G.R. No.

172101

November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL

SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure seeking to annul and set aside the
Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236,
dated 5 January 2006 and 20 March 2006, respectively, which annulled and
set aside the Orders of the Social Security Commission (SSC) in SSC Case
No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4
respectively, thereby dismissing the petition-complaint dated 12 June 2003
filed by herein petitioner Social Security System (SSS) against herein
respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a
quasi-judicial body authorized by law to resolve disputes arising under
Republic Act No. 1161, as amended by Republic Act No. 8282. 5 Petitioner
SSS is a government corporation created by virtue of Republic Act No. 1161,
as amended. On the other hand, herein respondent Asiapro Cooperative
(Asiapro) is a multi-purpose cooperative created pursuant to Republic Act
No. 69386 and duly registered with the Cooperative Development Authority
(CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460. 7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members.
Under its by-laws, owners-members are of two categories, to wit: (1) regular
member, who is entitled to all the rights and privileges of membership; and
(2) associate member, who has no right to vote and be voted upon and shall
be entitled only to such rights and privileges provided in its by-laws. 8 Its
primary objectives are to provide savings and credit facilities and to develop
other livelihood services for its owners-members. In the discharge of the
aforesaid primary objectives, respondent cooperative entered into several
Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a
company based in Bukidnon. The owners-members do not receive
compensation or wages from the respondent cooperative. Instead, they
receive a share in the service surplus10 which the respondent cooperative
earns from different areas of trade it engages in, such as the income derived

from the said Service Contracts with Stanfilco. The owners-members get
their income from the service surplus generated by the quality and amount of
services they rendered, which is determined by the Board of Directors of the
respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the
owners-members of the respondent cooperative, who were assigned to
Stanfilco requested the services of the latter to register them with petitioner
SSS as self-employed and to remit their contributions as such. Also, to
comply with Section 19-A of Republic Act No. 1161, as amended by Republic
Act No. 8282, the SSS contributions of the said owners-members were equal
to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President
for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent
cooperative, addressed to its Chief Executive Officer (CEO) and General
Manager Leo G. Parma, informing the latter that based on the Service
Contracts it executed with Stanfilco, respondent cooperative is actually a
manpower contractor supplying employees to Stanfilco and for that reason, it
is an employer of its owners-members working with Stanfilco. Thus,
respondent cooperative should register itself with petitioner SSS as an
employer and make the corresponding report and remittance of premium
contributions in accordance with the Social Security Law of 1997. On 9
October 2002,12 respondent cooperative, through its counsel, sent a reply to
petitioner SSSs letter asserting that it is not an employer because its
owners-members are the cooperative itself; hence, it cannot be its own
employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to
respondent cooperative ordering the latter to register as an employer and
report its owners-members as employees for compulsory coverage with the
petitioner SSS. Respondent cooperative continuously ignored the demand of
petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition 14 before
petitioner SSC against the respondent cooperative and Stanfilco praying that
the respondent cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperatives ownersmembers as covered employees under the compulsory coverage of SSS and
to remit the necessary contributions in accordance with the Social Security
Law of 1997. The same was docketed as SSC Case No. 6-15507-03.
Respondent cooperative filed its Answer with Motion to Dismiss alleging that
no employer-employee relationship exists between it and its ownersmembers, thus, petitioner SSC has no jurisdiction over the respondent
cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim
against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to

Dismiss filed by the respondent cooperative. The respondent cooperative

moved for the reconsideration of the said Order, but it was likewise denied in
another Order issued by the SSC dated 16 September 2004.

members, not employees.

Intending to appeal the above Orders, respondent cooperative filed a Motion

for Extension of Time to File a Petition for Review before the Court of
Appeals. Subsequently, respondent cooperative filed a Manifestation stating
that it was no longer filing a Petition for Review. In its place, respondent
cooperative filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

B. The rights and obligations of the owners-members of

[respondent] cooperative are derived from their Membership
Agreements, the Cooperatives By-Laws, and Republic Act
No. 6938, and not from any contract of employment or from
the Labor Laws. Moreover, said owners-members enjoy
rights that are not consistent with being mere employees of a
company, such as the right to participate and vote in
decision-making for the cooperative.

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein

petitioner] SSC were issued with grave abuse of discretion amounting to a
(sic) lack or excess of jurisdiction in that:

C. As found by the Bureau of Internal Revenue [BIR], the

owners-members of [respondent] cooperative are not paid
any compensation income.15 (Emphasis supplied.)

A. [Petitioner] SSC arbitrarily proceeded with the case as if it

has jurisdiction over the petition a quo, considering that it
failed to first resolve the issue of the existence of an
employer-employee relationship between [respondent]
cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to
coverage, benefits, contributions, and related matters, it is
respectfully submitted that [petitioner] SSC may only assume
jurisdiction in cases where there is no dispute as to the
existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal
issue of employer-employee relationship raised in
[respondents] Motion to Dismiss can be preliminarily
resolved through summary hearings prior to the hearing on
the merits. However, any inquiry beyond a preliminary
determination, as what [petitioner SSC] wants to accomplish,
would be to encroach on the jurisdiction of the National
Labor Relations Commission [NLRC], which is the more
competent body clothed with power to resolve issues relating
to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of
the petition a quo.
A. [Respondent] is not an employer within the contemplation
of the Labor Law but is a multi-purpose cooperative created
pursuant to Republic Act No. 6938 and composed of owners-

On 5 January 2006, the Court of Appeals rendered a Decision granting the

petition filed by the respondent cooperative. The decretal portion of the
Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17
February 2004] and [16 September 2004], are ANNULLED and SET ASIDE
and a new one is entered DISMISSING the petition-complaint dated [12 June
2003] of [herein petitioner] Social Security System. 16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a
reconsideration, but it was denied by the appellate court in its Resolution
dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of
Appeals erred in not finding that the SSC has jurisdiction over the subject
matter and it has a valid basis in denying respondents Motion to Dismiss.
The said issue is supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint
filed before it by the [petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the
jurisdiction of petitioner SSC after invoking its jurisdiction by filing an
[A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in
denying respondent [cooperatives] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is a question

of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent
cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed
before it by petitioner SSS as it involved an issue of whether or not a worker
is entitled to compulsory coverage under the SSS Law. Petitioners avow that
Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282,
expressly confers upon petitioner SSC the power to settle disputes on
compulsory coverage, benefits, contributions and penalties thereon or any
other matter related thereto. Likewise, Section 9 of the same law clearly
provides that SSS coverage is compulsory upon all employees. Thus, when
petitioner SSS filed a petition-complaint against the respondent cooperative
and Stanfilco before the petitioner SSC for the compulsory coverage of
respondent cooperatives owners-members as well as for collection of unpaid
SSS contributions, it was very obvious that the subject matter of the
aforesaid petition-complaint was within the expertise and jurisdiction of the
SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to
determine the existence of an employer-employee relationship between the
respondent cooperative and its owners-members, said issue does not
preclude petitioner SSC from taking cognizance of the aforesaid petitioncomplaint. Considering that the principal relief sought in the said petitioncomplaint has to be resolved by reference to the Social Security Law and not
to the Labor Code or other labor relations statutes, therefore, jurisdiction over
the same solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent cooperatives
Motion to Dismiss grounded on the alleged lack of employer-employee
relationship does not constitute grave abuse of discretion on the part of
petitioner SSC because the latter has the authority and power to deny the
same. Moreover, the existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary. Petitioners also
maintain that the respondent cooperative is already estopped from assailing
the jurisdiction of the petitioner SSC because it has already filed its Answer
before it, thus, respondent cooperative has already submitted itself to the
jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship
between the respondent cooperative and its owners-members. The
respondent cooperative is the employer of its owners-members considering
that it undertook to provide services to Stanfilco, the performance of which is

under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members
own the cooperative, thus, no employer-employee relationship can arise
between them. The persons of the employer and the employee are merged
in the owners-members themselves. Likewise, respondent cooperatives
owners-members even requested the respondent cooperative to register
them with the petitioner SSS as self-employed individuals. Hence, petitioner
SSC has no jurisdiction over the petition-complaint filed before it by petitioner
SSS.
Respondent cooperative further avers that the Court of Appeals correctly
ruled that petitioner SSC acted with grave abuse of discretion when it
assumed jurisdiction over the petition-complaint without determining first if
there was an employer-employee relationship between the respondent
cooperative and its owners-members. Respondent cooperative claims that
the question of whether an employer-employee relationship exists between it
and its owners-members is a legal and not a factual issue as the facts are
undisputed and need only to be interpreted by the applicable law and
jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped
from assailing the jurisdiction of petitioner SSC simply because it filed an
Answer with Motion to Dismiss, especially where the issue of jurisdiction is
raised at the very first instance and where the only relief being sought is the
dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized
into:
I. Whether the petitioner SSC has jurisdiction over the petitioncomplaint filed before it by petitioner SSS against the respondent
cooperative.
II. Whether the respondent cooperative is estopped from assailing
the jurisdiction of petitioner SSC since it had already filed an Answer
with Motion to Dismiss before the said body.
Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No.
8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with

respect to coverage, benefits, contributions and penalties thereon or any

other matter related thereto, shall be cognizable by the Commission, x x x.
(Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure
states:
Section 1. Jurisdiction. Any dispute arising under the Social Security Act
with respect to coverage, entitlement of benefits, collection and settlement of
contributions and penalties thereon, or any other matter related thereto, shall
be cognizable by the Commission after the SSS through its President,
Manager or Officer-in-charge of the Department/Branch/Representative
Office concerned had first taken action thereon in writing. (Emphasis
supplied.)
It is clear then from the aforesaid provisions that any issue regarding the
compulsory coverage of the SSS is well within the exclusive domain of the
petitioner SSC. It is important to note, though, that the mandatory coverage
under the SSS Law is premised on the existence of an employer-employee
relationship17 except in cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in
the Answer or in the Motion to Dismiss, determine which court has
jurisdiction over an action; otherwise, the question of jurisdiction would
depend almost entirely upon the defendant.18 Moreover, it is well-settled that
once jurisdiction is acquired by the court, it remains with it until the full
termination of the case.19 The said principle may be applied even to quasijudicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the
petitioner SSC against the respondent cooperative and Stanfilco alleges that
the owners-members of the respondent cooperative are subject to the
compulsory coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent cooperative being the
employer of its owners-members must register as employer and report its
owners-members as covered members of the SSS and remit the necessary
premium contributions in accordance with the Social Security Law of 1997.
Accordingly, based on the aforesaid allegations in the petition-complaint filed
before the petitioner SSC, the case clearly falls within its jurisdiction.
Although the Answer with Motion to Dismiss filed by the respondent
cooperative challenged the jurisdiction of the petitioner SSC on the alleged
lack of employer-employee relationship between itself and its ownersmembers, the same is not enough to deprive the petitioner SSC of its
jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC
cannot be faulted for initially assuming jurisdiction over the petition-complaint

of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship
between the respondent cooperative and its owners-members was put in
issue and considering that the compulsory coverage of the SSS Law is
predicated on the existence of such relationship, it behooves the petitioner
SSC to determine if there is really an employer-employee relationship that
exists between the respondent cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not
within the exclusive jurisdiction of the National Labor Relations Commission
(NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the
Labor Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION.
- (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement. 20
Although the aforesaid provision speaks merely of claims for Social Security,
it would necessarily include issues on the coverage thereof, because claims
are undeniably rooted in the coverage by the system. Hence, the question on
the existence of an employer-employee relationship for the purpose of
determining the coverage of the Social Security System is explicitly excluded
from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC
which is primarily charged with the duty of settling disputes arising under the
Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner
SSS involved the issue of compulsory coverage of the owners-members of
the respondent cooperative, this Court agrees with the petitioner SSC when it
declared in its Order dated 17 February 2004 that as an incident to the issue
of compulsory coverage, it may inquire into the presence or absence of an
employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination.
Since both the petitioner SSC and the NLRC are independent bodies and
their jurisdiction are well-defined by the separate statutes creating them,
petitioner SSC has the authority to inquire into the relationship existing
between the worker and the person or entity to whom he renders service to

determine if the employment, indeed, is one that is excepted by the Social

Security Law of 1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of the existence
of an employer-employee relationship, however, the respondent cooperative
already elevated the Order of the petitioner SSC, denying its Motion to
Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a
consequence thereof, the petitioner SSC became a party to the said Petition
for Certiorari pursuant to Section 5(b)22 of Republic Act No. 8282. The
appellate court ruled in favor of the respondent cooperative by declaring that
the petitioner SSC has no jurisdiction over the petition-complaint filed before
it because there was no employer-employee relationship between the
respondent cooperative and its owners-members. Resultantly, the petitioners
SSS and SSC, representing the Republic of the Philippines, filed a Petition
for Review before this Court.
Although as a rule, in the exercise of the Supreme Courts power of review,
the Court is not a trier of facts and the findings of fact of the Court of Appeals
are conclusive and binding on the Court,23 said rule is not without exceptions.
There are several recognized exceptions24 in which factual issues may be
resolved by this Court. One of these exceptions finds application in this
present case which is, when the findings of fact are conflicting. There are,
indeed, conflicting findings espoused by the petitioner SSC and the appellate
court relative to the existence of employer-employee relationship between
the respondent cooperative and its owners-members, which necessitates a
departure from the oft-repeated rule that factual issues may not be the
subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the
following elements are considered: (1) the selection and engagement of the
workers; (2) the payment of wages by whatever means; (3) the power of
dismissal; and (4) the power to control the workers conduct, with the latter
assuming primacy in the overall consideration.25 The most important element
is the employers control of the employees conduct, not only as to the result
of the work to be done, but also as to the means and methods to
accomplish.26 The power of control refers to the existence of the power and
not necessarily to the actual exercise thereof. It is not essential for the
employer to actually supervise the performance of duties of the employee; it
is enough that the employer has the right to wield that power.27 All the
aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the
respondent cooperative which has the exclusive discretion in the selection
and engagement of the owners-members as well as its team leaders who will
be assigned at Stanfilco.28 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."29 In this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its owners-members
were in reality wages, as the same were equivalent to an amount not lower
than that prescribed by existing labor laws, rules and regulations, including
the wage order applicable to the area and industry; or the same shall not be
lower than the prevailing rates of wages.30 It cannot be doubted then that
those stipends or shares in the service surplus are indeed wages, because
these are given to the owners-members as compensation in rendering
services to respondent cooperatives client, Stanfilco. Third. It is also stated
in the above-mentioned Service Contracts that it is the respondent
cooperative which has the power to investigate, discipline and remove the
owners-members and its team leaders who were rendering services at
Stanfilco.31 Fourth. As earlier opined, of the four elements of the employeremployee relationship, the "control test" is the most important. In the case at
bar, it is the respondent cooperative which has the sole control over the
manner and means of performing the services under the Service Contracts
with Stanfilco as well as the means and methods of work. 32 Also, the
respondent cooperative is solely and entirely responsible for its ownersmembers, team leaders and other representatives at Stanfilco. 33 All these
clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent
cooperative and Stanfilco expressly provide that there shall be no employeremployee relationship between the respondent cooperative and its ownersmembers.34 This Court, however, cannot give the said provision force and
effect.
As previously pointed out by this Court, an employee-employer relationship
actually exists between the respondent cooperative and its owners-members.
The four elements in the four-fold test for the existence of an employment
relationship have been complied with. The respondent cooperative must not
be allowed to deny its employment relationship with its owners-members by
invoking the questionable Service Contracts provision, when in actuality, it
does exist. The existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise. The employment status of a
person is defined and prescribed by law and not by what the parties say it
should be.35
It is settled that the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their agreement would have

the force of law between them. However, the agreed terms and conditions
must not be contrary to law, morals, customs, public policy or public order.36
The Service Contract provision in question must be struck down for being
contrary to law and public policy since it is apparently being used by the
respondent cooperative merely to circumvent the compulsory coverage of its
employees, who are also its owners-members, by the Social Security Law.

of Directors, which directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management of its affairs. 39
With that, a cooperative can be likened to a corporation with a personality
separate and distinct from its owners-members. Consequently, an ownermember of a cooperative can be an employee of the latter and an employeremployee relationship can exist between them.

This Court is not unmindful of the pronouncement it made in Cooperative

Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:

In the present case, it is not disputed that the respondent cooperative had
registered itself with the Cooperative Development Authority, as evidenced
by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board
of Directors directs, controls, and supervises the business and manages the
property of the respondent cooperative. Clearly then, the management of the
affairs of the respondent cooperative is vested in its Board of Directors and
not in its owners-members as a whole. Therefore, it is completely logical that
the respondent cooperative, as a juridical person represented by its Board of
Directors, can enter into an employment with its owners-members.

A cooperative, therefore, is by its nature different from an ordinary business

concern, being run either by persons, partnerships, or corporations. Its
owners and/or members are the ones who run and operate the business
while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner
thereof cannot invoke the right to collective bargaining for certainly an owner
cannot bargain with himself or his co-owners. In the opinion of August 14,
1981 of the Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative have no right
to form or join labor organizations for purposes of collective bargaining for
being themselves co-owners of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not
members or co-owners thereof, certainly such employees are entitled to
exercise the rights of all workers to organization, collective bargaining,
negotiations and others as are enshrined in the Constitution and existing
laws of the country.
The situation in the aforesaid case is very much different from the present
case. The declaration made by the Court in the aforesaid case was made in
the context of whether an employee who is also an owner-member of a
cooperative can exercise the right to bargain collectively with the employer
who is the cooperative wherein he is an owner-member. Obviously, an
owner-member cannot bargain collectively with the cooperative of which he
is also the owner because an owner cannot bargain with himself. In the
instant case, there is no issue regarding an owner-members right to bargain
collectively with the cooperative. The question involved here is whether an
employer-employee relationship can exist between the cooperative and an
owner-member. In fact, a closer look at Cooperative Rural Bank of Davao
City, Inc. will show that it actually recognized that an owner-member of a
cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon
its registration with the Cooperative Development Authority.38 It has its Board

In sum, having declared that there is an employer-employee relationship

between the respondent cooperative and its owners-member, we conclude
that the petitioner SSC has jurisdiction over the petition-complaint filed before
it by the petitioner SSS. This being our conclusion, it is no longer necessary
to discuss the issue of whether the respondent cooperative was estopped
from assailing the jurisdiction of the petitioner SSC when it filed its Answer
with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby
GRANTED. The Decision and the Resolution of the Court of Appeals in CAG.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively,
are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC
dated 17 February 2004 and 16 September 2004 are hereby REINSTATED.
The petitioner SSC is hereby DIRECTED to continue hearing the petitioncomplaint filed before it by the petitioner SSS as regards the compulsory
coverage of the respondent cooperative and its owners-members. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

G.R. No. 95011 April 22, 1991

M.Y. SAN BISCUITS, INC., petitioner,
vs.
ACTING SECRETARY BIENVENIDO E. LAGUESMA and PHILIPPINE
TRANSPORT AND GENERAL WORKERS ORGANIZATIONS,
respondents.

Ambrosio B. De Luna for petitioner.Pedro A. Lopez for private respondent.

Thus, this petition for certiorari with prayer for the issuance of a writ of
preliminary prohibitory injunction and temporary restraining order based on
the following grounds:

GANCAYCO, J.:p
The issue presented by this petition is whether or not the med-arbiter or the
Secretary of Labor and Employment has the authority to determine the
existence of an employer-employee relationship between the parties in a
petition for certification election.
On May 12, 1989, private respondent Philippine Transport and General
Workers Organization (Union for short) file a petition for certification election
as a bargaining agent for a group of employees of petitioner M.Y. San
Biscuits, Inc. before the med-arbiter of the Department of Labor and
Employment (DOLE).
After the parties submitted their position papers, on August 25, 1989, the
med-arbiter issued an order dismissing the petition for lack of merit as there
is no employer-employee relationship between petitioner and the delivery
drivers/helpers represented by respondent Union. 1
Meanwhile, respondent Union and several others filed before the NLRC
Branch of Region No. IV a complaint for underpayment of wages; nonpayment of 13th month pay; service incentive pay and COLA; damages and
attorney's fees.
On February 9, 1990, the labor arbiter rendered a decision dismissing the
said complaint on the ground that there is no employer-employee relationship
between the parties. 2 On February 26, 1990 private respondent appealed to
the National Labor Relations Commission (NLRC).
In the certification election case, private respondent appealed to the
Secretary of DOLE. On December 15, 1989, then DOLE Secretary Franklin
Drilon promulgated a resolution reversing the decision of the med-arbiter,
thus finding that there exists an employer-employee relationship between
petitioner and private respondent. 3
Petitioner filed a motion for reconsideration of this resolution on January 22,
1990 and a manifestation on February 12, 1990 asking that action be held in
abeyance pending consideration of the other case where the labor arbiter
rendered a decision declaring the absence of an employer-employee
relationship between the parties. 4 On April 16, 1990, public respondent
issued an order denying the relief sought in the manifestation of petitioner. 5
Petitioner filed a motion for reconsideration therefrom 6 but it was denied on
June 18, 1990. 7

I. The Acting Secretary Bienvenido E. Laguesma abused his

discretion in denying the Manifestation filed by Petitioner on
the ground of a Prejudicial question involving the issue of
employer-employee relationship pending before the National
Labor Relations Commission (NLRC).
II. The Hon. Secretary has no jurisdiction to determine the
existence of [an] employer-employee relationship between
petitioner and private respondent. 8
On September 19, 1990, the Court, without giving due course to the petition,
required the respondents to comment thereon within ten (10) days from
notice and granted the prayer for the issuance of a temporary restraining
order enjoining the execution of the questioned orders dated December 15,
1989 and June 18, 1990.
The main thrust of the petition is that the public respondent Secretary has no
jurisdiction to determine the existence of an employer-employee relationship
between the parties and that its determination is vested in the NLRC.
The petition must fail.
Under Article 226 of the Labor Code, as amended, the Bureau of Labor
Relations (BLR), of which the med-arbiter is an officer, has the following
jurisdiction
Art. 226. Bureau of Labor Relations. The Bureau of Labor
Relations and the Labor Relations divisions in the regional
offices of the Department of Labor shall have original and
exclusive authority to act, at their own initiative or upon
request of either or both parties, on all inter-union and intraunion conflicts, and all disputes, grievances or problems
arising from or affecting labor-management relations in all
work places whether agricultural or non-agricultural, except
those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject
of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on
labor cases before it, subject to extension by agreement of
the parties. (Emphasis supplied.)

