. In awarding such monetary awards, the NLRC ratiocinated that the employer bears the burden of proving that the employees received their wages and benefits. In this case, however, no proof of such payment was presented by the petitioners. The claim for overtime pay though was denied since proof of overtime work is necessary to warrant such award. Lastly, for Reyes’ unjustified act done in bad faith, respondents were awarded 10% attorney’s fees. The NLRC ruled as follows:

“WHEREFORE, Our previous Decision is VACATED and a new one rendered declaring complainants to have been illegally dismissed. Complainants are to be reinstated to their former positions without loss of seniority rights. Complainants are further awarded backwages reckoned from the time they were constructively dismissed up to the time of their actual reinstatement, whether physically or on payroll.

Complainants being underpaid are to be [paid] their salary differentials reckoned three (3) years backwards from the time they filed the instant complaints on January 26, 2000, premium pay for holiday, premium pay for rest day, holiday pay, service incentive leave pay, 13th month pay and COLA, if these have not been paid to them yet.

SO ORDERED.”14

Petitioners sought to reconsider this ruling via a Motion for Reconsideration,15 insisting that respondents were not illegally dismissed and that their reassignment or transfer as utility/security personnel was indispensable, made in good faith and in the exercise of a valid management prerogative. Hence, such reassignment does not amount to constructive dismissal. Reyes claimed that it would be likely for respondents, after filing complaints against him, to do something prejudicial to the business as chief bakers, like mixing harmful ingredients into the bread that they bake. This could be inimical to the health of the consuming public. Petitioners averred that respondents’ reassignment as utility/security personnel is a preventive measure designed to protect the business and its customers. They likewise added that the transfer was meant to be only temporary and besides, same does not involve any diminution in pay, rights and privileges of the respondents. Petitioners also alleged that respondents’ wage of P115.00 per day is in consonance with and is even higher than the mandated minimum wage of P105.00 under Wage Order No. RB6-09 for retail and service establishments employing not more than 10 workers as in his business.

The NLRC, in its Resolution16 dated December 18, 2003, again reconsidered its own ruling and held that respondents were not dismissed, either actually or constructively, but instead willfully disobeyed the return to work order of their employer. The NLRC upheld petitioners’ prerogative to transfer respondents if only to serve the greater interest, safety and well-being of the buying public by forestalling irregular acts of said employees. The NLRC then put the blame on respondents for disobeying the lawful orders of their employer, noting that it was the same attitude displayed by them in their dealings with their counsel, Atty. Delicana, in the proceedings before the Labor Arbiter. It also reversed its previous ruling that respondents were underpaid their wages and adjudged them to be even overpaid by P10.00 per

Wage Order No. RB 6-09-A. Thus, respondents’ complaints were dismissed except for their claims for premium pay for holiday, and rest day, service incentive leave pay, 13th month pay and COLA, which awards would stand only if no payment therefor has yet been made.

Respondents filed a Motion for Reconsideration17 and sought for the execution of the NLRC Resolution dated September 23, 2003 due to the alleged finality of the ruling. According to them, petitioners’ pro forma Motion for Reconsideration of the said resolution did not suspend the running of the period for taking an appeal. This motion was, however, denied in the NLRC Resolution18 dated April 19, 2004.

Proceedings before the Court of Appeals

Respondents appealed to the CA through a petition for certiorari,19 wherein they imputed grave abuse of discretion on the part of the NLRC in not declaring them to have been illegally dismissed and entitled to salary differentials.

The CA, in its Decision20 dated September 23, 2005, found merit in the petition, ruling that respondents were constructively dismissed since their designation from chief bakers to utility/security personnel is undoubtedly a demotion in rank which involved “a drastic change in the nature of work resulting to a demeaning and humiliating work condition.” It also held that petitioners’ fear that respondents might introduce harmful foreign substances in baking bread is more imaginary than real. Further, respondents could not be held guilty of abandonment of work as this was negated by their immediate filing of complaints to specifically ask for reinstatement. Nevertheless, the CA denied the claim for salary differentials by totally agreeing with the NLRC’s finding on the matter. Said court then resolved to award respondents the rest of their monetary claims for failure of petitioners to present proof of payment and 10% attorney’s fees as respondents’ dismissal was attended with bad faith which forced them to litigate, viz.:

“WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us SETTING ASIDE and REVERSING the Resolutions dated December 18, 2003 and April 19, 2004 in NLRC Case No. V-000785-2000. The record of this case is hereby REMANDED to the Labor Arbiter for the computation of backwages, premium pay for holidays and rest days, holiday pay, service incentive leave pay, 13th month pay and attorney’s fees due to the petitioners and, thereafter, for the payment thereof by the private respondent Reyes.”21

Petitioners filed a Motion for Reconsideration22 but the same was denied by the CA in a Resolution23 dated May 25, 2006.