From the foregoing, the BLR has the original and exclusive jurisdiction to
inter alia, decide all disputes, grievances or problems arising from or
affecting labor-management relations in all workplaces whether agricultural
or non-agricultural. Necessarily, in the exercise of this jurisdiction over labormanagement relations, the med-arbiter has the authority, original and
exclusive, to determine the existence of an employer-employee relationship
between the parties.
Apropos to the present case, once there is a determination as to the
existence of such a relationship, the med-arbiter can then decide the
certification election case. 9 As the authority to determine the employeremployee relationship is necessary and indispensable in the exercise of
jurisdiction by the med-arbiter, his finding thereon may only be reviewed and
reversed by the Secretary of Labor who exercises appellate jurisdiction under
Article 259 of the Labor Code, as amended, which provides
Art. 259. Appeal from certification election orders. Any
party to an election may appeal the order or results of the
election as determined by the Med-Arbiter directly to the
Secretary of Labor and Employment on the ground that the
rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the
election have been violated. Such appeal shall be decided
within fifteen (15) calendar days.

The Court reproduces with approval the findings and conclusions of the
Secretary in the said resolution dated December 15, 1989.
The sole issue to be resolved is whether or not there exists
an employer-employee relationship between members of
petitioning union and the company.
After a careful review of the records of the case, we find for
the appellant.
It has been well settled in jurisprudence that the factors to be
considered in determining the existence of employeremployee relationship are as follows: (a) selection and
engagement of the employees; (b) the payment of wages;
(e) the process [sic] of dismissal; and, (d) the employer's
power to control the employee with respect to the means
and methods [with] which the work is to be accomplished.
On the first factor, (selection and engagement of the
employer), [sic] it is very apparent from the records that the
personnel of M.Y. San Biscuits are the one responsible for
hiring of employees. Assuming, it is the salesman that
engages his own driver, it could be inferred however that
such authority emanates from the respondent.

When as in this case Secretary Drilon of DOLE rendered a resolution dated

December 15, 1989 reversing the order of the med-arbiter dated August 25,
1989 by declaring the existence of an employer-employee relationship
between the parties, such finding cannot be rendered nugatory by a contrary
finding of the labor arbiter in a separate dispute for money claims between
same parties.

On the second factor (payment of wages), while the

respondent tried to impress upon us that the drivers/helpers
are not in the payroll of the company and, therefore, not
receiving salaries from it, this at best is but an administrative
arrangement in order to save the respondent from the
burden of keeping records and other indirect cost.

It is absurd to suggest that the med-arbiter and Secretary of Labor cannot

make their own independent finding as to the sentence of such relationship
and must have to rely and wait for such a determination by the labor arbiter
or NLRC in a separate proceeding. For then, given a situation where there is
no separate complaint filed with the labor arbiter, the med-arbiter and/or the
Secretary of Labor can never decide a certification election case or any
labor-management dispute properly brought before them as they have no
authority to determine the existence of an employer-employee relationship.
Such a proposition is, to say the least, anomalous.

On the third factor, (the power of dismissal), it is very clear

that herein respondent is the authority that imposes
disciplinary measures against erring drivers. This alone
proves that it wields disciplinary authority over the
drivers/helpers.

Correctly indeed, the Secretary of Labor denied the prayer in the

manifestation of petitioner to await the resolution of the NLRC as to the
existence of such employer-employee relationship.

Finally, on the fourth factor which is the control test, the fact
that the respondent gives daily instructions to the drivers on
how to go about their work is sufficient indication that it
exercises control over the movements of the drivers/helpers.
The drivers are instructed as to what time they are supposed
to report to the office and what time they are supposed to
return.

Viewed from the above circumstances, it is every clear that

the herein respondent is the real employer of the
drivers/helpers. They are in truth and in fact the employees
of the respondent and its attempt to seek refuge on its
salesmen as the ostensible employer of the drivers/helpers
was nothing but an elaborate scheme to deprive
drivers/helpers their right to self-organization.

Petitioner seeks the reversal of the decision[1] dated January 10, 2000 of the
Court of Appeals in CA-G.R. SP No. 52780, dismissing its petition for
certiorari against the NLRC, as well as the resolution[2] dated February 24,
2000, denying its motion for reconsideration.

WHEREFORE, premises considered, the appeal is hereby

granted and the Med-Arbiter's Order dated 25 August 1989
vacated, and in lieu thereof, a new one is entered calling for
the conduct of a certification election among the
drivers/helpers of M.Y. San Biscuits with the following as
choices:

Private respondent Jaime O. dela Pea was employed as a veterinary aide

by petitioner in December 1975. He was among several employees
terminated in July 1989. On July 8, 1989, he was re-hired by petitioner and
given the additional job of feedmill operator. He was instructed to train
selected workers to operate the feedmill.

1. Philippine Transport and General Workers Organization

(PTGWO); and,
2. No Union.
SO ORDERED. 10
On September 19, 1990, the NLRC promulgated its resolution reversing the
decision of the labor arbiter and finding the existence of an employeremployee relationship between the parties. 11 A motion for reconsideration
filed by petitioner was denied in a resolution dated November 16, 1990. 12 On
all counts, the petition must be struck down.
WHEREFORE, the petition is DISMISSED. The temporary restraining order
which the Court issued on September 19, 1990 is hereby lifted, with costs
against petitioner.
SO ORDERED.
[G.R. No. 142244. November 18, 2002]
ATLAS FARMS, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, JAIME O. DELA PEA and MARCIAL I. ABION,
respondents.

The antecedent facts of the case, as found by the Court of Appeals,[3] are as
follows:

On March 13, 1993,[4] Pea was allegedly caught urinating and defecating
on company premises not intended for the purpose. The farm manager of
petitioner issued a formal notice directing him to explain within 24 hours why
disciplinary action should not be taken against him for violating company
rules and regulations. Pea refused, however, to receive the formal notice.
He never bothered to explain, either verbally or in writing, according to
petitioner. Thus, on March 20, 1993, a notice of termination with payment of
his monetary benefits was sent to him. He duly acknowledged receipt of his
separation pay of P13,918.67.
From the start of his employment on July 8, 1989, until his termination on
March 20, 1993, Pea had worked for seven days a week, including
holidays, without overtime, holiday, rest day pay and service incentive leave.
At the time of his dismissal from employment, he was receiving P180 pesos
daily wage, or an average monthly salary of P5,402.
Co-respondent Marcial I. Abion[5] was a carpenter/mason and a
maintenance man whose employment by petitioner commenced on October
8, 1990. Allegedly, he caused the clogging of the fishpond drainage resulting
in damages worth several hundred thousand pesos when he improperly
disposed of the cut grass and other waste materials into the ponds drainage
system. Petitioner sent a written notice to Abion, requiring him to explain
what happened, otherwise, disciplinary action would be taken against him.
He refused to receive the notice and give an explanation, according to
petitioner. Consequently, the company terminated his services on October
27, 1992. He acknowledged receipt of a written notice of dismissal, with his
separation pay.

DECISION
QUISUMBING, J.:

Like Pea, Abion worked seven days a week, including holidays, without
holiday pay, rest day pay, service incentive leave pay and night shift
differential pay. When terminated on October 27, 1992, Abion was receiving

a monthly salary of P4,500.

Pea and Abion filed separate complaints for illegal dismissal that were later
consolidated. Both claimed that their termination from service was due to
petitioners suspicion that they were the leaders in a plan to form a union to
compete and replace the existing management-dominated union.
On November 9, 1993, the labor arbiter dismissed their complaints on the
ground that the grievance machinery in the collective bargaining agreement
(CBA) had not yet been exhausted. Private respondents availed of the
grievance process, but later on refiled the case before the NLRC in Region
IV. They alleged lack of sympathy on petitioners part to engage in
conciliation proceedings.
Their cases were consolidated in the NLRC. At the initial mandatory
conference, petitioner filed a motion to dismiss, on the ground of lack of
jurisdiction, alleging private respondents themselves admitted that they were
members of the employees union with which petitioner had an existing CBA.
This being the case, according to petitioner, jurisdiction over the case
belonged to the grievance machinery and thereafter the voluntary arbitrator,
as provided in the CBA.

3) The amount of the separation pay received by private respondents from

petitioner shall not be deducted from their full back wages.
Costs against petitioner.
SO ORDERED.[7]
Petitioner forthwith filed its motion for reconsideration, which was denied in a
resolution dated February 24, 2000, which reads:
Acting on the Motion for Reconsideration filed by petitioner[s] which drew an
opposition from private respondents, the Court resolved to DENY the
aforesaid motion for reconsideration, as the issues raised therein have been
passed upon by the Court in its questioned decision and no substantial
arguments were presented to warrant its reversal, let alone modification.
SO ORDERED.[8]
In this petition now before us, petitioner alleges that the appellate court erred
in:

In a decision dated January 30, 1996, the labor arbiter dismissed the
complaint for lack of merit, finding that the case was one of illegal dismissal
and did not involve the interpretation or implementation of any CBA provision.
He stated that Article 217 (c) of the Labor Code[6] was inapplicable to the
case. Further, the labor arbiter found that although both complainants did not
substantiate their claims of illegal dismissal, there was proof that private
respondents voluntarily accepted their separation pay and petitioners
financial assistance.

I.
DENYING THE PETITION FOR CERTIORARI AND IN EFFECT
AFFIRMING THE RULINGS OF THE PUBLIC RESPONDENT NLRC THAT
THE PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED;

Thus, private respondents brought the case to the NLRC, which reversed the
labor arbiters decision. Dissatisfied with the NLRC ruling, petitioner went to
the Court of Appeals by way of a petition for review on certiorari under Rule
65, seeking reinstatement of the labor arbiters decision. The appellate court
denied the petition and affirmed the NLRC resolution with some
modifications, thus:

Petitioner contends that the dismissal of private respondents was for a just
and valid cause, pursuant to the provisions of the companys rules and
regulations. It also alleges lack of jurisdiction on the part of the labor arbiter,
claiming that the cases should have been resolved through the grievance
machinery, and eventually referred to voluntary arbitration, as prescribed in
the CBA.

WHEREFORE, the petition is DENIED. The resolution in NLRC CA No.

010520-96 is AFFIRMED with the following modifications:

For their part, private respondents contend that they were illegally dismissed
from employment because management discovered that they intended to
form another union, and because they were vocal in asserting their rights. In
any case, according to private respondents, the petition involves factual
issues that cannot be properly raised in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court.[10]

1) The private respondents can not be reinstated, due to their acceptance of

the separation pay offered by the petitioner;
2) The private respondents are entitled to their full back wages; and,

II. RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO

SEPARATION PAY AND FULL BACKWAGES;
III. RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT.[9]

In fine, there are three issues to be resolved: 1) whether private respondents

were legally and validly dismissed; 2) whether the labor arbiter and the NLRC
had jurisdiction to decide complaints for illegal dismissal; and 3) whether
petitioner is liable for costs of the suit.

damages, in the absence of an express agreement between the parties in

order for Article 262 of the Labor Code [Jurisdiction over other labor disputes]
to apply in the case at bar.
Moreover, per Justice Bellosillo:

The first issue primarily involves questions of fact, which can serve as basis
for the conclusion that private respondents were legally and validly
dismissed. The burden of proving that the dismissal of private respondents
was legal and valid falls upon petitioner. The NLRC found that petitioner
failed to substantiate its claim that both private respondents committed
certain acts that violated company rules and regulations,[11] hence we find
no factual basis to say that private respondents dismissal was in order. We
see no compelling reason to deviate from the NLRC ruling that their
dismissal was illegal, absent a showing that it reached its conclusion
arbitrarily.[12] Moreover, factual findings of agencies exercising quasi-judicial
functions are accorded not only respect but even finality, aside from the
consideration here that this Court is not a trier of facts. [13]
Anent the second issue, Article 217 of the Labor Code provides that labor
arbiters have original and exclusive jurisdiction over termination disputes. A
possible exception is provided in Article 261 of the Labor Code, which
provides thatThe Voluntary Arbitrator or panel of voluntary arbitrators shall have original
and exclusive jurisdiction to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article.
Accordingly, violations of a Collective Bargaining Agreement, except those
which are gross in character, shall no longer be treated as unfair labor
practice and shall be resolved as grievances under the Collective Bargaining
Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and or malicious refusal to comply
with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the grievance Machinery or Arbitration
provided in the Collective Bargaining Agreement.
But as held in Vivero vs. CA,[14] petitioner cannot arrogate into the powers
of Voluntary Arbitrators the original and exclusive jurisdiction of Labor
Arbiters over unfair labor practices, termination disputes, and claims for

It may be observed that under Policy Instruction No. 56 of the Secretary of

Labor, dated 6 April 1993, Clarifying the Jurisdiction Between Voluntary
Arbitrators and Labor Arbiters Over Termination Cases and Providing
Guidelines for the Referral of Said Cases Originally Filed with the NLRC to
the NCMB, termination cases arising in or resulting from the interpretation
and implementation of collective bargaining agreements and interpretation
and enforcement of company personnel policies which were initially
processed at the various steps of the plant-level Grievance Procedures
under the parties collective bargaining agreements fall within the original and
exclusive jurisdiction of the voluntary arbitrator pursuant to Art. 217 (c) and
Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases
shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to
the concerned NCMB Regional Branch for appropriate action towards an
expeditious selection by the parties of a Voluntary Arbitrator or Panel of
Arbitrators based on the procedures agreed upon in the CBA.
As earlier stated, the instant case is a termination dispute falling under the
original and exclusive jurisdiction of the Labor Arbiter, and does not
specifically involve the application, implementation or enforcement of
company personnel policies contemplated in Policy Instruction No. 56.
Consequently, Policy Instruction No. 56 does not apply in the case at bar.[15]
xxx
Records show, however, that private respondents sought without success to
avail of the grievance procedure in their CBA.[16] On this point, petitioner
maintains that by so doing, private respondents recognized that their cases
still fell under the grievance machinery. According to petitioner, without
having exhausted said machinery, the private respondents filed their action
before the NLRC, in a clear act of forum-shopping.[17] However, it is worth
pointing out that private respondents went to the NLRC only after the labor
arbiter dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for redress.
We agree with the NLRC that it was petitioner who failed to show proof that it
took steps to convene the grievance machinery after the labor arbiter first
dismissed the complaints for illegal dismissal and directed the parties to avail
of the grievance procedure under Article VII of the existing CBA. They could
not now be faulted for attempting to find an impartial forum, after petitioner
failed to listen to them and after the intercession of the labor arbiter proved
futile. The NLRC had aptly concluded in part that private respondents had
already exhausted the remedies under the grievance procedure.[18] It erred

only in finding that their cause of action was ripe for arbitration.
In the case of Maneja vs. NLRC,[19] we held that the dismissal case does
not fall within the phrase grievances arising from the interpretation or
implementation of the collective bargaining agreement and those arising from
the interpretation or enforcement of company personnel policies. In Maneja,
the hotel employee was dismissed without hearing. We ruled that her
dismissal was unjustified, and her right to due process was violated, absent
the twin requirements of notice and hearing. We also held that the labor
arbiter had original and exclusive jurisdiction over the termination case, and
that it was error to give the voluntary arbitrator jurisdiction over the illegal
dismissal case.
In Vivero vs. CA,[20] private respondents attempted to justify the jurisdiction
of the voluntary arbitrator over a termination dispute alleging that the issue
involved the interpretation and implementation of the grievance procedure in
the CBA. There, we held that since what was challenged was the legality of
the employees dismissal for lack of cause and lack of due process, the case
was primarily a termination dispute. The issue of whether there was proper
interpretation and implementation of the CBA provisions came into play only
because the grievance procedure in the CBA was not observed, after he
sought his unions assistance. Since the real issue then was whether there
was a valid termination, there was no reason to invoke the need to interpret
nor question an implementation of any CBA provision.
One significant fact in the present petition also needs stressing. Pursuant to
Article 260[21] of the Labor Code, the parties to a CBA shall name or
designate their respective representatives to the grievance machinery and if
the grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by the parties to a CBA.
Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the unions active participation
on behalf of the dismissed employees would be pointless, or even prejudicial
to their cause.
Coming to the merits of the petition, the NLRC found that petitioner did not
comply with the requirements of a valid dismissal. For a dismissal to be valid,
the employer must show that: (1) the employee was accorded due process,
and (2) the dismissal must be for any of the valid causes provided for by law.
[22] No evidence was shown that private respondents refused, as alleged, to
receive the notices requiring them to show cause why no disciplinary action
should be taken against them. Without proof of notice, private respondents
who were subsequently dismissed without hearing were also deprived of a

chance to air their side at the level of the grievance machinery. Given the
fact of dismissal, it can be said that the cases were effectively removed from
the jurisdiction of the voluntary arbitrator, thus placing them within the
jurisdiction of the labor arbiter. Where the dispute is just in the interpretation,
implementation or enforcement stage, it may be referred to the grievance
machinery set up in the CBA, or brought to voluntary arbitration. But, where
there was already actual termination, with alleged violation of the employees
rights, it is already cognizable by the labor arbiter.[23]
In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction
over the cases involving private respondents dismissal, and no error was
committed by the appellate court in upholding their assumption of jurisdiction.
However, we find that a modification of the monetary awards is in order. As a
consequence of their illegal dismissal, private respondents are entitled to
reinstatement to their former positions. But since reinstatement is no longer
feasible because petitioner had already closed its shop, separation pay in
lieu of reinstatement shall be awarded.[24] A terminated employees receipt
of his separation pay and other monetary benefits does not preclude
reinstatement or full benefits under the law, should reinstatement be no
longer possible.[25] As held in Cario vs. ACCFA:[26]
Acceptance of those benefits would not amount to estoppel. The reason is
plain. Employer and employee, obviously, do not stand on the same footing.
The employer drove the employee to the wall. The latter must have to get
hold of the money. Because out of job, he had to face the harsh necessities
of life. He thus found himself in no position to resist money proffered. His,
then, is a case of adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They are deemed not
to have waived their rights. Renuntiato non praesumitur.
Conformably, private respondents are entitled to separation pay equivalent to
one months salary for every year of service, in lieu of reinstatement.[27] As
regards the award of damages, in order not to further delay the disposition of
this case, we find it necessary to expressly set forth the extent of the
backwages as awarded by the appellate court. Pursuant to R.A. 6715, as
amended, private respondents shall be entitled to full backwages computed
from the time of their illegal dismissal up to the date of promulgation of this
decision without qualification, considering that reinstatement is no longer
practicable under the circumstances.[28]
Having found private respondents dismissal to be illegal, and the labor
arbiter and the NLRC duly vested with jurisdiction to hear and decide their
cases, we agree with the appellate court that petitioner should pay the costs
of suit.

WHEREFORE, the petition is DENIED for lack of merit. The decision of the
Court of Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the
MODIFICATION that petitioner is ordered to pay private respondents (a)
separation pay, in lieu of their reinstatement, equivalent to one months salary
for every year of service, (b) full backwages from the date of their dismissal
up to the date of the promulgation of this decision, together with (c) the costs
of suit.
SO ORDERED.

G.R. No. 121948

October 8, 2001

PERPETUAL HELP CREDIT COOPERATIVE, INC., petitioner,

vs.
BENEDICTO FABURADA, SISINITA VILLAR, IMELDA TAMAYO, HAROLD
CATIPAY, and the NATIONAL LABOR RELATIONS COMMISSION, Fourth
Division, Cebu City, respondents.
SANDOVAL-GUTIERREZ, J.:
On January 3, 1990, Benedicto Faburada, Sisinita Vilar, Imelda Tamayo and
Harold Catipay, private respondents, filed a complaint against the Perpetual
Help Credit Cooperative, Inc. (PHCCI), petitioner, with the Arbitration Branch,
Department of Labor and Employment (DOLE), Dumaguete City, for illegal
dismissal, premium pay on holidays and rest days, separation pay, wage
differential, moral damages, and attorney's fees.

holding that the case is impressed with employer-employee relationship and

that the law on cooperatives is subservient to the Labor Code.
On November 23, 1993, the Labor Arbiter rendered a decision, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring complainants illegally dismissed, thus respondent is
directed to pay Complainants backwages computed from the time
they were illegally dismissed up to the actual reinstatement but
subject to the three year backwages rule, separation pay for one
month for every year of service since reinstatement is evidently not
feasible anymore, to pay complainants 13th month pay, wage
differentials and Ten Percent (10%) attorney's fees from the
aggregate monetary award. However, complainant Benedicto
Faburada shall only be awarded what are due him in proportion to
the nine and a half months that he had served the respondent, he
being a part-time employee. All other claims are hereby dismissed
for lack of merit.
The computation of the foregoing awards is hereto attached and
forms an integral part of this decision."
On appeal,1 the NLRC affirmed the Labor Arbiter's decision.
Hence, this petition by the PHCCI.
The issue for our resolution is whether or not respondent judge committed
grave abuse of discretion in ruling that there is an employer-employee
relationship between the parties and that private respondents were illegally
dismissed.