Issues

Hence, this present petition raising the following issues for the Court’s consideration:

I. DID THE HONORABLE COURT OF APPEALS, IN DISTURBING THE FINDINGS OF FACTS OF THE LABOR ARBITER AS WELL AS THE NATIONAL LABOR [RELATIONS] COMMISSION WHO HAVE TRIED THE CASE, [COMMIT] GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION?

II. DID THE HONORABLE COURT OF APPEALS MANIFESTLY [OVERLOOK] RELEVANT FACTS NOT DISPUTED BY THE RESPONDENTS, WHICH, IF PROPERLY CONSIDERED COULD JUSTIFY A DIFFERENT CONCLUSION?

III. WAS THE TRANSFER/REASSIGNMENT OF RESPONDENTS TO ANOTHER POSITION WITHOUT DIMINUTION IN PAY AND OTHER PRIVILEGES TANTAMOUNT TO CONSTRUCTIVE DISMISSAL?24

Petitioners maintain that the NLRC, in its Resolution dated December 18, 2003, merely upheld the findings of the Labor Arbiter that there was no constructive dismissal because of the absence of any evidence to prove such allegation. As such, Reyes’ supposition is that the CA erred in coming up with a contrary finding.

Petitioners insist that the order transferring or reassigning respondents from chief bakers to utility/security personnel is a valid exercise of management prerogative for it does not involve any diminution in pay and privileges and that same is in accordance with the requirements of the business, viz: to protect its goodwill and reputation as well as the health and welfare of the consuming public.

Our Ruling

We find no merit in the petition.

The Court of Appeals is correct in reviewing the findings of the National Labor Relations Commission.

Petitioners claim that the CA should have accorded respect and finality to the factual findings rendered by the NLRC in its December 18, 2003 Resolution as the same merely affirmed the findings of the Labor Arbiter. Citing several jurisprudence on the matter, petitioners add that factual findings of labor officials who acquired expertise on matters within their jurisdiction have conclusive effect.

We reject this contention as none of the NLRC divergent rulings affirmed the findings of the Labor Arbiter. To recall, the Labor Arbiter dismissed respondents’ complaints on a technicality, that is, on the ground that respondents’ Joint Position Paper was filed late and that it did not contain any attachments to prove the allegations therein. Upon appeal, the NLRC rendered its first Decision on January 17, 2002 which remanded the case to the Labor Arbiter for purposes of identifying the real respondents and separating the consolidated cases if warranted, and for the conduct of further proceedings due to Reyes’s allegation that Arnaiz and Napal have a different employer. The NLRC also disagreed with the Labor Arbiter’s ratiocination that it behooved upon respondents to attach proof of their illegal dismissal. According to the NLRC, since Reyes admitted that he is Tolores’s employer, the burden to prove that the termination is valid as well as the due payment of money claims falls upon petitioners. Upon petitioners’ motion, however, the NLRC reconsidered this ruling and resolved the case on the merits. In so doing, it found the respondents to have been constructively dismissed through its Resolution dated September 23, 2003. The NLRC, however, once again reversed itself in a Resolution dated December 18, 2003 upon Reyes’s filing of a Motion for Reconsideration. This time, the NLRC held that respondents were not illegally dismissed but instead abandoned their jobs. It was at this point that respondents sought recourse from the CA.

Indeed, “factual findings of labor officials who are deemed to have acquired expertise in matters within their respective jurisdictions are generally accorded not only respect, but even finality.”25 It is a well-entrenched rule that findings of facts of the NLRC, affirming those of the Labor Arbiter, are accorded respect and due consideration when supported by substantial evidence.26 We, however, find that the doctrine of great respect and finality has no application to the case at bar. As stated, the Labor Arbiter dismissed respondents’ complaints on mere technicality. The NLRC, upon appeal, then came up with three divergent rulings. At first, it remanded the case to the Labor Arbiter. However, in a subsequent resolution, it decided to resolve the case on the merits by ruling that respondents were constructively dismissed. But later on, it again reversed itself in its third and final resolution of the case and ruled in petitioners’ favor. Therefore, contrary to Reyes’s claim, the NLRC did not, on any occasion, affirm any factual findings of the Labor Arbiter. The CA is thus correct in reviewing the entire records of the case to determine which findings of the NLRC is sound and in accordance with law. Besides, the CA, at any rate, may still resolve factual issues by express mandate of the law despite the respect given to administrative findings of fact.27

The transfer/reassignment of respondents

constitutes constructive dismissal.

Petitioners contend that the order transferring or reassigning respondents from their position as chief bakers to utility/security personnel is within the ambit of management prerogative as employer. They harp on the fact that no evidence was presented by respondents to show that they were dismissed from employment.