Forthwith, petitioner PHCCI filed a motion to dismiss the complaint on the

ground that there is no employer-employee relationship between them as
private respondents are all members and co-owners of the cooperative.
Furthermore, private respondents have not exhausted the remedies provided
in the cooperative by-laws.

Petitioner PHCCI contends that private respondents are its members and are
working for it as volunteers. Not being regular employees, they cannot sue
petitioner.

On September 3, 1990, petitioner filed a supplemental motion to dismiss

alleging that Article 121 of R.A. No. 6939, otherwise known as the
Cooperative Development Authority Law which took effect on March 26,
1990, requires conciliation or mediation within the cooperative before a resort
to judicial proceeding.

In determining the existence of an employer-employee relationship, the

following elements are considered: (1 ) the selection and engagement of the
worker or the power to hire; (2) the power to dismiss; (3) the payment of
wages by whatever means; and (4) the power to control the worker's
conduct, with the latter assuming primacy in the overall consideration. No
particular form of proof is required to prove the existence of an employeremployee relationship. Any competent and relevant evidence may show the
relationship.2

On the same date, the Labor Arbiter denied petitioner's motion to dismiss,

The above elements are present here. Petitioner PHCCI, through Mr.
Edilberto Lantaca, Jr., its Manager, hired private respondents to work for it.
They worked regularly on regular working hours, were assigned specific
duties, were paid regular wages and made to accomplish daily time records
just like any other regular employee. They worked under the supervision of
the cooperative manager. But unfortunately, they were dismissed.
That an employer-employee exists between the parties is shown by the
averments of private respondents in their respective affidavits, carefully
considered by respondent NLRC in affirming the Labor Arbiter's decision,
thus:
Benedicto Faburada Regular part-time Computer programmer/
operator. Worked with the Cooperative since June 1, 1988 up to
December 29, 1989. Work schedule: Tuesdays and Thursdays, from
1:00 p.m. to 5:30 p.m. and every Saturday from 8:00 to 11:30 a.m.
and 1:00 to 4:00 p.m. and for at least three (3) hours during
Sundays. Monthly salary: P1,000.00 from June to December
1988; P1,350.00 - from January to June 1989; and P1,500.00 from
July to December 1989. Duties: Among others, Enter data into the
computer; compute interests on savings deposits, effect mortuary
deductions and dividends on fixed deposits; maintain the masterlist
of the cooperative members; perform various forms for
mimeographing; and perform such other duties as may be assigned
from time to time.
Sisinita Vilar Clerk. Worked with the Cooperative since December
1, 1987 up to December 29, 1989. Work schedule: Regular working
hours. Monthly salary: P500.00 from December 1, 1987 to
December 31, 1988; P1,000.00 from January 1, 1989 to June 30,
1989; and P1,150.00 from July 1, 1989 to December 31, 1989.
Duties: Among others, Prepare summary of salary advances, journal
vouchers, daily summary of disbursements to respective
classifications; schedule loans; prepare checks and cash vouchers
for regular and emergency loans; reconcile bank statements to the
daily summary of disbursements; post the monthly balance of fixed
and savings deposits in preparation for the computation of interests,
dividends, mortuary and patronage funds; disburse checks during
regular and emergency loans; and perform such other bookkeeping
and accounting duties as may be assigned to her from time to time.
Imelda C. Tamayo Clerk. Worked with the Cooperative since
October 19, 1987 up to December 29, 1989. Work schedule: Monday
to Friday - 8:00 to 11:30 a.m and 2:00 to 5:30 p.m.; every Saturday
8:00 to 11:30 a.m and 1:00 to 4:00 p.m; and for one Sunday each
month - for at least three (3) hours. Monthly salary: P60.00 from

October to November 1987; P250.00 for December 1987; P500.00

from January to December 1988; P950 from January to June
1989; and P1,000.00 from July to December 1989. Duties: Among
others, pick up balances for the computation of interests on savings
deposit, mortuary, dividends and patronage funds; prepare cash
vouchers; check petty cash vouchers; take charge of the preparation
of new passbooks and ledgers for new applicants; fill up members
logbook of regular depositors, junior depositors and special
accounts; take charge of loan releases every Monday morning;
assist in the posting and preparation of deposit slips; receive
deposits from members; and perform such other bookkeeping and
accounting duties as may be assigned her from time to time.
Harold D. Catipay Clerk. Worked with the Cooperative since
March 3 to December 29, 1989. Work schedule: Monday to Friday
8:00 to 11:30 a.m. and 2:00 to 5:30 p.m.; Saturday 8:00 to
11:30 a.m. and 1:00 to 4:00 p.m.; and one Sunday each month for
at least three (3) hours. Monthly salary: P900.00 from March to
June 1989; P1,050.00 - from July to December 1989. Duties: Among
others, Bookkeeping, accounting and collecting duties, such as, post
daily collections from the two (2) collectors in the market; reconcile
passbooks and ledgers of members in the market; and assist the
other clerks in their duties.
All of them were given a memorandum of termination on January 2,
1990, effective December 29, 1989.
We are not prepared to disregard the findings of both the Labor Arbiter and
respondent NLRC, the same being supported by substantial evidence, that
quantum of evidence required in quasi judicial proceedings, like this one.
Necessarily, this leads us to the issue of whether or not private respondents
are regular employees. Article 280 of the Labor Code provides for three kinds
of employees: (1) regular employees or those who have been engaged to
perform activities which are usually necessary or desirable in the usual
business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season; and
(3) casual employees or those who are neither regular nor project
employees.3 The employees who are deemed regular are: (a) those who
have been engaged to perform activities which are usually necessary or
desirable in the usual trade or business of the employer; and (b) those casual
employees who have rendered at least one (1 ) year of service, whether such
service is continuous or broken, with respect to the activity in which they are

employed.4 Undeniably, private respondents were rendering services

necessary to the day-to-day operations of petitioner PHCCI. This fact alone
qualified them as regular employees.
All of them, except Harold D. Catipay, worked with petitioner for more than
one (1) year: Benedicto Faburada, for one and a half (1 1/2) years; Sisinita
Vilar, for two (2) years; and Imelda C. Tamayo, for two (2) years and two (2)
months. That Benedicto Faburada worked only on a part-time basis, does not
mean that he is not a regular employee. One's regularity of employment is
not determined by the number of hours one works but by the nature and by
the length of time one has been in that particular job. 5 Petitioner's contention
that private respondents are mere volunteer workers, not regular employees,
must necessarily fail. Its invocation of San Jose City Electric Cooperative vs.
Ministry of Labor and Employment (173 SCRA 697, 703 (1989) is misplaced.
The issue in this case is whether or not the employees-members of a
cooperative can organize themselves for purposes of collective bargaining,
not whether or not the members can be employees. Petitioner missed the
point
As regular employees or workers, private respondents are entitled to security
of tenure. Thus, their services may be terminated only for a valid cause, with
observance of due process.
The valid causes are categorized into two groups: the just causes under
Articles 282 of the Labor Code and the authorized causes under Articles 283
and 284 of the same Code. The just causes are: (1) serious misconduct or
willful disobedience of lawful orders in connection with the employee's work;
(2) gross or habitual neglect of duties; (3) fraud or willful breach of trust; (4)
commission of a crime or an offense against the person of the employer or
his immediate family member or representative; and, analogous cases. The
authorized causes are: (1) the installation of labor-saving devices; (2)
redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation
of operations of the establishment or undertaking, unless the closing is for
the purpose of circumventing the provisions of law. Article 284 provides that
an employer would be authorized to terminate the services of an employee
found to be suffering from any disease if the employee's continued
employment is prohibited by law or is prejudicial to his health or to the health
of his fellow employees6
Private respondents were dismissed not for any of the above causes. They
were dismissed because petitioner considered them to be mere voluntary
workers, being its members, and as such work at its pleasure. Petitioner thus
vehemently insists that their dismissal is not against the law.
Procedural due process requires that the employer serve the employees to

be dismissed two (2) written notices before the termination of their

employment is effected: (a) the first, to apprise them of the particular acts or
omissions for which their dismissal is sought and (b) the second, to inform
them of the decision of the employer that they are being dismissed. 7 In this
case, only one notice was served upon private respondents by petitioner. It
was in the form of a Memorandum signed by the Manager of the Cooperative
dated January 2, 1990 terminating their services effective December 29,
1989. Clearly, petitioner failed to comply with the twin requisites of a valid
notice.
We hold that private respondents have been illegally dismissed.
Petitioner contends that the labor arbiter has no jurisdiction to take
cognizance of the complaint of private respondents considering that they
failed to submit their dispute to the grievance machinery as required by P.D.
175 (strengthening the Cooperative Movement) 8 and its implementing rules
and regulations under LOI 23. Likewise, the Cooperative Development
Authority did not issue a Certificate of Non-Resolution pursuant to Section 8
of R.A. 6939 or the Cooperative Development Authority Law.
As aptly stated by the Solicitor General in his comment, P.D. 175 does not
provide for a grievance machinery where a dispute or claim may first be
submitted. LOI 23 refers to instructions to the Secretary of Public Works and
Communications to implement immediately the recommendation of the
Postmaster General for the dismissal of some employees of the Bureau of
Post. Obviously, this LOI has no relevance to the instant case.
Article 121 of Republic Act No. 6938 (Cooperative Code of the Philippines)
provides the procedure how cooperative disputes are to be resolved, thus:
ART. 121. Settlement of Disputes. Disputes among members,
officers, directors, and committee members, and intra-cooperative
disputes shall, as far as practicable, be settled amicably in
accordance with the conciliation or mediation mechanisms embodied
in the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall
be settled in a court of competent jurisdiction."
Complementing this Article is Section8 of R.A. No. 6939 (Cooperative
Development Authority Law) which reads:
SEC. 8 Mediation and Conciliation. Upon request of either or both
parties, the Authority shall mediate and conciliate disputes within a
cooperative or between cooperatives: Provided, That if no mediation

or conciliation succeeds within three (3) months from request

thereof, a certificate of non-resolution shall be issued by the
Commission prior to the filing of appropriate action before the proper
courts.
The above provisions apply to members, officers and directors of the
cooperative involved in disputes within a cooperative or between
cooperatives.
There is no evidence that private respondents are members of petitioner
PHCCI and even if they are, the dispute is about payment of wages, overtime
pay, rest day and termination of employment. Under Art. 217 of the Labor
Code, these disputes are within the original and exclusive jurisdiction of the
Labor Arbiter.
As illegally dismissed employees, private respondents are therefore entitled
to reinstatement without loss of seniority rights and other privileges and to full
backwages, inclusive of allowances, plus other benefits or their monetary
equivalent computed from the time their compensation was withheld from
them up to the time of their actual reinstatement. 9 Since they were dismissed
after March 21, 1989, the effectivity date of R.A. 6715 10 they are granted full
backwages, meaning, without deducting from their backwages the earnings
derived by them elsewhere during the period of their illegal dismissal. 11 If
reinstatement is no longer feasible, as when the relationship between
petitioner and private respondents has become strained, payment of their
separation pay in lieu of reinstatement is in order.12
WHEREFORE, the petition is hereby DENIED. The decision of respondent
NLRC is AFFIRMED, with modification in the sense that the backwages due
private respondents shall be paid in full, computed from the time they were
illegally dismissed up to the time of the finality of this Decision. 13
SO ORDERED.

G.R. No. 124382

August 16, 1999

PASTOR DIONISIO V. AUSTRIA, petitioner,

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division),
CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF
THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR V. GAYARES,
PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U.
DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR
GARSULA, ELISEO DOBLE, PORFIRIO BALACY, DAVID RODRIGO,
LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS.
TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO
LOBITANA, respondents.
KAPUNAN, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules of
Court is the Resolution1 of public respondent National Labor Relations
Commission (the "NLRC"), rendered on 23 January 1996, in NLRC Case No.
V-0120-93, entitled "Pastor Dionisio V. Austria vs. Central Philippine Union
Mission Corporation of Seventh Day Adventists, et al.," which dismissed the
case for illegal dismissal filed by the petitioner against private respondents
for lack of jurisdiction.1wphi1.nt
Private Respondent Central Philippine Union Mission Corporation of the
Seventh-Day Adventists (hereinafter referred to as the "SDA") is a religious
corporation duly organized and existing under Philippine law and is
represented in this case by the other private respondents, officers of the
SDA. Petitioner, on the other hand, was a Pastor of the SDA until 31 October
1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the
SDA for twenty eight (28) years from 1963 to 1991. 2 He began his work with
the SDA on 15 July 1963 as a literature evangelist, selling literature of the
SDA over the island of Negros. From then on, petitioner worked his way up

the ladder and got promoted several times. In January, 1968, petitioner
became the Assistant Publishing Director in the West Visayan Mission of the
SDA. In July, 1972, he was elevated to the position of Pastor in the West
Visayan Mission covering the island of Panay, and the provinces of Romblon
and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989,
petitioner was promoted as District Pastor of the Negros Mission of the SDA
and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with
twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his
services were terminated on 31 October 1991.
On various occasions from August up to October, 1991, petitioner received
several communications3 from Mr. Eufronio Ibesate, the treasurer of the
Negros Mission asking him to admit accountability and responsibility for the
church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his
district which amounted to P15,078.10, and to remit the same to the Negros
Mission.
In his written explanation dated 11 October 1991, 4 petitioner reasoned out
that he should not be made accountable for the unremitted collections since
it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate
who authorized his wife to collect the tithes and offerings since he was very
sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the
office of Pastor Buhat, the president of the Negros Mission. During said call,
petitioner tried to persuade Pastor Buhat to convene the Executive
Committee for the purpose of settling the dispute between him and the
private respondent, Pastor David Rodrigo. The dispute between Pastor
Rodrigo and petitioner arose from an incident in which petitioner assisted his
friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for
the repair of the latter's motor vehicle which he failed to pay to Diamada. 5
Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the
latter harbored ill-feelings against petitioner. When news reached petitioner
that Pastor Rodrigo was about to file a complaint against him with the Negros
Mission, he immediately proceeded to the office of Pastor Buhat on the date
abovementioned and asked the latter to convene the Executive Committee.
Pastor Buhat denied the request of petitioner since some committee
members were out of town and there was no quorum. Thereafter, the two
exchanged heated arguments. Petitioner then left the office of Pastor Buhat.
While on his way out, petitioner overheard Pastor Buhat saying, "Pastor daw
inisog na ina iya (Pador you are talking tough)." 6 Irked by such remark,
petitioner returned to the office of Pastor Buhat, and tried to overturn the
latter's table, though unsuccessfully, since it was heavy. Thereafter, petitioner
banged the attach case of Pastor Buhat on the table, scattered the books in
his office, and threw the phone.7 Fortunately, private respondents Pastors

Yonilo Leopoldo and Claudio Montao were around and they pacified both
Pastor Buhat and petitioner.
On 17 October 1991, petitioner received a letter 8 inviting him and his wife to
attend the Executive Committee meeting at the Negros Mission Conference
Room on 21 October 1991, at nine in the morning. To be discussed in the
meeting were the non-remittance of church collection and the events that
transpired on 16 October 1991. A fact-finding committee was created to
investigate petitioner. For two (2) days, from October 21 and 22, the factfinding committee conducted an investigation of petitioner. Sensing that the
result of the investigation might be one-sided, petitioner immediately wrote
Pastor Rueben Moralde, president of the SDA and chairman of the factfinding committee, requesting that certain members of the fact-finding
committee be excluded in the investigation and resolution of the case. 9 Out of
the six (6) members requested to inhibit themselves from the investigation
and decision-making, only two (2) were actually excluded, namely: Pastor
Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner
received a letter of dismissal10 citing misappropriation of denominational
funds, willful breach of trust, serious misconduct, gross and habitual neglect
of duties, and commission of an offense against the person of employer's
duly authorized representative, as grounds for the termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a
complaint11 on 14 November 1991, before the Labor Arbiter for illegal
dismissal against the SDA and its officers and prayed for reinstatement with
backwages and benefits, moral and exemplary damages and other labor law
benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in
favor of petitioner, the dispositive portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL
PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTHDAY ADVENTISTS (CPUMCSDA) and its officers, respondents
herein, are hereby ordered to immediately reinstate complainant
Pastor Dionisio Austria to his former position as Pastor of Brgy.
Taculing, Progreso and Banago, Bacolod City, without loss of
seniority and other rights and backwages in the amount of ONE
HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY
PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the
following:
A. 13th month pay P 21,060.00

B. Allowance P 4,770.83
C. Service Incentive
Leave Pay P 3,461.85
D. Moral Damages P 50,000.00
E. Exemplary
Damages P 25,000.00
F. Attorney's Fee P 22,012.27
SO ORDERED.12
The SDA, through its officers, appealed the decision of the Labor Arbiter to
the National Labor Labor Relations Commission, Fourth Division, Cebu City.
In a decision, dated 26 August 1994, the NLRC vacated the findings of the
Labor Arbiter. The decretal portion of the NLRC decision states:
WHEREFORE, the Decision appealed from is hereby VACATED and
a new one ENTERED dismissing this case for want of merit.
SO ORDERED.13
Petitioner filed a motion for reconsideration of the above-named decision. On
18 July 1995, the NLRC issued a Resolution reversing its original decision.
The dispositive portion of the resolution reads:
WHEREFORE, premises considered, Our decision dated August 26,
1994 is VACATED and the decision of the Labor Arbiter dated
February 15, 1993 is REINSTATED.
SO ORDERED.14
In view of the reversal of the original decision of the NLRC, the SDA filed a
motion for reconsideration of the above resolution. Notable in the motion for
reconsideration filed by private respondents is their invocation, for the first
time on appeal, that the Labor Arbiter has no jurisdiction over the complaint
filed by petitioner due to the constitutional provision on the separation of
church and state since the case allegedly involved an ecclesiastical affair to
which the State cannot interfere.

The NLRC, without ruling on the merits of the case, reversed itself once
again, sustained the argument posed by private respondents and,
accordingly, dismissed the complaint of petitioner. The dispositive portion of
the NLRC resolution dated 23 January 1996, subject of the present petition,
is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for
reconsideration is hereby granted. Accordingly, this case is hereby
DISMISSED for lack of jurisdiction.
SO ORDERED.15
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor
General (the "OSG") to file its comment on behalf of public respondent
NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of
comment16 setting forth its stand that it cannot sustain the resolution of the
NLRC. In its manifestation, the OSG submits that the termination of petitioner
from his employment may be questioned before the NLRC as the same is
secular in nature, not ecclesiastical. After the submission of memoranda of all
the parties, the case was submitted for decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and
decide the complaint filed by petitioner against the SDA;
2) Whether or not the termination of the services of petitioner is an
ecclesiastical affair, and, as such, involves the separation of church
and state; and
3) Whether or not such termination is valid.
The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of
church and state, the Labor Arbiter and the NLRC have no jurisdiction to
entertain the complaint filed by petitioner. Since the matter at bar allegedly
involves the discipline of a religious minister, it is to be considered a purely
ecclesiastical affair to which the State has no right to interfere.
The contention of private respondents deserves scant consideration. The
principle of separation of church and state finds no application in this case.

The rationale of the principle of the separation of church and state is

summed up in the familiar saying, "Strong fences make good-neighbors." 17
The idea advocated by this principle is to delineate the boundaries between
the two institutions and thus avoid encroachments by one against the other
because of a misunderstanding of the limits of their respective exclusive
jurisdictions.18 The demarcation line calls on the entities to "render therefore
unto Ceasar the things that are Ceasar's and unto God the things that are
God's."19 While the state is prohibited from interfering in purely ecclesiastical
affairs, the Church is likewise barred from meddling in purely secular
matters.20
The case at bar does not concern an ecclesiastical or purely religious affair
as to bar the State from taking cognizance of the same. An ecclesiastical
affair is "one that concerns doctrine, creed, or form of worship of the church,
or the adoption and enforcement within a religious association of needful
laws and regulations for the government of the membership, and the power
of excluding from such associations those deemed unworthy of
membership.21 Based on this definition, an ecclesiastical affair involves the
relationship between the church and its members and relate to matters of
faith, religious doctrines, worship and governance of the congregation. To be
concrete, examples of this so-called ecclesiastical affairs to which the State
cannot meddle are proceedings for excommunication, ordinations of religious
ministers, administration of sacraments and other activities with attached
religious significance. The case at bar does not even remotely concern any
of the abovecited examples. While the matter at hand relates to the church
and its religious minister it does not ipso facto give the case a religious
significance. Simply stated, what is involved here is the relationship of the
church as an employer and the minister as an employee. It is purely secular
and has no relation whatsoever with the practice of faith, worship or doctrines
of the church. In this case, petitioner was not ex-communicated or expelled
from the membership of the SDA but was terminated from employment.
Indeed, the matter of terminating an employee, which is purely secular in
nature, is different from the ecclesiastical act of expelling a member from the
religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for
petitioner's dismissal, namely: misappropriation of denominational funds,
willful breach of trust, serious misconduct, gross and habitual neglect of
duties and commission of an offense against the person of his employer's
duly authorized representative, are all based on Article 282 of the Labor
Code which enumerates the just causes for termination of employment. 22 By
this alone, it is palpable that the reason for petitioner's dismissal from the
service is not religious in nature. Coupled with this is the act of the SDA in
furnishing NLRC with a copy of petitioner's letter of termination. As aptly
stated by the OSG, this again is an eloquent admission by private
respondents that NLRC has jurisdiction over the case. Aside from these, SDA

admitted in a certification23 issued by its officer, Mr. Ibesate, that petitioner

has been its employee for twenty-eight (28) years. SDA even registered
petitioner with the Social Security System (SSS) as its employee. As a matter
of fact, the worker's records of petitioner have been submitted by private
respondents as part of their exhibits. From all of these it is clear that when
the SDA terminated the services of petitioner, it was merely exercising its
management prerogative to fire an employee which it believes to be unfit for
the job. As such, the State, through the Labor Arbiter and the NLRC, has the
right to take cognizance of the case and to determine whether the SDA, as
employer, rightfully exercised its management prerogative to dismiss an
employee. This is in consonance with the mandate of the Constitution to
afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of
employees, is comprehensive enough to include religious corporations, such
as the SDA, in its coverage. Article 278 of the Labor Code on postemployment states that "the provisions of this Title shall apply to all
establishments or undertakings, whether for profit or not." Obviously, the
cited article does not make any exception in favor of a religious corporation.
This is made more evident by the fact that the Rules Implementing the Labor
Code, particularly, Section 1, Rule 1, Book VI on the Termination of
Employment and Retirement, categorically includes religious institutions in
the coverage of the law, to wit:
Sec. 1. Coverage. This Rule shall apply to all establishments and
undertakings, whether operated for profit or not, including
educational, medical, charitable and religious institutions and
organizations, in cases of regular employment with the exception of
the Government and its political subdivisions including governmentowned or controlled corporations.24
With this clear mandate, the SDA cannot hide behind the mantle of protection
of the doctrine of separation of church and state to avoid its responsibilities
as an employer under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are
estopped from raising the issue of lack of jurisdiction for the first time on
appeal. It is already too late in the day for private respondents to question the
jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully
participated in the trials and hearings of the case from start to finish. The
Court has already ruled that the active participation of a party against whom
the action war brought, coupled with his failure to object to the jurisdiction of
the court or quasi-judicial body where the action is pending, is tantamount to
an invocation of that jurisdiction and a willingness to abide by the resolution
of the case and will bar said party from later on impugning the court or body's
jurisdiction.25 Thus, the active participation of private respondents in the

proceedings before the Labor Arbiter and the NLRC mooted the question on
jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine
whether the dismissal of petitioner was valid.
At the outset, we note that as a general rule, findings of fact of administrative
bodies like the NLRC are binding upon this Court. A review of such findings is
justified, however, in instances when the findings of the NLRC differ from
those of the labor arbiter, as in this case.26 When the findings of NLRC do not
agree with those of the Labor Arbiter, this Court must of necessity review the
records to determine which findings should be preferred as more comfortable
to the evidentiary facts.27
We turn now to the crux of the matter. In termination cases, the settled rule is
that the burden of proving that the termination was for a valid or authorized
cause rests on the employer.28 Thus, private respondents must not merely
rely on the weaknesses of petitioner's evidence but must stand on the merits
of their own defense.
The issue being the legality of petitioner's dismissal, the same must be
measured against the requisites for a valid dismissal, namely: (a) the
employee must be afforded due process, i.e., he must be given an
opportunity to be heard and to defend himself, and; (b) the dismissal must be
for a valid cause as provided in Article 282 of the Labor Code. 29 Without the
concurrence of this twin requirements, the termination would, in the eyes of
the law, be illegal.30
Before the services of an employee can be validly terminated, Article 277 (b)
of the Labor Code and Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code further require the employer to furnish the
employee with two (2) written notices, to wit: (a) a written notice served on
the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side; and,
(b) a written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been
established to justify his termination.
The first notice, which may be considered as the proper charge, serves to
apprise the employee of the particular acts or omissions for which his
dismissal is sought.31 The second notice on the other hand seeks to inform
the employee of the employer's decision to dismiss him. 32 This decision,
however, must come only after the employee is given a reasonable period
from receipt of the first notice within which to answer the charge and ample
opportunity to be heard and defend himself with the assistance of a

representative, if he so desires.33 This is in consonance with the express

provision of the law on the protection to labor and the broader dictates of
procedural due process.34 Non-compliance therewith is fatal because these
requirements are conditions sine qua non before dismissal may be validly
effected.35
Private respondent failed to substantially comply with the above
requirements. With regard to the first notice, the letter,36 dated 17 October
1991, which notified petitioner and his wife to attend the meeting on 21
October 1991, cannot be construed as the written charge required by law. A
perusal of the said letter reveals that it never categorically stated the
particular acts or omissions on which petitioner's impending termination was
grounded. In fact, the letter never even mentioned that petitioner would be
subject to investigation. The letter merely mentioned that petitioner and his
wife were invited to a meeting wherein what would be discussed were the
alleged unremitted church tithes and the events that transpired on 16
October 1991. Thus, petitioner was surprised to find out that the alleged
meeting turned out to be an investigation. From the tenor of the letter, it
cannot be presumed that petitioner was actually on the verge of dismissal.
The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued. For this
reason, it cannot be said that petitioner was given enough opportunity to
properly prepare for his defense. While admittedly, private respondents
complied with the second requirement, the notice of termination, this does
not cure the initial defect of lack of the proper written charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents
enumerated the following as grounds for the dismissal of petitioner, namely:
misappropriation of denominational funds, willful breach of trust, serious
misconduct, gross and habitual neglect of duties, and commission of an
offense against the person of employer's duly authorized representative.
Breach of trust and misappropriation of denominational funds refer to the
alleged failure of petitioner to remit to the treasurer of the Negros Mission
tithes, collections and offerings amounting to P15,078.10 which were
collected by his wife, Mrs. Thelma Austria, in the churches under his
jurisdiction. On the other hand, serious misconduct and commission of an
offense against the person of the employer's duly authorized representative
pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final
ground invoked by private respondents is gross and habitual neglect of
duties allegedly committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of
trust. Private respondents allege that they have lost their confidence in
petitioner for his failure, despite demands, to remit the tithes and offerings
amounting to P15,078.10, which were collected in his district. A careful study

of the voluminous records of the case reveals that there is simply no basis for
the alleged loss of confidence and breach of trust. Settled is the rule that
under Article 282 (c) of the Labor Code, the breach of trust must be willful. A
breach is willful if it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.38 It must rest on substantial
grounds and not on the employer's arbitrariness, whims, caprices or
suspicion; otherwise the employee would eternally remain at the mercy of the
employer.39 It should be genuine and not simulated.40 This ground has never
been intended to afford an occasion for abuse, because of its subjective
nature. The records show that there were only six (6) instances when
petitioner personally collected and received from the church treasurers the
tithes, collections, and donations for the church. 41 The stenographic notes on
the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a
witness for private respondents, show that Pastor Austria was able to remit
all his collections to the treasurer of the Negros Mission. 42
Though private respondents were able to establish that petitioner collected
and received tithes and donations several times, they were notable to
establish that petitioner failed to remit the same to the Negros Mission, and
that he pocketed the amount and used it for his personal purpose. In fact, as
admitted by their own witness, Naomi Geniebla, petitioner remitted the
amounts which he collected to the Negros Mission for which corresponding
receipts were issued to him. Thus, the allegations of private respondents that
petitioner breached their trust have no leg to stand on.
In a vain attempt to support their claim of breach of trust, private respondents
try to pin on petitioner the alleged non-remittance of the tithes collected by
his wife. This argument deserves little consideration. First of all, as proven by
convincing and substantial evidence consisting of the testimonies of the
witnesses for private respondents who are church treasurers, it was Mrs.
Thelma Austria who actually collected the tithes and donations from them,
and, who failed to remit the same to the treasurer of the Negros Mission. The
testimony of these church treasurers were corroborated and confirmed by
Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of
conspiracy and collusion, which private respondents failed to demonstrate,
between petitioner and his wife, petitioner cannot be made accountable for
the alleged infraction committed by his wife. After all, they still have separate
and distinct personalities. For this reason, the Labor Arbiter found it difficult to
see the basis for the alleged loss of confidence and breach of trust. The
Court does not find any cogent reason, therefore, to digress from the findings
of the Labor Arbiter which is fully supported by the evidence on record.
With respect to the grounds of serious misconduct and commission of an
offense against the person of the employer's duly authorized representative,
we find the same unmeritorious and, as such, do not warrant petitioner's

dismissal from the service.

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 in character, and implies wrongful intent and not
mere error in judgment.43 For misconduct to be considered serious it must be
of such grave and aggravated character and not merely trivial or
unimportant.44 Based on this standard, we believe that the act of petitioner in
banging the attach case on the table, throwing the telephone and scattering
the books in the office of Pastor Buhat, although improper, cannot be
considered as grave enough to be considered as serious misconduct. After
all, as correctly observed by the Labor Arbiter, though petitioner committed
damage to property, he did not physically assault Pastor Buhat or any other
pastor present during the incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the employer's representatives was
never really established or proven by private respondents. Hence, there is no
basis for the allegation that petitioner's act constituted serious misconduct or
that the same was an offense against the person of the employer's duly
authorized representative. As such, the cited actuation of petitioner does not
justify the ultimate penalty of dismissal from employment. While the
Constitution does condone wrongdoing by the employee, it nevertheless
urges a moderation of the sanctions that may be applied to him in light of the
many disadvantages that weigh heavily on him like an albatross on his
neck.45 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 such as dismissal from employment.46 For the foregoing reasons,
we believe that the minor infraction committed by petitioner does not merit
the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner,
gross and habitual neglect of duties, does not require an exhaustive
discussion. Suffice it to say that all private respondents had were allegations
but not proof. Aside from merely citing the said ground, private respondents
failed to prove culpability on the part of petitioner. In fact, the evidence on
record shows otherwise. Petitioner's rise from the ranks disclose that he was
actually a hard-worker. Private respondents' evidence, 47 which consisted of
petitioner's Worker's Reports, revealed how petitioner travelled to different
churches to attend to the faithful under his care. Indeed, he labored hard for
the SDA, but, in return, he was rewarded with a dismissal from the service for
a non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that
petitioner was terminated from service without just or lawful cause. Having
been illegally dismissed, petitioner is entitled to reinstatement to his former
position without loss of seniority right48 and the payment of full backwages
without any deduction corresponding to the period from his illegal dismissal

up to actual reinstatement.46
WHEREFORE, the petition for certiorari is GRANTED. The challenged
Resolution of public respondent National Labor Relations Commission,
rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision
of the Labor Arbiter, dated 15 February 1993, is REINSTATED and hereby
AFFIRMED.

declaring the complainant as a regular employee of respondent ADB, and the

termination of his services as illegal. Accordingly, respondent Bank is hereby
ordered:
"1. To immediately reinstate the complainant to his former position effective
September 16, 1993;

SO ORDERED.

"2. To pay complainant full backwages from December 1, 1992 to

September 15, 1993 in the amount of P42,750.00 (P4,500.00 x 9 months);

[G.R. No. 113191. September 18, 1996]

"3. And to pay complainants other benefits and without loss of seniority
rights and other privileges and benefits due a regular employee of Asian
Development Bank from the time he was terminated on December 31, 1992;

DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES V. DE
CASTRO and JOSE C. MAGNAYI, respondents.
DECISION
VITUG, J.:
The questions raised in the petition for certiorari are a few coincidental
matters relative to the diplomatic immunity extended to the Asian
Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 0001-0690-93 for his alleged illegal dismissal by ADB and the latter's violation
of the "labor-only" contracting law. Two summonses were served, one sent
directly to the ADB and the other through the Department of Foreign Affairs
("DFA"), both with a copy of the complaint. Forthwith, the ADB and the DFA
notified respondent Labor Arbiter that the ADB, as well as its President and
Officers, were covered by an immunity from legal process except for
borrowings, guaranties or the sale of securities pursuant to Article 50(1) and
Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between
The Bank And The Government Of The Philippines Regarding The Bank's
Headquarters (the "Headquarters Agreement").
The Labor Arbiter took cognizance of the complaint on the impression that
the ADB had waived its diplomatic immunity from suit. In time, the Labor
Arbiter rendered his decision, dated 31 August 1993, that concluded:
"WHEREFORE, above premises considered, judgment is hereby rendered

"4. To pay 10% attorney's fees of the total entitlements."[1]

The ADB did not appeal the decision. Instead, on 03 November 1993, the
DFA referred the matter to the National Labor Relations Commission
("NLRC"); in its referral, the DFA sought a "formal vacation of the void
judgment." Replying to the letter, the NLRC Chairman, wrote:
"The undersigned submits that the request for the 'investigation' of Labor
Arbiter Nieves de Castro, by the National Labor Relations Commission, has
been erroneously premised on Art. 218(c) of the Labor Code, as cited in the
letter of Secretary Padilla, considering that the provision deals with 'a
question, matter or controversy within its (the Commission) jurisdiction'
obviously referring to a labor dispute within the ambit of Art. 217 (on
jurisdiction of Labor Arbiters and the Commission over labor cases).
"The procedure, in the adjudication of labor cases, including raising of
defenses, is prescribed by law. The defense of immunity could have been
raised before the Labor Arbiter by a special appearance which, naturally, may
not be considered as a waiver of the very defense being raised. Any
decision thereafter is subject to legal remedies, including appeals to the
appropriate division of the Commission and/or a petition for certiorari with the
Supreme Court, under Rule 65 of the Rules of Court. Except where an
appeal is seasonably and properly made, neither the Commission nor the
undersigned may review, or even question, the propriety of any decision by a
Labor Arbiter. Incidentally, the Commission sits en banc (all fifteen
Commissioners) only to promulgate rules of procedure or to formulate
policies (Art. 213, Labor Code).
"On the other hand, while the undersigned exercises 'administrative
supervision over the Commission and its regional branches and all its
personnel, including the Executive Labor Arbiters and Labor Arbiters'

(penultimate paragraph, Art. 213, Labor Code), he does not have the
competence to investigate or review any decision of a Labor Arbiter.
However, on the purely administrative aspect of the decision-making
process, he may cause that an investigation be made of any misconduct,
malfeasance or misfeasance, upon complaint properly made.
"If the Department of Foreign Affairs feels that the action of Labor Arbiter
Nieves de Castro constitutes misconduct, malfeasance or misfeasance, it is
suggested that an appropriate complaint be lodged with the Office of the
Ombudsman.
"Thank you for your kind attention."[2]
Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's
resolution of 31 January 1994, respondents were required to comment.
Petitioner was later constrained to make an application for a restraining order
and/or writ of preliminary injunction following the issuance, on 16 March
1994, by the Labor Arbiter of a writ of execution. In a resolution, dated 07
April 1994, the Court issued the temporary restraining order prayed for.
The Office of the Solicitor General (OSG), in its comment of 26 May 1994,
initially assailed the claim of immunity by the ADB. Subsequently, however, it
submitted a Manifestation (dated 20 June 1994) stating, among other things,
that "after a thorough review of the case and the records," it became
convinced that ADB, indeed, was correct in invoking its immunity from suit
under the Charter and the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal process, except in
cases arising out of or in connection with the exercise of its powers to borrow
money, to guarantee obligations, or to buy and sell or underwrite the sale of
securities.[3]
Under Article 55 thereof All Governors, Directors, alternates, officers and employees of the Bank,
including experts performing missions for the Bank:
(1)
shall be immune from legal process with respect of acts performed
by them in their official capacity, except when the Bank waives the
immunity.[4]

Like provisions are found in the Headquarters Agreement. Thus, its Section
5 reads:
"The Bank shall enjoy immunity from every form of legal process, except in
cases arising out of, or in connection with, the exercise of its powers to
borrow money, to guarantee obligations, or to buy and sell or underwrite the
sale of securities.[5]
And, with respect to certain officials of the bank, Section 44 of the agreement
states:
Governors, other representatives of Members, Directors, the President,
Vice-President and executive officers as may be agreed upon between the
Government and the Bank shall enjoy, during their stay in the Republic of the
Philippines in connection with their official duties with the Bank:
x x x

xxx

xxx

(b)
Immunity from legal process of every kind in respect of words
spoken or written and all acts done by them in their official capacity.[6]
The above stipulations of both the Charter and Headquarters Agreement
should be able, nay well enough, to establish that, except in the specified
cases of borrowing and guarantee operations, as well as the purchase, sale
and underwriting of securities, the ADB enjoys immunity from legal process
of every form. The Banks officers, on their part, enjoy immunity in respect of
all acts performed by them in their official capacity. The Charter and the
Headquarters Agreement granting these immunities and privileges are treaty
covenants and commitments voluntarily assumed by the Philippine
government which must be respected.
In World Health Organization vs. Aquino,[7] we have declared:
It is a recognized principle of international law and under our system of
separation of powers that diplomatic immunity is essentially a political
question and courts should refuse to look beyond a determination by the
executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the
government x x x it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of the
government, x x x or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their
jurisdiction x x x as to embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine that `in such cases the
judicial department of government follows the action of the political branch

and will not embarrass the latter by assuming an antagonistic jurisdiction.'"[8]

To the same effect is the decision in International Catholic Migration
Commission vs. Calleja,[9] which has similarly deemed the Memoranda of
the Legal Adviser of the Department of Foreign Affairs to be "a categorical
recognition by the Executive Branch of Government that ICMC x x x enjoy(s)
immunities accorded to international organizations" and which determination
must be held "conclusive upon the Courts in order not to embarrass a
political department of Government. In the instant case, the filing of the
petition by the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.
Being an international organization that has been extended a diplomatic
status, the ADB is independent of the municipal law.[10] In Southeast Asian
Fisheries Development Center vs. Acosta,[11] the Court has cited with
approval the opinion[12] of the then Minister of Justice; thus "One of the basic immunities of an international organization is immunity from
local jurisdiction, i.e., that it is immune from the legal writs and processes
issued by the tribunals of the country where it is found. (See Jenks, Id., pp.
37-44). The obvious reason for this is that the subjection of such an
organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in their operations or
even influence or control its policies and decisions of the organization;
besides, such subjection to local jurisdiction would impair the capacity of
such body to discharge its responsibilities impartially on behalf of its
member-states."[13]

"In view of the fact that the Asian Development Bank (ADB) invokes its
immunity which is sustained by the Department of Foreign Affairs, a
continuous hearing of this case erodes the credibility of the Philippine
government before the international community, let alone the negative
implication of such a suit on the official relationship of the Philippine
government with the ADB.

"For the Secretary of Foreign Affairs

(Sgd.)
"SIME D. HIDALGO
Assistant Secretary"[14]
The Office of the President, likewise, has issued on 18 May 1993 a letter to
the Secretary of Labor, viz:
"Dear Secretary Confesor,
"I am writing to draw your attention to a case filed by a certain Jose C.
Magnayi against the Asian Development Bank and its President, Kimimasa
Tarumizu, before the National Labor Relations Commission, National Capital
Region Arbitration Board (NLRC NCR Case No. 00-01690-93).

Contrary to private respondent's assertion, the claim of immunity is not here

being raised for the first time; it has been invoked before the forum of origin
through communications sent by petitioner and the ADB to the Labor Arbiter,
as well as before the NLRC following the rendition of the questioned
judgment by the Labor Arbiter, but evidently to no avail.

"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de
Castro, addressed a Notice of Resolution/Order to the Bank which brought it
to the attention of the Department of Foreign Affairs on the ground that the
service of such notice was in violation of the RP-ADB Headquarters
Agreement which provided, inter-alia, for the immunity of the Bank, its
President and officers from every form of legal process, except only, in cases
of borrowings, guarantees or the sale of securities.

In its communication of 27 May 1993, the DFA, through the Office of Legal
Affairs, has advised the NLRC:

"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V.

de Castro of this fact by letter dated March 22, copied to you.

"Respectfully returned to the Honorable Domingo B. Mabazza, Labor

Arbitration Associate, National Labor Relations Commission, National Capital
Judicial Region, Arbitration Branch, Associated bank Bldg., T.M. Kalaw St.,
Ermita, Manila, the attached Notice of Hearing addressed to the Asian
Development Bank, in connection with the aforestated case, for the reason
stated in the Department's 1st Indorsement dated 23 March 1993, copy
attached, which is self-explanatory.

"Despite this, the labor arbiter in question persisted to send summons, the
latest dated May 4, herewith attached, regarding the Magnayi case.
"The Supreme Court has long settled the matter of diplomatic immunities. In
WHO vs. Aquino, SCRA 48, it ruled that courts should respect diplomatic
immunities of foreign officials recognized by the Philippine government.
Such decision by the Supreme Court forms part of the law of the land.