We have held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor.28

In constructive dismissal cases, the employer has the burden of proving that the transfer of an employee is for just or valid ground, such as genuine business necessity. The employer must demonstrate that the transfer is not unreasonable, inconvenient, or prejudicial to the employee and that the transfer does not involve a demotion in rank or a diminution in salary and other benefits. “If the employer fails to overcome this burden of proof, the employee’s transfer is tantamount to unlawful constructive dismissal.”29

In this case, petitioners insist that the transfer of respondents was a measure of self-preservation and was prompted by a desire to protect the health of the buying public, claiming that respondents should be transferred to a position where they could not sabotage the business pending resolution of their cases. According to petitioners, the possibility that respondents might introduce harmful substances to the bread while in the performance of their duties as chief bakers is not imaginary but real as borne out by what Tolores did in one of the bakeshops in Culasi, Antique where he was assigned as baker.

This postulation is not well-taken. On the contrary, petitioners failed to satisfy the burden of proving that the transfer was based on just or valid ground. Petitioners’ bare assertions of imminent threat from the respondents are mere accusations which are not substantiated by any proof. This Court is proscribed from making conclusions based on mere presumptions or suppositions. An employee’s fate cannot be justly hinged upon conjectures and surmises.30 The act attributed against Tolores does not even convince us as he was merely a suspected culprit in the alleged sabotage for which no investigation took place to establish his guilt or culpability. Besides, Reyes still retained Tolores as an employee and chief baker when he could have dismissed him for cause if the allegations were indeed found true. In view of these, this Court finds no compelling reason to justify the transfer of respondents from chief bakers to utility/security personnel. What appears to this Court is that respondents’ transfer was an act of retaliation on the part of petitioners due to the former’s filing of complaints against them, and thus, was clearly made in bad faith. In fact, petitioner Reyes even admitted that he caused the reassignments due to the pending complaints filed against him. As the CA aptly held:

“In the case at bench, respondent Reyes failed to justify petitioners’ transfer from the position of chief bakers to utility/security personnel. We find that the threat being alluded to by respondent Reyes—that the petitioners might introduce harmful foreign substances in baking bread—is imaginary and not real. We recall that what triggered the petitioners’ reassignment was the filing of their complaints against private respondents in the NLRC. The petitioners were not even given an opportunity to refute the reason for the transfer. The drastic change in petitioners’ nature of work unquestionably resulted in, as rightly perceived by them, a demeaning and humiliating work condition. The transfer was a demotion in rank, beyond doubt. There is demotion when an employee is transferred from a position of dignity to a servile or menial job. One does not need to stretch the imagination to distinguish the work of a chief baker to that of a security cum utility man.”31

“[D]emotion involves a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.”32 When there is a demotion in rank and/or a diminution in pay; when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee; or when continued employment is rendered impossible, unreasonable or unlikely, the transfer of an employee may constitute constructive dismissal.33

We agree with the CA in ruling that the transfer of respondents amounted to a demotion. Although there was no diminution in pay, there was undoubtedly a demotion in titular rank. One cannot deny the disparity between the duties and functions of a chief baker to that of a utility/security personnel tasked to clean and manage the orderliness of the outside premises of the bakeshop. Respondents were even prohibited from entering the bakeshop. The change in the nature of their work undeniably resulted to a demeaning and humiliating work condition.

In Globe Telecom, Inc. v. Florendo-Flores,34 we held:

“The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion. It must always bear in mind the basic elements of justice and fair play. Having the right must not be confused with the manner that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker.”

Petitioners’ claim that respondents abandoned their job stands on shallow grounds. Respondents cannot be faulted for refusing to report for work as they were compelled to quit their job due to a demotion without any just cause. Moreover, we have consistently held that a charge of abandonment is inconsistent with the filing of a complaint for constructive dismissal.35 Respondents’ demand to maintain their positions as chief bakers by filing a case and asking for the relief of reinstatement belies abandonment.36

As the transfer proves unbearable to respondents as to foreclose any choice on their part except to forego continued employment, same amounts to constructive dismissal for which reinstatement without loss of seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the time their compensation was withheld up to the time of their actual reinstatement, should be granted.37 The CA, therefore, did not err in awarding the reliefs prayed for by the respondents as they were, without a doubt, constructively dismissed.

WHEREFORE, the petition is DENIED. The September 23, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 86257 is AFFIRMED.

SO ORDERED.

Corona (C.J., Chairperson), Leonardo-De Castro, Bersamin and Villarama, Jr., JJ., concur.

Petition denied, judgment affirmed.

Notes.—Constructive dismissal occurs when there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, or, when there is a demotion in rank or diminution in pay or both, or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee. (La Rosa vs. Ambassador Hotel, 581 SCRA 340 [2009])

The reason why an employer has a much wider discretion in terminating the employment of managerial personnel as compared to rank and file employees is that officers in such key positions perform not only functions which by nature require the employer’s full trust and confidence but also functions that spell the success or failure of a business. (Lowe, Inc. vs. Court of Appeals, 596 SCRA 140 [2009])

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted, upon erring employees. (Caong, Jr. vs. Regualos, 640 SCRA 597 [2011]) [Julie's Bakeshop vs. Arnaiz, 666 SCRA 101(2012)]