"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that
ignorance of the law is a ground for dismissal.
"Very truly yours,
(Sgd.)
JOSE B. ALEJANDRINO
Chairman, PCC-ADB"[15]
Private respondent argues that, by entering into service contracts with
different private companies, ADB has descended to the level of an ordinary
party to a commercial transaction giving rise to a waiver of its immunity from
suit. In the case of Holy See vs. Hon. Rosario, Jr.,[16] the Court has held:
There are two conflicting concepts of sovereign immunity, each widely held
and firmly established. According to the classical or absolute theory, a
sovereign cannot, without its consent, be made a respondent in the Courts of
another sovereign. According to the newer or restrictive theory, the immunity
of the sovereign is recognized only with regard to public acts or acts jure
imperii of a state, but not with regard to private act or acts jure gestionis.
x x x

xxx

xxx

Certainly, the mere entering into a contract by a foreign state with a private
party cannot be the ultimate test. Such an act can only be the start of the
inquiry. The logical question is whether the foreign state is engaged in the
activity in the regular course of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or transaction must then be
tested by its nature. If the act is in pursuit of a sovereign activity, or an
incident thereof, then it is an act jure imperii, especially when it is not
undertaken for gain or profit.[17]

seriously impair the conduct of the country's foreign relations. The DFA must
be allowed to plead its case whenever necessary or advisable to enable it to
help keep the credibility of the Philippine government before the international
community. When international agreements are concluded, the parties
thereto are deemed to have likewise accepted the responsibility of seeing to
it that their agreements are duly regarded. In our country, this task falls
principally on the DFA as being the highest executive department with the
competence and authority to so act in this aspect of the international arena.
[18] In Holy See vs. Hon. Rosario, Jr.,[19] this Court has explained the matter
in good detail; viz:
"In Public International Law, when a state or international agency wishes to
plead sovereign or diplomatic immunity in a foreign court, it requests the
Foreign Office of the state where it is sued to convey to the court that said
defendant is entitled to immunity.
"In the United States, the procedure followed is the process of 'suggestion,'
where the foreign state or the international organization sued in an American
court requests the Secretary of State to make a determination as to whether
it is entitled to immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to submit to the
court a 'suggestion' that the defendant is entitled to immunity. In England, a
similar procedure is followed, only the Foreign Office issues a certification to
that effect instead of submitting a 'suggestion' (O'Connell, I International Law
130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities
and Obligations, 50 Yale Law Journal 1088 [1941]).

With regard to the issue of whether or not the DFA has the legal standing to
file the present petition, and whether or not petitioner has regarded the basic
rule that certiorari can be availed of only when there is no appeal nor plain,
speedy and adequate remedy in the ordinary course of law, we hold both in
the affirmative.

"In the Philippines, the practice is for the foreign government or the
international organization to first secure an executive endorsement of its
claim of sovereign or diplomatic immunity. But how the Philippine Foreign
Office conveys its endorsement to the courts varies. In International Catholic
Migration Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of
Foreign Affairs just sent a letter directly to the Secretary of Labor and
Employment, informing the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World Health Organization
vs. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the
U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor
General to make, in behalf of the Commander of the United States Naval
Base at Olongapo City, Zambales, a 'suggestion' to respondent Judge. The
Solicitor General embodied the 'suggestion' in a manifestation and
memorandum as amicus curiae.

The DFA's function includes, among its other mandates, the determination of
persons and institutions covered by diplomatic immunities, a determination
which, when challenged, entitles it to seek relief from the court so as not to

"In the case at bench, the Department of Foreign Affairs, through the Office
of Legal Affairs moved with this Court to be allowed to intervene on the side
of petitioner. The Court allowed the said Department to file its memorandum

The service contracts referred to by private respondent have not been

intended by the ADB for profit or gain but are official acts over which a waiver
of immunity would not attach.

in support of petitioner's claim of sovereign immunity.

"In some cases, the defense of sovereign immunity was submitted directly to
the local courts by the respondents through their private counsels (Raquiza
vs. Bradford, 75 Phil. 50 [1945]; Miquiabas vs. Philippine-Ryukyus
Command, 80 Phil. 262 [1948]; United States of America vs. Guinto, 182
SCRA 644 [1990] and companion cases). In cases where the foreign states
bypass the Foreign Office, the courts can inquire into the facts and make
their own determination as to the nature of the acts and transactions
involved."[20]
Relative to the propriety of the extraordinary remedy of certiorari, the Court
has, under special circumstances, so allowed and entertained such a petition
when (a) the questioned order or decision is issued in excess of or without
jurisdiction,[21] or (b) where the order or decision is a patent nullity,[22]
which, verily, are the circumstances that can be said to obtain in the present
case. When an adjudicator is devoid of jurisdiction on a matter before him,
his action that assumes otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the decision of
the Labor Arbiter, dated 31 August 1993 is VACATED for being NULL AND
VOID. The temporary restraining order issued by this Court on 07 April 1994
is hereby made permanent. No costs.
SO ORDERED.
Bellosillo, Kapunan, and Hermosisima, Jr., JJ., concur.
Padilla, (Chairman), J., no part.

Armelo J. Lamayo (respondent) began working for Negros Metal Corporation

(petitioner or the company) in September 1999 as a machinist.
Sometime in May 2002, while respondent was at the companys foundry
grinding some tools he was using, William Uy, Sr. (Uy), company manager,
called his attention why he was using the grinder there to which he replied
that since the machine there was bigger, he would finish his work faster.
Respondents explanation was found unsatisfactory, hence, he was, via
memorandum, charged of loitering and warned.1 Taking the warning as a
three-day suspension as penalized under company rules, respondent
reported for work after three days, only to be meted with another 10-day
suspension2 from May 30 to June 10, 2002, for allegedly failing to sign the
memorandum suspending him earlier.
After serving the second suspension, respondent reported for work on June
11, 2002 but was informed by Uy that his services had been terminated and
that he should draft his resignation letter, drawing respondent to file on June
17, 2002 a complaint3 for illegal dismissal.
In lieu of a position paper, petitioner submitted a Manifestation 4 contending
that the complaint should be dismissed because the Labor Arbiter had no
jurisdiction over it since, under their Collective Bargaining Agreement 5 (CBA),
such matters must first be brought before the companys grievance
machinery.
By Decision6 of December 29, 2004, the Labor Arbiter, brushing aside
petitioners position, held that respondent was illegally dismissed. The
dispositive portion of the said Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:

G.R. No. 186557

August 25, 2010

NEGROS METAL CORPORATION, Petitioner,

vs.
ARMELO J. LAMAYO, Respondent.
DECISION
CARPIO MORALES, J.:

1. DECLARING that complainant was illegally dismissed by

respondents;
2. ORDERING respondent to pay complainant the total amount of
P178,978.48 representing payment for separation pay, back wages
and 13th month pay, plus 10% thereof as attorneys fees in the
amount of P17,897.85, or in the total amount of
ONE HUNDRED NINETY SIX THOUSAND EIGHTH HUNDRED SEVENTY
SIX PESOS & 33/100 (P196,876.33) the same to be deposited with the
Cashier of this Office, within ten (10) calendar days from receipt of this
Decision.

On petitioners appeal, the National Labor Relations Commission (NLRC), by

Resolution7 of March 30, 2006, set aside the ruling of, and remanded the
case to, the Labor Arbiter for disposition based on the companys grievance
procedure. It held that based on a letter of the company union president
Arturo Ronquillo (Ronquillo), respondent invoked the CBA provision on
grievance procedure. Respondents Motion for Reconsideration was denied
by the NLRC by Resolution8 of June 27, 2006. He thereupon appealed to the
Court of Appeals.
By Decision9 of March 25, 2008, the appellate court set aside the NLRC
Resolutions and reinstated the Labor Arbiters Decision. It held that the Labor
Arbiter had jurisdiction to hear the complaint; that as respondents dismissal
did not proceed from the parties interpretation of or implementation of the
CBA, it is not covered by the grievance machinery procedure; that the laws
and rules governing illegal dismissal are not to be found in the parties CBA
but in the labor statutes, hence, the Labor Arbiter had jurisdiction; and that
although the option to go through the grievance machinery was stated in
Ronquillos letter10 to petitioner, respondent denied having made that option
as he had ceased to be a member of the union, as evidenced by a March 20,
2001 Certification11 of the unions past president Alex Sanio that he had
resigned effective March 18, 2001. The appellate court went on to hold that,
at that point, it was too late to direct the parties to go through the grievance
machinery.
In holding that respondent was illegally dismissed, the appellate court noted
that he was not allowed to go back to work after serving two suspensions,
without affording him the requisite notice and hearing; and that respondents
failure to seek reinstatement did not negate his claim for illegal dismissal,
there being nothing wrong in opting for separation pay in lieu of
reinstatement.
Petitioners motion for reconsideration having been denied by Resolution 12 of
January 21, 2009, it interposed the present petition for review on certiorari,
maintaining that the grievance machinery procedure should have been
followed first before respondents complaint for illegal dismissal could be
given due course.
The petition fails.
Articles 217, 261, and 262 of the Labor Code outline the jurisdiction of labor
arbiters and voluntary arbitrators as follows:
Art. 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except
as otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days

after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over
all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements. (emphasis and underscoring supplied)
xxxx
Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators.
- The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have
original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the

Collective Bargaining Agreement and those arising from the

interpretation or enforcement of company personnel policies referred to
in the immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as grievances
under the Collective Bargaining Agreement. For purposes of this article,
gross violations of Collective Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with the economic provisions of such
agreement.
The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement. (emphasis and
underscoring supplied)
ART. 262. Jurisdiction over other labor disputes. - The Voluntary Arbitrator
or panel of Voluntary Arbitrators, upon agreement of the parties, shall
also hear and decide all other labor disputes including unfair labor
practices and bargaining deadlocks. (emphasis and underscoring supplied)
Under Art. 217, it is clear that a labor arbiter has original and exclusive
jurisdiction over termination disputes. On the other hand, under Article 261, a
voluntary arbitrator has original and exclusive jurisdiction over grievances
arising from the interpretation or enforcement of company policies.
As a general rule then, termination disputes should be brought before a labor
arbiter, except when the parties, under Art. 262, unmistakably express that
they agree to submit the same to voluntary arbitration. 13

grievance is defined as any disagreement between the UNION and the

EMPLOYER or between a worker or group of workers on one hand and
the EMPLOYER on the one hand as to the application and interpretation
of any of the provisions of this contract. Other matters subject of
collective bargaining or regulated by existing labor laws shall not be
considered as grievances. (emphasis and underscoring supplied)
Even assuming, however, that the suspension of an employee may be
considered as a "disagreement" which bears on the "application and
interpretation of any of the provisions" of the CBA, respondent could not have
bound himself to bring the matter of his suspension to grievance procedure
or voluntary arbitration in light of the documented fact that he had resigned
from the union more than a year before his suspension, not to mention the
fact that he denied having a hand in the preparation of the union president
Ronquillos letter invoking the grievance procedure.1avvphi1 In fine, the labor
tribunal had original and exclusive jurisdiction over respondents complaint
for illegal dismissal.
On the merits, as did the appellate court, the Court sustains the Labor
Arbiters ruling that respondent was illegally dismissed absent a showing that
he was accorded due process when he was summarily terminated. The
Court is not a trier of facts. It is not tasked to review the evidence on record,
documentary and testimonial, and reassess the probative weight thereof,
especially in view of the well-entrenched rule that findings of fact of
administrative officials, such as labor arbiters, who have acquired expertise
on account of their specialized jurisdiction are accorded by the courts not
only respect but, most often, with finality, particularly when affirmed on
appeal.
WHEREFORE, the petition is DENIED.
SO ORDERED.

In the present case, the CBA provision on grievance machinery being

invoked by petitioner does not expressly state that termination disputes are
included in the ambit of what may be brought before the companys
grievance machinery. Thus, the pertinent provision in the parties CBA reads:

CONCHITA CARPIO MORALES

G.R. No. 101875 July 14, 1995

Article IV
GRIEVANCE MACHINERY
Section 1. The parties hereto agree on principle that all disputes between
labor and management may be settled through friendly negotiations that the
parties have the same interest in the continuity of work until all points in
dispute shall have been discussed and settled. x x x For this purpose, a

CASIANO A. NAVARRO III, petitioner,

vs.
HON. ISRAEL D. DAMASCO, in his capacity as VOLUNTARY
ARBITRATOR, and BUSCO SUGAR MILLING CO., INC., respondents.

QUIASON, J.:

on fellow employee, with a penalty of dismissal.

This is a petition for certiorari to reverse the Decision dated August 16, 1991
of the Voluntary Arbitrator, respondent Israel D. Damasco, declaring as valid
the separation from employment of petitioner.

2. Immoral conduct within company premises, regardless of

whether or not committed during working time, punishable by
reprimand to dismissal, depending on the prejudice caused
by such act to the company.

We dismiss the petition.

I
Petitioner was employed as typist of private respondent at its plant in
Quezon, Bukidnon.
At about 5:00 P.M. of November 27, 1990, petitioner went to visit Mercy
Baylas, a co-employee, at the ladies' dormitory inside the compound of
private respondent. Upon seeing petitioner, Baylas hid behind the divider at
the reception room. Rosemarie Basa and Isabel Beleno, co-boarders of
Baylas, told petitioner that Baylas was not at the dormitory and advised him
to stop courting her because she had no feelings towards him. Afterwards,
the two left leaving petitioner alone in the room. When he peeped behind the
divider, he saw Baylas, who stood up without answering his greetings and
ran towards her room. He followed, and after taking hold of her left hand,
pulled her towards him. The force caused her to fall on the floor. He then
placed himself on top of her. She resisted and futilely struggled to free herself
from his grasp. Sonia Armada, the dormitory housekeeper, responded to
Baylas' shouts for help. Armada saw petitioner embracing and kissing
Baylas. She tried to separate petitioner from Baylas but to no avail. So she
went outside and asked Basa and Beleno to help Baylas. She also asked the
help of Edmundo Subong.
Basa and Beleno tried to pull petitioner away from Baylas, but it was Subong
who was able to free Baylas from petitioner.
According to the medical report issued by Dr. Letecia P. Maraat, Baylas
complained of pains on her shoulder and left foot.
On December 5, 1990, petitioner was informed of the complaint against him
and was placed under preventive suspension. Nolito S. Densing, Jr. was
instructed to investigate the incident. In his report dated December 26, 1990,
Densing recommended that the maximum penalty be meted out against
petitioner. On January 5, 1991, petitioner was dismissed from the service for
having violated paragraph 3.B (Conduct and Behavior) of the Code of
Employee Discipline, which provides:
1. Inflicting or attempting to inflict bodily injury, in any form,

3. Improper conduct and acts of gross discourtesy or

disrespect to fellow employees at any time within the
company premises punishable by reprimand to dismissal,
depending on the gravity of the offense.
4. Knowingly giving false or untruthful statements or
concealing material facts in an investigation conducted by
authorized representative of the company, punishable by
dismissal ( Rollo, pp. 47-48).
On March 18, 1991, the President of the Mindanao Sugar Workers Union, for
and in behalf of petitioner, and Jaime J. Javier, Personnel Officer of private
respondent, agreed to submit the case of petitioner to voluntary arbitration.
At the initial conference on March 27, 1991, petitioner, represented by his
counsel, agreed to limit the issues to be submitted to the Voluntary Arbitrator
to the following:
1. Whether or not the grievance procedure in the CBA for
bringing a case before the Voluntary Arbitrator had been
followed;
2. Whether petitioner's dismissal was legal; and
3. Who was the complainant insofar as the grievance
procedure under the CBA was concerned ( Rollo, p. 147).
The parties also agreed to submit the case for decision based on their
position papers.
On August 16, 1991, a decision was rendered by the Voluntary Arbitrator
dismissing petitioner from his employment and holding that private
respondent did not violate the provisions of the grievance procedure under
the Collective Bargaining Agreement.
Not satisfied with the decision, petitioner filed the instant petition.

II
According to petitioner's version, Baylas was his girlfriend, whom he visited
at the ladies' dormitory in the afternoon of November 27, 1990. At the
dormitory, petitioner saw Rosemarie Basa who told him that Baylas was not
around. To prove that Basa was lying, he peeped behind the divider and saw
Baylas hiding there. When Baylas ran towards her room, petitioner followed
her. While running, Baylas lost her balance and fell down. However,
petitioner got hold of her to prevent her from hitting the floor and to help her
to her feet. He denied having kissed and embraced her. He admitted that
Subong arrived and pulled him away from Baylas. He also admitted that he
voluntarily surrendered to the security guards.
III
Petitioner contends that the grievance procedure provided for in the
Collective Bargaining Agreement was not followed; hence, the Voluntary
Arbitrator exceeded his authority when he took cognizance of the labor case.
Section 2, Article X of the Collective Bargaining Agreement specifies the
instances when the grievance machinery may be availed of, thus:
Any protest or misunderstanding concerning any ruling,
practice or working conditions in the Company, or any
dispute arising as to the meaning, application or claim of
violation of any provision of this Agreement or any complaint
that any employee may have against the COMPANY shall
constitute a grievance ( Rollo, p. 27).
The instant case is not a grievance that must be submitted to the grievance
machinery. What are subject of the grievance procedure for adjustment and
resolution are grievances arising from the interpretation or implementation of
the collective bargaining agreement (Labor Code of the Philippines, as
amended by R.A. No. 6715, Art. 260).
The acts of petitioner involved a violation of the Code of Employee Discipline,
particularly the provision penalizing the immoral conduct of employees.
Consequently, there was no justification for petitioner to invoke the grievance
machinery provisions of the Collective Bargaining Agreement (Auxilio, Jr. v.
National Labor Relations Commission, 188 SCRA 263 [1990]).
The case of petitioner was submitted to voluntary arbitration by agreement of
the president of the labor union to which petitioner belongs, and his
employer, through its personnel officer. Petitioner himself voluntarily
submitted to the jurisdiction of the Voluntary Arbitrator when he, through his

counsel, filed his position paper with the Voluntary Arbitrator and even
submitted additional documentary evidence. In addition thereto, during the
initial conference on March 27, 1991, the parties manifested that they were
not questioning the authority of the Voluntary Arbitrator.
It is the policy of the State to promote voluntary arbitration as a mode of
settling labor disputes (Manguiat, Mechanisms of Voluntary Arbitration in
Labor Disputes 2-6 [1978]).
Petitioner claims that he was denied due process of law because no hearing
was held and he was not given an opportunity to cross-examine the
witnesses.
We held in Stayfast Philippines Corp. v. National Labor Relation Commission,
218 SCRA 596 (1993) that:
The essence of due process is simply an opportunity to be
heard, or as applied to administrative proceedings, an
opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of.
A formal or trial-type hearing is not at all times and in all
instances essential. The requirements are satisfied where
the parties are fair and reasonable opportunity to explain
their side of the controversy at hand. What is frowned upon
is the absolute lack of notice and hearing. . . .
(at p. 601).
Concerning the allegation that petitioner was not allowed to cross-examine
the witnesses, the record shows that the parties had agreed not to crossexamine their witnesses anymore.
Petitioner alleges that the quarrel between Baylas and him was a purely
private affair. We do not agree with this contention. It will be noted that not
only did the incident happen within the company premises, i.e. the ladies'
dormitory which was located inside the plant site, but both of them are
employees of private respondent. Management would then be at the mercy
of its employees if it cannot enforce discipline within company premises
solely because the quarrel is purely personal matter. The harassment of an
employee by a co-employee within the company premises even after office
hours is a work-related matter considering that the peace of the company is
thereby affected. The Code of Employee Discipline is very clear that immoral
conduct "within the company premises regardless of whether or not [it is]
committed during working time" is punishable.

The pretext of petitioner that he was merely helping Baylas is belied by the
eyewitnesses. Petitioner admitted that it took Subong to pull him away from
Baylas. His alleged act of chivalry is nothing more than a chance to gratify
his amorous feelings.

should not be dismissed for having been absent without official leave.
In her letter,7 Axalan claimed that she held online classes while attending the
seminar. She explained that she was under the impression that faculty
members would not be marked absent even if they were not physically
present in the classroom as long as they conducted online classes.

WHEREFORE, the Decision of the respondent Voluntary Arbitrator is

AFFIRMED. SO ORDERED.

G.R. No. 181146

In reply,8 Dean Celestial relayed to Axalan the message of the university

president that no administrative charge would be filed if Axalan would admit
having been absent without official leave and write a letter of apology
seeking forgiveness.

January 26, 2011

THE UNIVERSITY OF THE IMMACULATE CONCEPTION and MO. MARIA

ASSUMPTA DAVID, RVM, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and TEODORA AXALAN,
Respondents.

From 28 January to 3 February 2003, Axalan attended a seminar in Baguio

City on advanced paralegal training. Dean Celestial wrote Axalan informing
her that her participation in the paralegal seminar in Baguio City was the
subject of a second AWOL charge.11 The dean asked Axalan to explain in
writing why no disciplinary action should be taken against her.12

DECISION
CARPIO, J.:
The Case
1

Convinced that she could not be deemed absent since she held online
classes, Axalan opted not to write the letter of admission and contrition the
university president requested.9 The Dean wrote Axalan that the university
president had created an ad hoc grievance committee to investigate the
AWOL charge.10

This is a petition for review on certiorari of the 13 December 2007 Decision

of the Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August
2005 and the 24 October 2005 Resolutions3 of the National Labor Relations
Commission in NLRC CA No. M-008333-2005, which sustained the 11
October 2004 Decision4 of the Labor Arbiter in RAB-11-12-01187-03 ordering
petitioner to reinstate private respondent to her former position without loss
of seniority rights and to pay her backwages, salary differentials, damages,
and attorneys fees.
The Facts
Petitioner University of the Immaculate Conception is a private educational
institution located in Davao City. Private respondent Teodora C. Axalan is a
regular faculty member in the university holding the position of Associate
Professor II. Aside from being a regular faculty member, Axalan is the elected
president of the employees union.5
From 18 November to 22 November 2002, Axalan attended a seminar in
Quezon City on website development. Axalan then received a memorandum 6
from Dean Maria Rosa Celestial asking her to explain in writing why she

In her letter,13 Axalan explained that before going to Baguio City for the
seminar, she sought the approval of Vice-President for Academics Alicia
Sayson. In a letter,14 VP Sayson denied having approved Axalans application
for official leave. The VP stated in her letter that it was the university
president, Maria Assumpta David, who must approve the application.
After conducting hearings and receiving evidence, the ad hoc grievance
committee found Axalan to have incurred AWOL on both instances and
recommended that Axalan be suspended without pay for six months on each
AWOL charge.15 The university president approved the committees
recommendation.
The university president then wrote Axalan informing her that she incurred
absences without official leave when she attended the seminars on website
development in Quezon City and on advanced paralegal training in Baguio
City on 18-22 November 2002 and on 28 January-3 February 2003,
respectively. In the same letter, the university president informed Axalan that
the total penalty of one-year suspension without pay for both AWOL charges
would be effective immediately.16
On 1 December 2003, Axalan filed a complaint17 against the university for

illegal suspension, constructive dismissal, reinstatement with backwages,

and unfair labor practice with prayer for damages and attorneys fees.

2004 upon the expiration of the one-year suspension.

The university moved to dismiss the complaint on the ground that the Labor
Arbiter had no jurisdiction over the subject matter of the complaint. The
university maintained that jurisdiction lay in the voluntary arbitrator.18
In denying the universitys motion to dismiss, the Labor Arbiter held that there
being no existing collective bargaining agreement between the parties, no
grievance machinery was constituted, which barred resort to voluntary
arbitration.19
Meanwhile, upon the expiration of the one-year suspension, Axalan promptly
resumed teaching at the university on 1 October 2004.1wphi1
The Ruling of the Labor Arbiter
On 11 October 2004, the Labor Arbiter rendered a Decision holding that the
suspension of Axalan amounted to constructive dismissal entitling her to
reinstatement and payment of backwages, salary differentials, damages, and
attorneys fees, thus:
WHEREFORE, premises laid, judgment is hereby rendered declaring that the
suspension of complainant amounted to constructive dismissal, and as such,
she is entitled to reinstatement and payment of her full backwages reckoned
from the time it was withheld from her up to the time of reinstatement.
Accordingly, Respondent University of the Immaculate Conception acting
through its President, Respondent Mo. Maria Assumpta David, RVM, is
directed to reinstate the complainant to her former position without loss of
seniority rights and to pay her the sum of Five Hundred Forty Three
Thousand Four Hundred Fifty Two Pesos (P543,452.00) representing her
backwages, salary differentials (diminution) and damages plus ten percent
(10%) thereof as attorneys fees or the sum of P54,345.20.

The Ruling of the NLRC

The NLRC held that the Labor Arbiter, not the voluntary arbitrator, had
jurisdiction as the controversy did not pertain to a dispute involving the union
and the university. In its 15 August 2005 Resolution, the NLRC ruled:
WHEREFORE, for want of merit, the instant appeal is hereby DISMISSED.
SO ORDERED.21
NLRC Commissioner Jovito C. Cagaanan, in his dissenting opinion, 22
stressed that the parties previously agreed to submit the dispute to voluntary
arbitration, which cast doubt on the jurisdiction of the Labor Arbiter.
The university moved for reconsideration of the NLRC Resolution. But the
NLRC, in its 24 October 2005 Resolution,23 denied the motion for
reconsideration for lack of merit. The university challenged both Resolutions
of the NLRC before the Court of Appeals via a petition for certiorari.
The Ruling of the Court of Appeals
The Court of Appeals affirmed the findings of the Labor Arbiter and the
NLRC. In its 13 December 2007 Decision, the Court of Appeals dismissed
the universitys petition for certiorari, thus:

The Respondent UIC and its President are hereby directed to inform this
Office of the mode of compliance it will avail itself by reason of the Order of
reinstatement.

We find no grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of public respondent in affirming the Labor Arbiter.
Respondent Commissions ruling finds more than ample support in statutory
and case law. It cannot, therefore, be characterized as whimsical, arbitrary,
or oppressive.

SO ORDERED.20

WHEREFORE, the instant petition is hereby DISMISSED.

The university appealed the Labor Arbiters Decision to the National Labor
Relations Commission (NLRC). It challenged the jurisdiction of the Labor
Arbiter insisting that the voluntary arbitrator had jurisdiction over the labor
dispute. The university pointed out that when the Labor Arbiter rendered his
Decision on 11 October 2004, Axalan had returned to work on 1 October

SO ORDERED.24
Dissatisfied, the university filed in this Court the instant petition for review on
certiorari.

income. Axalan maintains that the award of damages was just proper
considering that her suspension was without basis and amounted to unfair
labor practice.
The Issues
The issues for resolution are (1) whether the voluntary arbitrator had
jurisdiction over the labor dispute; (2) whether Axalan was constructively
dismissed; and (3) whether the Labor Arbiters computation of backwages,
damages, and attorneys fees was correct.
The Courts Ruling
The petition is impressed with merit.
The university contends that based on the transcript of stenographic notes
from the ad hoc grievance committee hearing held on 20 February 2003, the
parties agreed that the voluntary arbitrator would have jurisdiction over the
labor dispute. The university maintains that Axalans suspension does not
constitute constructive dismissal and that the Labor Arbiters decision treating
it as such is an attempt to make it appear that the voluntary arbitrator has no
jurisdiction. The university points out that for constructive dismissal to exist,
there must be severance of employment by the employee because of
unbearable act of discrimination, insensibility, or disdain on the part of the
employer leaving the employee with no choice but to forego continued
employment. The university claims that on the contrary, Axalan eagerly
reported for work as soon as the one-year suspension was over. The
university further argues that assuming Axalan is entitled to backwages, it
should have been based on Axalans average gross monthly income at the
time she was suspended in SY2003-2004, which was P14,145.00, not on her
average gross monthly income in SY2002-2003, which was P18,502.00.
Private respondent Axalan counters that the university raises the same
factual issues already decided unanimously by the Labor Arbiter, the NLRC,
and the Court of Appeals. On the issue of jurisdiction, Axalan stresses that
the present labor case, being a complaint for constructive dismissal and
unfair labor practice, is within the jurisdiction of the Labor Arbiter. On the
finding of constructive dismissal, Axalan points out that the Labor Arbiters
factual finding of constructive dismissal, when affirmed by the NLRC and the
Court of Appeals, binds this Court. Axalan claims that both AWOL charges
against her were without basis and were only a form of harassment
amounting to unfair labor practice. As to the computation of the award of
backwages, Axalan points out that her average gross monthly income in
SY2002-2003 was reduced in SY2003-2004 precisely because she was not
given an overload of two extra assignments resulting in the diminution of her

Well-settled is the rule that the jurisdiction of this Court in a petition for review
on certiorari is limited to reviewing only errors of law, not of fact, unless the
factual findings being assailed are not supported by the evidence on record
or the impugned judgment is based on a misapprehension of facts. Patently
erroneous findings of the Labor Arbiter, even when affirmed by the NLRC and
the Court of Appeals, are not binding on this Court. 25
As to the first issue, Article 217 of the Labor Code states that unfair labor
practices and termination disputes fall within the original and exclusive
jurisdiction of the Labor Arbiter:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except
as otherwise provided under this Code, the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide x x x the following
cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
x x x x (Emphasis supplied)
Article 262 of the same Code provides the exception:
ART. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or
panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear
and decide all other labor disputes including unfair labor practices and
bargaining deadlocks. (Emphasis supplied)
In San Miguel Corp. v. NLRC,26 the Court ruled that for the exception to
apply, there must be agreement between the parties clearly conferring
jurisdiction to the voluntary arbitrator. Such agreement may be stipulated in a
collective bargaining agreement. However, in the absence of a collective
bargaining agreement, it is enough that there is evidence on record showing
the parties have agreed to resort to voluntary arbitration. 27
As can be gleaned from the transcript of stenographic notes of the
administrative hearing held on 20 February 2003, the parties in this case
clearly agreed to resort to voluntary arbitration. To quote the exact words of
the parties counsels:

Atty. Dante Sandiego: x x x So, are we to understand that the decision of the
President shall be without prejudice to the right of the employees to contest
the validity or legality of his dismissal or of the disciplinary action imposed
upon him by asking for voluntary arbitration under the Labor Code or when
applicable availing himself of the grievance machinery under the Labor Code
which ends in voluntary arbitration. That will be the steps that we will have to
follow.

Note that on the first AWOL incident, the university even offered to drop the
AWOL charge against Axalan if she would only write a letter of contrition. But
Axalan adamantly refused knowing fully well that the administrative case
would take its course leading to possible sanctions. She cannot now be
heard that the imposition of the penalty of six-month suspension without pay
for each AWOL charge is unreasonable. We are convinced that Axalan was
validly suspended for cause and in accord with procedural due process.

Atty. Sabino Padilla, Jr.: Yes, agreed.28

Thus, the Labor Arbiter should have immediately disposed of the complaint
and referred the same to the voluntary arbitrator when the university moved
to dismiss the complaint for lack of jurisdiction.
No less than Section 3, Article XIII of the Constitution declares as state
policy the preferential use of voluntary modes in settling disputes, to wit:

The Court recognizes the right of employers to discipline its employees for
serious violations of company rules after affording the latter due process and
if the evidence warrants. The university, after affording Axalan due process
and finding her guilty of incurring AWOL on two separate occasions, acted
well within the bounds of labor laws in imposing the penalty of six-month
suspension without pay for each incidence of AWOL.

Sec. 3. x x x x The State shall promote the principle of shared responsibility

between workers and employers and the preferential use of voluntary
modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace. (Emphasis supplied)

As a learning institution, the university cannot be expected to take lightly

absences without official leave among its employees, more so among its
faculty members even if they happen to be union officers. To do so would
send the wrong signal to the studentry and the rest of its teaching staff that
irresponsibility is widely tolerated in the academe.

As to the second issue, constructive dismissal occurs when there is

cessation of work because continued employment is rendered impossible,
unreasonable, or unlikely as when there is a demotion in rank or diminution
in pay or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee leaving the latter with no other option
but to quit.29
In this case however, there was no cessation of employment relations
between the parties.1wphi1 It is unrefuted that Axalan promptly resumed
teaching at the university right after the expiration of the suspension period.
In other words, Axalan never quit. Hence, Axalan cannot claim that she was
left with no choice but to quit, a crucial element in a finding of constructive
dismissal. Thus, Axalan cannot be deemed to have been constructively
dismissed.
Significantly, at the time the Labor Arbiter rendered his Decision on 11
October 2004, Axalan had already returned to her teaching job at the
university on 1 October 2004. The Labor Arbiters Decision ordering the
reinstatement of Axalan, who at the time had already returned to work, is
thus absurd.
There being no constructive dismissal, there is no legal basis for the Labor
Arbiters order of reinstatement as well as payment of backwages, salary
differentials, damages, and attorneys fees.30 Thus, the third issue raised in
the petition is now moot.

The law protects both the welfare of employees and the prerogatives of
management.31 Courts will not interfere with prerogatives of management on
the discipline of employees, as long as they do not violate labor laws,
collective bargaining agreements if any, and general principles of fairness
and justice.32
WHEREFORE, we GRANT the petition. The 13 December 2007 Decision of the
Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24
October 2005 Resolutions of the National Labor Relations Commission in NLRC CA
No. M-008333-2005, which sustained the 11 October 2004 Decision of the Labor
Arbiter in RAB-11-12-01187-03, is SET ASIDE.No pronouncement as to costs.

SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
G.R. No. 89894 January 3, 1997
M. RAMIREZ INDUSTRIES and/or MANNY RAMIREZ, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT AND CAROLYN
ALFONSO, WILLIAM DE LA TORRE, RODULFO CANDIA, CLARISSA HERMOSA, GINA
CABIGAS, ELIZABETH, ENDRINA, ORLANDO SEGUERRA, RODEO SEGUERRA,
JOSELITO DE LA TORRE, MA. THERESA DE LA RIARTE, LUISA DE LA RIARTE, MARIO
MANCAO, REX DEIPARINE, PAULINO VILLAVER, ROGELIO PARAN, LIJCILA
CAEZARES, ROBERTA DELA TORRE, JUANITA DELA TORRE, SUSAN VILLAVER,

EDWIN BACUS, DIORES LABAJO, ROLANDO REMULINO, ELVIS MAHIPOS, RAULITO

PATATAG, OFELIA VILLAVER, EMELIA MANCAO, EDDIE ROMARES, FLORIAN DE
OCAMPO, LEONARDO VILLARTA, GUADALUPE BELLEZA, MA. THERESA PACAA,
TOMASA MANCIA, IRENE MANCIA, JOSE TOROY, JR., MARIBEL BULABUS, CABRIEL
REPUNO, RODRIGO SEGUERRA, ALEX HERUELA, EMIE BARCOMA, FRANCISCO
NEBRIA, JR., ANICITA DELIMA, CATHERINE DE LA VICTORIA, RIZALINA CABALAN,
TERESITO BONTILAO, ALLN ABELLA, FLORIANA ROSKA, JUSTINO MANACIO,
RIZALINO LABAJO, DENNI LABAJO, ARTURO FERNANDEZ, ROGELIA BELLEZA,
DOMINGA CANONO, JANETH FAJARDO, RAQUELIZA BACUS, FELIPE BERENGUEL,
JOELITO REPUNO, RAYMUNDO CAPALA, RONIE ZAFRA, ROD DELIMA, BERNA
OBEJERO, LUDY RAVANEZ, MELIT LEE, LEONORA RICO, PERIGRINA. TIROL, J.
GONDABAN, FRANCISCO LARIOSA, EMILITO SENSONTIC, NAPOLEON DABLO, JR.,
TERESITA PALANGCO, HANORIA ABALLERO, LEOPOLDO LEBRADILLA, ROMEO
GENGUYON, MELVIN JERALI, ERNING ZAFRA, EDNA ABAD, MIRALUNA TECSON,
LORNA DEL ROSARIO, WILFREDO RIVERAL, LYDIA FILOMENO, SUSANA MEREDORAS,
NEMESIA CAMPO, JUDITHA BELLANA, MARVIN TOGONON, CONSTANTINO CAON,
BEATRIZ YLANAN, SANTIAGO DEIPARINE, TERESITA VERNAIZ REBECCA MERCADO,
ELIZABETH DELOS REYES, AILEEN LOPEZ, MANUELA BUCAO, WENCESLAO DELA
TORRE, RAMIL BACALSO, EDGAR ESPINA, RENATO BACALSO, FRANCISCO CEREO,
CARMELITO PAQUET, RICARDO SABELLANO, ENRIQUE GONZALES, JR., TEODULO
TARDIN, WILFREDO CANONO, EDWARD ABELLANA, SISMAR UFIL, TALANDRON
CORDING, PEPE CEREO, DARIO ZAFRA, FELICISIMA SEQUISNAR, JOVENCIO
BASALO, SULPICIO MALERONG, MERCEDITA RAVANES, MAXIMO ZAFRA, ELIZABETH
CABILES, NARCISO SADAYA, LEONILA ALFANTE, CARINA POLINGA, EDWIN ABISO,
DIOMEDES BARICUATRO, JUDITHO DEGUMA, FELIXBERTO BASALO, NELSON
BACALSO, CRISCENCIO ECHAVEZ, ACHILLES TELERON, JAIME JAVA, EDDIE
MURALEM, ROLANDO MEOZA, JORGE ABISO, MARISSA SELLOTE, MYRNA UBAS,
MATIAS ALFEREZ, ARLENE SELLORIA, CELESTINO ABELLAR, EDURIGES ABELLAR,
TEODORA VILLAMEA, ELENA VILLAMEA, NICOLAS ALIVO, HENRY DIOSMANO,
MARITES SABELLON, ROMEO NACARIO, CRESCENSIO ALFANTE, DIONISIO SEGUE,
FELIPA ALFERES, JUDY HERMIDA, MARCIAL VILARMEA, ALEJANDRO PANCHO,
JOSELITO MEOZA, OSWARD HILWANO, RANDY SELLORIA, HERACLEO RAVANES,
NELSON ORALDE, TEODORO ALFORQUE, BERNARDINO CARIZ, ZOSIMO SAZ, LUIS
OBATOG, SAMUEL CANIA, JOEL ABALO, ANDRES QUITARA, CRISPIN SABELLANO, BEN
ABARQUEZ, ROBERTO CANONEO, FEDILITO PARDILLO, MODESTO PAQUIT, RAMON
NATAD, JR., THOMAS ENGHOG, FELOMINA BACARRO, CHRISTINA MAACAP, PAZ
ALGOSO, LEO FERNANDEZ, LUISA CAVALIDA, ADELINA TUMULAC, ELESITO ABISO,
HELDITHA BARICUATRO, JULIE BARICUATRO, MA. SOCORRO CALLEDO, JUDITA
BASALO, ROGER BORJA, ELIZABETH PASIBUG, LIMBERTO ALLER, HIPOLITA
BACARRO, JOVITA ALLER, ADOLFO SAYSON, BRENDA BORJA, THELMA ALFORQUE,
JUVY REPOLLO, DARIO ALFORQUE, GINA ALICABO, WENONA REPOLLO, CHONA
ALFEREZ, VIRGINIA LABANG, FORTUNATA CRUDA, CRESCENCIA TAGALOG,
FRANCISCA BORJA, NESTOR BASALANG, DOMINADOR BASALAN, DANILO JUCOY,
ALEJANDRO HERMDA, CARMELITO TAPANGAN, ERLANDO SAGISMAR, RUFINO RAGA,
ELESIO MALARONG, SABINO BASALAN, CIRILO LAPUT, JOSE CABUSAS, BOYETTE
VILLAVER, CARFIL HAMILA, TEODOLO CAADA, PHILIP BONJOC, FLORDELINA
VILLAMOR, ELIZABETH SALOMON, MANUEL FERNANDEZ, ROY ABREA, FERNANDO
MUNALEM, NILA CAAS, ALFONSO CAROLINE, JANET SOLLANO, IREN RIVERA,
MUNDA BARICUATRO, VIVIAN REPUNTE, LORINDA OBINA, MARINO FRANZKIE,
NARCISA BADAYA, MERLINDA CAPIONESE, CENON CABArespondents.

MENDOZA, J.:
This is a petition for certiorari to set aside the orders of the Secretary of

Labor and Employment, dated May 12, 1989 and August 22, 1989, affirming
the order of the Director of the Regional Office No. VII of the Department of
Labor in Cebu City, granting the claims for salary differentials and emergency
cost of living allowances (ECOLAs) of private respondents in the total
amount of P430,901.75.
The facts are as follows:
Petitioner M. Ramirez Industries is a single proprietorship in Tungkop,
Minglanilla, Cebu. It is engaged in the manufacture of handmade rattan
baskets for export abroad, principally to Japan, and has in its employ from
400 to 500 employees. 1
On April 1, 1986, Carolyn Alfonso and 260 other employees filed a complaint
with the Regional Office No. VII of the Department of Labor in Cebu City,
alleging non-payment of minimum wage, living allowances and noncompliance with other labor standard laws against M. Ramirez Industries
and/or Manny Ramirez, its proprietor. 2
Accordingly, an inspection was conducted in the company premises on the
same day by Labor Standard Officer Juanito Yallosa. 3 After verifying the
allegations of the complaint, the case was docketed as LSED Case No. 02886. Meantime it appears that private respondents stopped working on April 8,
1986. 4
On April 11, 1986, petitioner filed an ex parte motion to dismiss the case
alleging voluntary desistance by private respondents. Attached to the motion
was a letter, signed by 215 employees, affirming their decision to desist from
proceeding with their claim against petitioner. 5
The motion was set for conference on May 7, 1986. Both petitioner and
private respondents were notified, 6 but only private respondents appeared.
Private respondents opposed the motion on the ground that they were not
signatories to the letter of affirmation supporting the motion to dismiss. 7
The Regional Director denied petitioner's motion in an order dated May 22,
1986, after finding that 90 per cent of the signatures in the letter were not
those of the complainants, 8 while complainants, whose signatures appeared
in the letters, had been deceived into signing the letters.
On June 11, 1986, petitioner filed a motion to remand the case to the
National Labor Relations Commission, contending that the matter was
outside the jurisdiction of the Regional Director. 9 Without acting on the
motion, the Regional Director on July 18, 1986 ordered petitioner to pay

private respondents the total amount of P430,901.75. The dispositive portion

of the order reads:
WHEREFORE, premises considered, respondent M.
RAMIREZ INDUSTRIES AND/OR MR. MANNY (MANUEL)
RAMIREZ is hereby ordered to pay the complainants claim
in the aggregate amount of FOUR HUNDRED THIRTY
THOUSAND NINE HUNDRED ONE AND 75/100
(P430,901.75), PHILIPPINE CURRENCY, within ten (10)
days from the receipt hereof, and distributed as follows:
Names of complainants who worked from January to April 8,
1986 with their corresponding differentials:
1. William de la Torre P1,748.00
2. Rodulfo Candia P1,702.00
3. Clarissa Hermosa P1,633.00
4. Gina Cabigas P1,702.00
5. Elizabeth Endrina P1,702.00
6. Orlando Seguerra P1,748.00
7. Rodeo Seguerra P1,672.00
8. Joselito de la Torre P1,540.00
9. Ma. Theresa de la Riarte P1,610.00
10. Luisa de la Riarte P1,628.00
11. Mario Mancao P1,540.00
12. Rex Deiparine P1,540.00
13. Paulino Villaver P1,540.00
14. Rogelio Paran P1,540.00
15. Lucila Caezares P1,633.00
16. Roberta dela Torre P1,633.00
17. Juanita dela Torre P1,633.00
18. Susan Villaver P1,628.00
19. Edwin Bacus P1,544.00
20. Diores Labajo P1,518.00
21. Rolando Remulino P1,738.00
22. Elvis Mahipos P1,738.00
23. Raulito Patatag P1,738.00
24. Ofelia Villaver P1,628.00
25. Emelia Mancao P1,628.00
26. Eddie Romares P1,518.00
27. Florian de Ocampo P1,518.00
28. Leonardo Villarta P1,496.00
29. Guadalupe Belleza P1,496.00
30. Ma. Theresa Pacaa P1,496.00
31. Tomasa Mancia P1,738.00
32. Irene Mancia P1,738.00
33. Jose Toroy, Jr. P1,496.00

34. Maribel Bulabus P1,73 8.00

35. Cabriel Repuno P1,564.00
36. Rodrigo Seguerra P1,518.00
37. Alex Heruela P1,288.00
38. Emie Barcoma P1,232.00
39. Francisco Nebria, Jr. P1,771.00
40. Anicita Delima P1,702.00
41. Catherine de la Victoria P1,679.00
42. Rizalina Cabalan P1,679.00
43. Teresito Bontilao P1,679.00
44. Alln Abella P1,679.00
45. Floriana Roska P1,472.00
46. Justino Manacio P1,472.00
47. Rizalino Labajo P1,679.00
48. Denni Labajo P1,288.00
49. Arturo Femandez P1,587.00
50. Rogelia Belleza P1,587.00
51. Dominga Canono P1,628.00
52. Janeth Fajardo P1,472.00
53. Raqueliza Bacus P1,650.00
54. Felipe Berenguel P1,050.00
55. Joelito Repuno P1,311.00
56. Raymundo Capala P1,403.00
57. Ronie Zafra P1,610.00
58. Rod Delima P1,403.00
59. Berna Obejero P1,403.00
60. Ludy Ravanez P1,403.00
61. Melit Lee P1,541.00
62. Leonora Rico P1,495.00
63. Perigrina Tirol P1,587.00
64. J. Gondaban P1,541.00
65. Francisco Lariosa P1,564.00
66. Emilito Sensontic P1,564.00
67. Napoleon Dablo, Jr. P1,656.00
68. Teresita Palangco P1,748.00
69. Hanoria Caballero P1,748.00
70. Leopoldo Lebradilla P1,748.00
71. Romeo Genguyon P1,748.00
72. Melvin Jerali P1,748.00
73. Erning Zafra P1,748.00
74. Edna Abad P1,748.00
75. MiralunaTecson P1,748.00
76. Lorna del Rosario P1,541.00
77. WilfredoRiveral P1,679.00
78. Lydia Filomeno P1,541.00
79. Susana Meredoras P1,541.00

80. Nemesia Campo P1,541.00

81. Juditha Abellana P1,541.00
82. Marvin Togonon P1,541.00
83. Constantino Caon P1,541.00
84. Beatriz Ylanan P1,541.00
85. Santiago Deiparine P1,426.00
86. Teresita Vernaiz P1,426.00
87. Rebecca Mercado P1,380.00
88. Elizabeth delos Reyes P1,472.00
89. Aileen Lopez P1,426.00
90. Manuela Bucao P1,403.00
91. Wenceslao dela Torre P1,403.00
92. Ramil Bacalso P2,433.75
93. EdgarEspina P2,433.75
94. Renato Bacalso P2,433.75
95. Francisco Cereo P2,433.75
96. CarmelitoPaquet P2,433.75
97. Ricardo Sabellano P2,433.75
98. Enrique Gonzales, Jr. P2,433.75
99. TeoduloTardin P2,433.75
100. Wilfredo Canono P2,433.75
101. Edward Abellana P2,433.75
102. Sismar Ufil P2,433.75
103. Talandron Cording P2,433.75
104. Pepe Cereo P2,433.75
105. Dario Zafra P1,564.00
106. Felicisima Sequisnar P1,518.00
107. Jovencio Basalo P1,679.00
108. Sulpicio Malerong P1,679.00
109. Mercedita Ravanes P1,679.00
110. Maximo Zafra P1,679.00
111. Elizabeth Cabiles P1,472.00
112. Narciso Sadaya P1,633.00
113. Leonila Alfante P1,679.00
114. Carina Polinga P1,679.00
115. Edwin Abiso P1,679.00
116. Diomedes Baricuatro P1 ,679.00
117. Juditho Deguma P1,679.00
118. Felixberto Basalo P1,679.00
119. Nelson Bacalso P1,679.00
120. Criscencio Echavez P1,679.00
121. Achilles Teleron P1,679.00
122. Jaime Java P1,679.00
123. Eddie Muralem P1,679.00
124. Rolando Meoza P1,679.00
125. Jorge Abiso P1,679.00

126. Marissa Sellote 1,127.00

127. Myrna Ubas P1,518.00
128. Matias Alferez P1,633.00
129. Arlene Selloria P1,518.00
130. Celestino Abellar P1,656.00
131. Eduriges Abellar P1,656.00
132. Teodora Villamea P1,656.00
133. Elena Villamea P1,521.00
134. Nicolas Alivo P1,656.00
135. Henry Diosmano P1,656.00
136. Marites Sabellon P1,679.00
137. Romeo Nacario P1,656.00
138. Crescensio Alfante P1,633.00
139. Dionisio Segue P1,408.00
140. Felipa Alferes P1,679.00
141. Judy Hermida P1,679.00
142. Marcial Vilarmea P1,679.00
143. Alejandro Pancho P1,606.00
144. Joselito Meoza P1,679.00
145. Osward Hilwano P1,679.00
146. Randy Selloria P1,679.00
147. Heracleo Ravanes P1,679.00
148. Nelson Oralde P1,320.00
149. Teodoro Alforque P1,320.00
150. Bernardino Cariz P1,540.00
151. Zosimo Saz P1,320.00.
152. Luis Obatog P1,470.00
153. Samuel Cania P1,320.00
154. Joel Abalo P1,518.00
155. Andres Quitara P1,518.00
156. Crispin Sabellano P1,320.00
157. Ben Abarquez P1,320.00
158. Roberto Canoneo P1,617.00
159. Fedilito Pardillo P1,837.50
160. Modesto Paquit P1,606.00
161. Ramon Natad, Jr. P1,637.50
162. Thomas Enghog P1,690.50
163. Felomina Bacarro P1,837.50
164. Christina Maacap P1,837.50
165. Paz Algoso P1,666.00
166. Leo Femandez P1,666.00
167. Luisa Cavalida P1,666.00
168. AdelinaTumulac P1,666.00
169. Elesito Abiso P1,837.50
170. Helditha Baricuatro P1,837.50
171. Julie Baricuatro P1,837.50

172. Ma. Socorro Calledo P1,837.50

173. Judita Basalo P1,837.50
174. Roger Borja P1,462.50
175. Elizabeth Pasibug P1,690.50
176. Limberto Aller P1,690.50
177. Hipolita Bacarro P1,837.50
178. Jovita Aller P1,690.50
179. Adolfo Sayson P1,690.50
180. Brenda Borja P1,679.00
181. Thelma Alforque P1,788.50
182. Juvy Repollo P1,788.50
183. Dario Alforque P1,788.50
184. Gina Alicabo P1,788.50
185. Wenona Repollo P1,788.50
186. Chona Alferez P1,788.50
187. Virginia Labang P1,679.00
188. Fortunata Cruda P1,788.50
189. Crescencia Tagalog P1,679.00
190. FranciscaBorja P1,788.50
191. Nestor Basalang P1,788.50
192. Dominadar Basalan P1,788.50
193. DaniloJucoy P1,788.50
194. Alejandro Hermda P1,564.00
195. Carmelito Tapangan P1,564.00
196. Erlando Sagismar P1,564.00
197. Rufino Raga P1,564.00
198. Elesio Malarong P1,748.00
199. Sabino Basalan P1,633.00
200. Cirilo Laput P1,564.00
201. Jose Cabusas P1,035.00
202. Boyette Villaver P1,541.00
203. Carfil Hamila P1,541.00
204. Teodolo Caada P1,364.00
205. Philip Bonjoc P1,541.00
206. Flordelina Villamor P1,562.00
207. Elizabeth Salomon P1,633.00
208. Manuel Femandez P1,610.00
209. Roy Abrea P1,610.00
210. Fernando Munalem P1,679.00
211. Nila Caas P1,679.00
212. Alfonso Caroline P1,656.00
213. Janet Sollano P1,679.00
214. Iren Rivera P1,587.00
215. Munda Baricuatro P1,587.00
216. Vivian Repunte P1,587;00
217. Lorinda Obina P1,656.00

218. Marino Franzkie P1,564.00

219. Narcisa Badaya P1,656.00
220. Merlinda Capionese P1,725.00
221. Cenon Cabaa P1,702.00
222. Miraflor Paparon P1,610.00
223. Jorie del Carmen P1,650.00
224. Jerry Molbog P1,650.00
225. Cecenia Tapangan P1,650.00
226. Arsenia Cascua P1,650.00
227. Josefina Basalan P1,739.50
228. Elizabeth Sayson P1,739.50
229. Dorotea Panilag P1,739.50
230. Estelita Pasayloon P1,739.50
231. Claudeth Repollo P1,702.00
232. Pacita Alfeche P1,813.00
233. Maria Alfeche P1,813.00
234. Elizabeth Ubas P1,739.50
235. Leonida dela Cerna P1,666.00
236. Marina Adlawan P1,702.00
237. Mariaflor Abad P1,650.00
238. Marlyn Sasan P1,715.00
239. Jun Pacaa P1,837.50
240. Noel Gulfiano P1,837.50
241. Ruben Bacalso P1,837.50
242. Romeo del Carmen P1,837.50
243. Malou Alcantara P1,813.00
244. Ricardo Jayro P1,837.50
245. Camilo Labura P1,725.00
246. Jaime Tibimina Pl,837.50
247. Jerry Abalayan P1,837.50
248. Arnie Sanggotan P1,837.50
249. ConchitaGinodiala P1,298.00
250. Jose Bonghanoy P1,430.00
251. Leonardo Saz P1,650.00
252. Avelino Ragans P1,628.00
253. Arlene Sebial P1,298.00
254. Mario Franges P1,298.00
255. Francisco Bonghanoy P1,739.50
256. Marivic Navales P1,813.00
Names of Complainants who worked from February
to April 8, 1986 w/ their corresponding differentials:
1. Norma Lapoa P1,127.00
2. Indolencia Nuez P1,127.00
3. Carmelita Cabaero P1,127.00

4. Lenita Ubas P1,452.00

Complainant who worked from March to April, 18,
1986 with his corresponding differential:
1. Noel Caintic P136.00
SO ORDERED.

non-payment or underpayment of wages, overtime

compensation, separation pay and other benefits provided
by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and
maternity benefits;
4. Cases involving household services; and

10

Petitioner moved for a reconsideration of the Regional Director's order, which

was treated as an appeal to the Secretary of Labor and Employment. On
May 12, 1989, the Secretary issued an order affirming that of the Regional
Director. Petitioner filed a motion for reconsideration, but its motion was
denied on August 22, 1989. Hence this petition, assailing the foregoing
orders of the Secretary of Labor and Employment on the following grounds:
(1) The Regional Director has no jurisdiction to take
cognizance of this case;
(2) Petitioner was denied due process; and
(3) The order of the Regional Director does not state clearly
the facts and the law upon which it is based and is not
supported by substantial evidence.
With respect to the first ground, petitioner contends that the case falls within
the original and exclusive jurisdiction of the Labor Arbiter, citing in support of
its contention Art. 217 of the Labor Code, which, before its amendment by
R.A. No. 6715 on March 21, 1989, provided:
Art. 217. Jurisdiction of Labor Arbiter and the Commission.
(a) The Labor Arbiters shall have the original and exclusive
jurisdiction to hear and decide within thirty (30) working days
after submission of the case by the parties for decision, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of
work and other terms and conditions of employment,
3. All money claims of workers, including those based on

5. Cases arising from any violation of Article 265 of this

Code, including questions involving the legality of strikes and
lockouts.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
The contention has no merit. It is true that on April 1, 1986, when this case
was filed in the Regional Office, Labor Arbiters had original and exclusive
jurisdiction over money claims of laborers pursuant to Art. 217(a)(3) of the
Labor Code as quoted above. On March 3, 1987, however, President
Corazon C. Aquino, issued E.O. No. 111, conferring jurisdiction over money
claims of laborers on Regional Directors, concurrently with Labor Arbiters. In
Briad Agro Dev. Corp. v. Dela Serna, 11 this Court, after declaring E.O. No.
111 to be in the nature of acurative statute, gave it retroactive application with
respect to claims filed in 1982 and 1987. Then on March 21, 1989, R.A. No.
6715 was enacted, amending the Labor Code so that, so far as pertinent, it
now provides:
Art. 129. Recovery of wages, simple money claims and other
benefits. Upon complaint of any interested party, the
regional director of the Department of Labor and
Employment or any of the duly authorized hearing officers of
the Department is empowered, through summary
proceeding and after due notice, to hear and decide any
matter involving the recovery of wages and other claims and
benefits, including legal interest, owing to an employee or
person employed in domestic or household service or
househelper under this Code, arising from employeremployee relations: Provided, That such complaint does not
include a claim for reinstatement: Provided further, that the
aggregate money claims of each employee or househelper
does not exceed five thousand pesos (P5,000.00). The
regional director or hearing officer shall decide or resolve the
complaint within thirty (30) calendar days from the date of
the filing of the same. Any sum thus recovered on behalf of

any employee or househelper pursuant to this Article shall

be held in a special deposit account by, and shall be paid on
order of, the Secretary of Labor and Employment or the
regional director directly to the employee or househelper
concerned. . . .
Art. 217. Jurisdiction of Labor Arbiters and the Commission
(a) Except as otherwise provided under this Code the
Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural.
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,00000)
regardless or whether accompanied with a claim for
reinstatement. . . . (Emphasis added)
Like E.O. No. 111, this amendatory statute was also retroactively applied to
cases where the money claims of laborers were filed in 1980, 12
1986, 13 1987 14 and 1989, 15 i.e., long before the enactment of said statute on
March 21, 1989. As we have construed the above provisions of the Labor
Code, as thus amended, the Regional Director has the power to decide the
cases involving money claims of laborers where the following requisites
concur: (1) the claim must arise from employer-employee relationship; (2) the
claimant does not seek reinstatement; and (3) the aggregate money claim of
each employee does not exceed P5,000.00. 16 On the other hand, if the
individual claims of employees exceed P5,000.00 and, even if they do not, if
they include claims for reinstatement, the matter falls within the original and
exclusive jurisdiction of the Labor Arbiter.
It is not disputed in this case that at the time of the filing of the complaint,
private respondents were employees of petitioner and that said relationship
gave rise to private respondents' claim for wage differentials. Although no
longer employees of petitioner, private respondents do not seek
reinstatement and the aggregate money claim of each of them does not
exceed P5,000.00. As a matter of fact, the Regional Director's order shows
that the aggregate claim of each of the 261 employees involved does not
exceed P2,500.00.

Moreover, petitioner is estopped from questioning the jurisdiction of the

Regional Director, having previously invoked it by filing a motion to dismiss.
As has been held:
[A] party can not invoke the jurisdiction of a court to secure
affirmative relief against his opponent and, after obtaining or
failing to obtain such relief, repudiate or question that same
jurisdiction.
In the case just cited, by way of explaining the rule, it was
further said that the question whether the court had
jurisdiction either of the subject-matter of the action or of the
parties is barred from such conduct not because the
judgment or order of the court is valid and conclusive as an
adjudication, but for the reason that such a practice can not
be tolerated obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily
submitting a cause and encountering an adverse decision on
the merits, it is too late for the loser to question the
jurisdiction or power of the court. . . And in Littleton vs.
Burges, 16 Wyo, 58, the Court said that it is not right for a
party who has affirmed and invoked the jurisdiction of a court
in a particular matter to secure an affirmative relief, to
afterwards deny that same jurisdiction to escape a penalty. 17
The Regional Director may not be divested of jurisdiction over these claims,
unless the following elements are present:
(a) that the petitioner (employer) contests the findings of the
labor regulation officer and raises issues thereon;
(b) that in order to resolve such issues, there is need to
examine evidentiary matters; and
(c) that such matters are not verifiable in the normal course
of inspection. 18
These conditions do not exist in this case and, therefore, there can be no
question that the Regional Director had jurisdiction to decide the claims of
private respondents.
This brings us to the second ground for the present petition, namely, the
alleged denial of due process to petitioner. Petitioner claims that it was not
able to contest the findings of the Labor Standard Officer because it was not

furnished a copy of the inspection report containing the findings and because
instead of denying its motion to dismiss for lack of jurisdiction and thereafter
giving it a hearing, the Regional Director simply issued his questioned order.
As already stated, after petitioner had filed a motion to dismiss the case
based on the alleged desistance of the complainants, the Regional Office
called the parties to a conference, but only private respondents came.
Petitioner did not appear. After its motion was denied, the case was again set
for conciliation conference on June 18, 1989, but again petitioner did not
come, insisting instead on the remand of the case to the NLRC.
If petitioner attended the hearing on its motion to dismiss (based on alleged
desistance of employees) it would have known who the complainants were
because it would have been furnished a copy of the complaint.
Nor can petitioner pretend that it did not know what the nature of private
respondents' claims was because petitioner in fact moved for the remand of
the case to the NLRC on the ground that it involved a claim "within the
original exclusive jurisdiction of the Labor Arbiter of said commission."
Petitioner could only have invoked the original and exclusive jurisdiction of
Labor Arbiters precisely because it knew the nature of the claims of private
respondent.
As this Court has time and again stated:
The essence of due process is that a party be afforded
reasonable opportunity to be heard and to submit any
evidence he may have in support of his defense. In
administrative proceedings such as the one at bench, due
process simply means the opportunity to explain one's side
or the opportunity to seek a reconsideration of the action or
ruling complained
of. 19
The Regional Director therefore rightly concluded in his order of July 29,
1986:
The records showed that the respondent [now petitioner]
was afforded ample time to defend and present evidences to
refute the complainants allegations, but failed to avail of
those opportunities. 20
The fact is that, as the Secretary of Labor and Employment stated in his
order of May 26, 1989:

In the course of inspection Mr. Manny Ramirez, owner of the

Industry, revealed that he was not giving the living
allowances and other benefits for by doing so would mean
business closure. He advised the labor inspector to settle the
case amicably with the complainants. 21
What seems to have been overlooked by petitioner is that the proceedings in
the Regional Office were a summary one. Under Art. 128(a) of the Labor
Code, the Secretary of Labor or his duly authorized representatives, such as
the Regional Directors, has visitorial powers which authorize him to inspect
the records and premises of an employer at any time of the day or night
whenever work is being undertaken therein, to question any employee and
investigate any fact, condition or matter, and to determine violations of labor
laws, wage orders or rules and regulations. If the employer refuses to attend
the inspection or conference or to submit any record, such as payrolls and
daily time records, he will be deemed to have waived his right to present
evidence. 22
Indeed, Art. 129 of the Labor Code provides that proceedings before the
Regional Director shall be summary in nature and, hence, should be resolved
expeditiously. Accordingly, the parties to such proceedings must be vigilant
and prompt in the assertion and protection of their rights.
Finally it is contended that the order of the Regional Director is defective
because it does not contain a clear and distinct statement of the facts and
the law on which it is based. Petitioner claims that the deficiency was
supplied only in the order of the Secretary of Labor.
This contention has likewise no merit. The order in question reads:
This case is for non-payment of the minimum wage, living
allowance and non-compliance with other labor standard
laws which was filed in this Office on April 1, 1986 by
Carolyn Alfonso and 260 others against M. Ramirez
Industries and/or Manny Ramirez..
The complainants were not given the minimum wage and
emergency cost of living allowance as mandated by labor
laws since the period of their employment in January 1986,
when the respondent opened for business, up to the time it
stop business operations last April 8, 1986.
The records showed that the respondent was afforded ample
time to defend and present evidences to refute the
complainants allegations, but failed to avail of those

opportunities.
The complainants, therefore, are entitled to the difference of
what has been provided by law less the amount actually
received by them.
....
Contrary to the claim of petitioner, the order of the Regional Director states
the ultimate facts, to wit: that private respondents were employed by
petitioner in 1986; that on April 1, 1986 private respondents, led by Carolyn
Alfonso, filed the case complaining of nonpayment of the minimum wage,
living allowance and noncompliance with labor standards laws; that petitioner
stopped business operations on April 8, 1986; that private respondents were
entitled to wage differentials; and that petitioner failed to refute the private
respondents' allegations despite opportunity given to petitioner.
These are the facts on which the order was based. The order of the
Secretary of Labor and Employment, which petitioner seems to consider as
adequate contains no more recital of the facts than the order of the Regional
Director in question. The only difference between the two is that the
Secretary's order, aside from stating the facts, also states the proceedings in
the case. Thus, the Secretary's order reads:
The factual background are as follows:
This case is for non-payment of minimum wage, living
allowance and non-compliance with other labor standard
laws which was filed on April 1, 1986 by Carolyn Alfonso and
260 others against respondent herein..
On the strength of Office Order No. 23 dated April 1, 1986,
Labor Standard and Welfare Officer, Mr. Juanito Yallosa,
conducted a complaint inspection at the respondent's
premises. Consequently, several conciliation hearings were
held until it was reset to April 18, 1986.
However, on April 14, 1986, respondent filed an Ex-Parte
Motion to Dismiss the case on the ground of complainants'
voluntary desistance from pursuing their case and attaching
therein their letter of affirmation to said desistance.
On May 7, 1986, both parties again were called for a
conference. Complainants appeared while respondent did
not. In said hearing complainants vehemently objected to

respondent's motion on the ground that the signatories

appearing thereon are not the complainants.
On May 22, 1986, the Regional Director promulgated an
Order dismissing respondent Ex-Parte Motion To Dismiss.
On June 11, 1986, respondent filed another Motion praying
that the case be remanded to the National Labor Relations
Commission alleging among others, that the case is within
the original and exclusive jurisdiction of the NLRC.
On June 18, 1986 an Order was promulgated ordering
respondent to pay the claims of the complainants.
Hence, respondent appealed.
A decision must state the grounds for it so that any party who wishes to
appeal therefrom can make a proper assignment of error against the
decision. In the language of Ang Tibay v. CIR: 23
(7) The [administrative agency] should, in all controversial
questions, render its decision in such a manner that the
parties to the proceeding can know the various issues
involved, and the reasons for the decisions rendered. The
performance of this duty is inseparable from the authority
conferred upon it.
If the test of sufficiency of a decision or order is that the party adversely
affected by it can, if he wishes to, assign errors against it, then the order of
Regional Director in question is sufficient. Thus, in its motion for
reconsideration dated July 29, 1986, petitioner took issue with the findings
contained in the order of the Regional Director. Petitioner said:
The awards are inequitable, unjust and oppressive. Contrary
to what was recited in the questioned order that the
respondent stopped business operations on April 8, 1986,
respondent opened for business his new but still-not-finished
factory buildings on July 2, 1986. During the alleged period
of employment of the complainants, respondent was, and
even presently is, undertaking construction in progress of his
factory buildings and compound. Anticipating that
respondent will need workers when the factory will open for
business, many presented themselves to learn the trade of
weaving baskets which will be the crafts to be produced in
respondent's factory. Sacrificing valuable materials,

respondent allowed those who are interested to learn the

trade. Naturally, many of the baskets weaved are of inferior
and unsalable quality, but respondent was not counting the
costs, expecting that when the time comes to open the
factory for business, there would be already available
workers skilled in the art of weaving baskets. Besides, there
were some who possess the aptitude and had weaved
baskets of fair quality, so, they were correspondingly paid of
their labor on a piece rate basis. Unfortunately however,
even as construction of respondent's factory was not yet
completed, his business was not spared of agitation initiated
by elements of a radical labor union. Hence, this case. And,
now, to compel respondent to pay as commanded in the
questioned order, despite much sacrifice to waste valuable
materials so prospective workers will learn to weave is,
verily, inequitable, unjust and oppressive. (Emphasis added)
Petitioner would not have been able to say "contrary to what was recited in
the questioned order..." if the basis of the Regional Director's order was not
stated. In effect petitioner admitted that he had not paid the respondents
some of their claims, such as those for living allowance, albeit it defended
itself by claiming that private respondents were not regular workers but only
learners, who were allowed to work so that they would learn the craft,
pending their employment. However that may be, the fact is that petitioner
admitted not having paid private respondents regular wages. That private
respondents were regular workers is a finding that the Regional Director
made, based on the report of the Labor Standard Officer. The failure of
petitioner to dispute this factual finding gives it the stamp of finality. It is now
settled that factual findings of administrative agencies are to be accorded not
only respect but even finality when they are supported by substantial
evidence. 24
WHEREFORE, the petition for certiorari is DISMISSED for lack of merit.
SO ORDERED.

G.R. No. 168424

June 8, 2007

CONSOLIDATED BROADCASTING SYSTEM, INC., petitioner,

vs.
DANNY OBERIO, ELNA DE PEDRO, LUISITO VILLAMOR, WILMA
SUGATON, RUFO DEITA, JR., EMILY DE GUZMAN, CAROLINE
LADRILLO, JOSE ROBERTO REGALADO, ROSEBEL NARCISO &

ANANITA TANGETE, respondents.

DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the July 30, 2004 Decision 1 of the Court
of Appeals in CA-G.R. SP No. 77098, which affirmed the December 5, 2001
Decision2 of the National Labor Relations Commission (NLRC) holding that
respondents were regular employees of petitioner and that they were illegally
dismissed.
Respondents alleged that they were employed as drama talents by DYWBBombo Radyo, a radio station owned and operated by petitioner
Consolidated Broadcasting System, Inc. They reported for work daily for six
days in a week and were required to record their drama production in
advance. Some of them were employed by petitioner since 1974, while the
latest one was hired in 1997.3 Their drama programs were aired not only in
Bacolod City but also in the sister stations of DYWB in the Visayas and
Mindanao areas.4
Sometime in August 1998, petitioner reduced the number of its drama
productions from 14 to 11, but was opposed by respondents. After the
negotiations failed, the latter sought the intervention of the Department of
Labor and Employment (DOLE), which on November 12, 1998, conducted
through its Regional Office, an inspection of DWYB station. The results
thereof revealed that petitioner is guilty of violation of labor standard laws,
such as underpayment of wages, 13th month pay, non-payment of service
incentive leave pay, and non-coverage of respondents under the Social
Security System.
Petitioner contended that respondents are not its employees and refused to
submit the payroll and daily time records despite the subpoena duces tecum
issued by the DOLE Regional Director. Petitioner further argued that the case
should be referred to the NLRC because the Regional Director has no
jurisdiction over the determination of the existence of employer-employee
relationship which involves evidentiary matters that are not verifiable in the
normal course of inspection.
Vexed by the respondents complaint, petitioner allegedly pressured and
intimidated respondents. Respondents Oberio and Delta were suspended for
minor lapses and the payment of their salaries were purportedly delayed.
Eventually, on February 3, 1999, pending the outcome of the inspection case
with the Regional Director, respondents were barred by petitioner from
reporting for work; thus, the former claimed constructive dismissal. 5

On April 8, 1999, the DOLE Regional Director issued an order directing

petitioner to pay respondents a total of P318,986.74 representing nonpayment/underpayment of the salary and benefits due them. 6 However, on
July 8, 1999, the Regional Director reconsidered the April 8, 1999 order and
certified the records of the case to the NLRC, Regional Arbitration Branch VI,
for determination of employer-employee relationship.7 Respondents
appealed said order to the Secretary of Labor.
On October 12, 1999, respondents filed a case for illegal dismissal,
underpayment/non-payment of wages and benefits plus damages against
petitioner. On April 10, 2000, the Labor Arbiter dismissed the case without
prejudice while waiting for the decision of the Secretary of Labor on the same
issue of the existence of an employer-employee relationship between
petitioner and respondents.
On appeal to the NLRC, respondents raised the issue of employer-employee
relationship and submitted the following to prove the existence of such
relationship, to wit: time cards, identification cards, payroll, a show cause
order of the station manager to respondent Danny Oberio and memoranda
either noted or issued by said manager. Petitioner, on the other hand, did not
present any documentary evidence in its behalf and merely denied the
allegations of respondents. It claimed that the radio station pays for the
drama recorded by piece and that it has no control over the conduct of
respondents.
On December 5, 2001, the NLRC rendered a decision holding that
respondents were regular employees of petitioner who were illegally
dismissed by the latter. It further held that respondents complied with the
requirements of the rule on forum shopping. The decretal portion thereof,
provides:
WHEREFORE, premises considered, the decision of Labor Arbiter Ray Alan
T. Drilon dated 10 April 2000 is SET ASIDE and VACATED and a new one
entered.
Ordering respondent Consolidated Broadcasting System, Inc. (Bombo Radyo
Philippines), DYWB to reinstate the complainants without loss of seniority
rights wi[th] full back wages computed from February 1999 up to the time of
actual reinstatement.
SO ORDERED.8
Hence, petitioner filed the instant recourse.
The issues for resolution are as follows: (1) Did respondents violate the rule

on forum shopping; (2) whether the NLRC correctly ruled on the merits of the
case instead of remanding the case to the Labor Arbiter; (3) whether
respondents were employees of petitioner; and (4) whether their dismissal
was illegal.
Respondents complaint in the inspection case before the DOLE Regional
Director alleged that they were under the employ of petitioner at the time of
the filing of said complaint. Pending the resolution thereof, they claimed to
have been dismissed; hence, the filing of the present illegal dismissal case
before the Labor Arbiter. The causes of action in these two complaints are
different, i.e., one for violation of labor standard laws, and the other, for illegal
dismissal, but the entitlement of respondents to the reliefs prayed for hinges
on the same issue of the existence of an employer-employee relationship.
While the decision on the said issue by one tribunal may operate as res
judicata on the other, dismissal of the present illegal dismissal case on the
ground of forum shopping, would work injustice to respondents because it is
the law itself which provides for two separate remedies for their distinct
causes of action.
Under Article 2179 of the Labor Code, termination cases fall under the
jurisdiction of Labor Arbiters. Whereas, Article 12810 of the same Code vests
the Secretary of Labor or his duly authorized representatives with the power
to inspect the employers records to determine and compel compliance with
labor standard laws. The exercise of the said power by the Secretary or his
duly authorized representatives is exclusive to cases where employeremployee relationship still exists. Thus, in cases where the complaint for
violation of labor standard laws preceded the termination of the employee
and the filing of the illegal dismissal case, it would not be in consonance with
justice to charge the complainants with engaging in forum shopping when the
remedy available to them at the time their causes of action arose was to file
separate cases before different fora. Besides, in the instant case, respondent
Danny Oberio disclosed in the verification the pendency of the case
regarding wage differential.11 In addition, said case was discussed in detail in
the position paper,12 evincing the absence of any intention on the part of
respondents to mislead the Labor Arbiter.
Similarly, in Benguet Management Corporation v. Court of Appeals,13
petitioner filed separate actions to enjoin the foreclosure of real estate
mortgages before the Regional Trial Courts of San Pablo City and Zambales
which has jurisdiction over the place where the properties were located. In
both cases, petitioner contended, among others, that the loan secured by
said mortgages imposed unauthorized penalties, interest and charges. The
Court did not find the mortgagors guilty of forum shopping considering that
since injunction is enforceable only within the territorial limits of the trial court,
the mortgagor is left without remedy as to the properties located outside the
jurisdiction of the issuing court, unless an application for injunction is made

with another court which has jurisdiction over the latter properties.
By parity of reasoning, it would be unfair to hold respondents in the instant
case guilty of forum shopping because the recourse available to them after
their termination, but pending resolution of the inspection case before the
DOLE, was to file a case for illegal dismissal before the Labor Arbiter who
has jurisdiction over termination disputes.
More importantly, substantial justice dictates that this case be resolved on
the merits considering that the NLRC and the Court of Appeals correctly
found that there existed an employer-employee relationship between
petitioner and respondents and that the latters dismissal was illegal, as will
be discussed hereunder.
In the same vein, the NLRC correctly ruled on the merits instead of
remanding the case to the Labor Arbiter. Respondents specifically raised the
issue of the existence of employer-employee relationship but petitioner
refused to submit evidence to disprove such relationship on the erroneous
contention that to do so would constitute a waiver of the right to question the
jurisdiction of the NLRC to resolve the case on the merits. 14 This is rather odd
because it was the stand of petitioner in the inspection case before the DOLE
that the case should be certified to the NLRC for the resolution of the issue of
employer-employee relationship. But when the same issue was proffered
before the NLRC, it refused to present evidence and instead sought the
dismissal of the case invoking the pendency of the inspection case before
the DOLE. Petitioner refused to meet head on the substantial aspect of this
controversy and resorted to technicalities to delay its disposition. It must be
stressed that labor tribunals are not bound by technical rules and the Court
would sustain the expedient disposition of cases so long as the parties are
not denied due process.15 The rule is that, due process is not violated where
a person is given the opportunity to be heard, but chooses not to give his or
her side of the case.16 Significantly, petitioner never claimed that it was
denied due process. Indeed, no such denial exists because it had all the
opportunities to present evidence before the labor tribunals below, the Court
of Appeals, and even before this Court, but chose not to do so for reasons
which will not warrant the sacrifice of substantial justice over technicalities.
On the third issue, respondents employment with petitioner passed the "fourfold test" on employer-employee relations, namely: (1) the selection and
engagement of the employee, or the power to hire; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control the employee.
Petitioner failed to controvert with substantial evidence the allegation of
respondents that they were hired by the former on various dates from 1974
to 1997. If petitioner did not hire respondents and if it was the director alone

who chose the talents, petitioner could have easily shown, being in
possession of the records, a contract to such effect. However, petitioner
merely relied on its contention that respondents were piece rate contractors
who were paid by results.17 Note that under Policy Instruction No. 40,
petitioner is obliged to execute the necessary contract specifying the nature
of the work to be performed, rates of pay, and the programs in which they will
work. Moreover, project or contractual employees are required to be apprised
of the project they will undertake under a written contract. This was not
complied with by the petitioner, justifying the reasonable conclusion that no
such contracts exist and that respondents were in fact regular employees.
In ABS-CBN v. Marquez,18 the Court held that the failure of the employer to
produce the contract mandated by Policy Instruction No. 40 is indicative that
the so called talents or project workers are in reality, regular employees.
Thus
Policy Instruction No. 40 pertinently provides:
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 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 or sponsoring companies, shall be under a
written contract specifying, among other things, the nature of the work to
be performed, rates of 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 days from its consummation. (Emphasis
supplied)
Ironically, however, petitioner failed to adduce an iota proof that the
requirements for program employment were even complied with by it. It is
basic that project or contractual employees are appraised of the project they
will work under a written contract, specifying, inter alia, the nature of work to
be performed and the rates of pay and the program in which they will work.
Sadly, however, no such written contract was ever presented by the
petitioner. Petitioner is in the best of position to present these documents.
And because none was presented, we have every reason to surmise that no
such written contract was ever accomplished by the parties, thereby belying
petitioners posture.
Worse, there was no showing of compliance with the requirement that after
every engagement or production of a particular television series, the required

reports were filed with the proper government agency, as provided no less
under the very Policy Instruction invoked by the petitioner, nor under the
Omnibus Implementing Rules of the Labor Code for project employees. This
alone bolsters respondents contention that they were indeed petitioners
regular employees since their employment was not only for a particular
program.
Moreover, the engagement of respondents for a period ranging from 2 to 25
years and the fact that their drama programs were aired not only in Bacolod
City but also in the sister stations of DYWB in the Visayas and Mindanao
areas, undoubtedly show that their work is necessary and indispensable to
the usual business or trade of petitioner. The test to determine whether
employment is regular or not is the reasonable connection between the
particular activity performed by the employee in relation to the usual business
or trade of the employer. Also, if the employee has been performing the job
for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability of
that activity to the business. Thus, even assuming that respondents were
initially hired as project/contractual employees who were paid per drama or
per project/contract, the engagement of their services for 2 to 25 years justify
their classification as regular employees, their services being deemed
indispensable to the business of petitioner.19
As to the payment of wages, it was petitioner who paid the same as shown
by the payroll bearing the name of petitioner company in the heading with the
respective salaries of respondents opposite their names. Anent the power of
control, dismissal, and imposition of disciplinary measures, which are
indicative of an employer-employee relationship,20 the same were duly
proven by the following: (1) memorandum21 duly noted by Wilfredo Alejaga,
petitioners station manager, calling the attention of the "Drama Department"
to the late submission of scripts by writers and the tardiness and absences of
directors and talents, as well as the imposable fines of P100 to P200 for
future infractions; (2) the memorandum22 of the station manager directing
respondent Oberio to explain why no disciplinary action should be taken
against him for punching the time card of a certain Mrs. Fe Oberio who was
not physically present in their office; and (3) the station managers
memorandum23 suspending respondent Oberio for six days for the said
infraction which constituted violation of petitioners network policy. All these,
taken together, unmistakably show the existence of an employer-employee
relationship. Not only did petitioner possess the power of control over their
work but also the power to discipline them through the imposition of fines and
suspension for violation of company rules and policies.
Finally, we find that respondents were illegally dismissed. In labor cases, the
employer has the burden of proving that the dismissal was for a just cause;

failure to show this would necessarily mean that the dismissal was unjustified
and, therefore, illegal. To allow an employer to dismiss an employee based
on mere allegations and generalities would place the employee at the mercy
of his employer; and the right to security of tenure, which this Court is bound
to protect, would be unduly emasculated.24 In this case, petitioner merely
contended that it was respondents who ceased to report to work, and never
presented any substantial evidence to support said allegation. Petitioner
therefore failed to discharge its burden, hence, respondents were correctly
declared to have been illegally dismissed.
Furthermore, 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 a justifiable cause. It is a time-honored rule that in
controversies between a laborer and his master, doubts reasonably arising
from the evidence should be resolved in the formers favor. The policy is to
extend the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy of the
State to give maximum aid and protection of labor.25
When a person is illegally dismissed, he is entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages. In the
event, however, that reinstatement is no longer feasible, or if the employee
decides not to be reinstated, the employer shall pay him separation pay in
lieu of reinstatement. Such a rule is likewise observed in the case of a
strained employer-employee relationship or when the work or position
formerly held by the dismissed employee no longer exists. In sum, an illegally
dismissed employee is entitled to: (1) either reinstatement if viable or
separation pay if reinstatement is no longer viable, and (2) backwages. In the
instant controversy, reinstatement is no longer viable considering the strained
relations between petitioner and respondents. As admitted by the latter, the
complaint filed before the DOLE strained their relations with petitioner who
eventually dismissed them from service. Payment of separation pay instead
of reinstatement would thus better promote the interest of both parties.
Respondents separation pay should be computed based on their respective
one (1) month pay, or one-half (1/2) month pay for every year of service,
whichever is higher, reckoned from their first day of employment up to finality
of this decision. Full backwages, on the other hand, should be computed
from the date of their dismissal until the finality of this decision. 26
WHEREFORE, the petition is DENIED. The July 30, 2004 Decision of the
Court of Appeals in CA-G.R. SP No. 77098, finding respondents to be regular
employees of petitioner and holding them to be illegally dismissed and
directing petitioner to pay full backwages, is AFFIRMED with the
MODIFICATION that petitioner is ordered to pay respondents their

separation pay instead of effecting their reinstatement.

assistance regarding petitioners alleged violation of laws on labor standards,

to wit:

SO ORDERED.
1. Illegal deduction of wages
CONSUELO YNARES-SANTIAGO
Associate Justice

2. Underpayment of night shift differential

3. Underpayment of minimum wage
4. Nonpayment of overtime pay and legal holiday pay

G.R. No. 124915

February 18, 2008

RIZAL SECURITY & PROTECTIVE SERVICES INC., and/or RUFINO S.

ANTONIO, JR., petitioners,
vs.
HON. DIRECTOR ALEX E. MARAAN, Regional Sheriff of DOLE,
Cordillera Administrative Region, and RICO GOMEZ, ROLANDO TUPAS,
DETECIO VICENTE, EDWIN TUPAS, ROBERTO RUIZ, RONNIE
LEABRES, DENNIS LEABRES, and SANDY FIGER, respondents.

5. Nonpayment of 13th month pay

Pursuant to the visitorial and enforcement powers of the Secretary of Labor
and Employment or his duly authorized representative under Article 128 of
the Labor Code, as amended, an inspection was conducted on petitioner
Rizal Securitys establishment by the Labor Inspector on 1 June 1995. The
said inspection yielded the following violations as indicated in the Notice of
Inspection Results dated 9 October 1995:
1. Underpayment of wages

DECISION
2. Underpayment of COLA
CHICO-NAZARIO, J.:
3. Nonpayment of overtime pay
The Petition brought before this Court is a special civil action under Rule 65
of the Revised Rules of Court, with petitioners praying for the issuance of a
writ of certiorari and a temporary restraining order (TRO) enjoining from
execution the Order1 dated 24 January 1996 issued by public respondent
Alex E. Maraan, then Department of Labor and Employment (DOLE)
Regional Director for the Cordillera Administrative Region (CAR), in CAR009507-CI-25.
Petitioner Rizal Security and Protective Service, Inc. (Rizal Security) is a
corporation organized under Philippine laws and is doing business as a
security agency. Petitioner Rufino S. Antonio, Jr. (Antonio) is the president of
the aforesaid corporation. On the other hand, private respondents were
formerly employed by petitioner Rizal Security as security guards detailed at
Rainbow End Village in Baguio City.
The instant case arose on 19 May 1995, when private respondents Rico
Gomez (Gomez) and Edwin O. Tupas (Tupas), who were then still employed
as security guards of petitioner Rizal Security, filed a Complaint with the
DOLE-CAR Regional Office, docketed as CAR00-9507-CI-25, to seek

4. Nonpayment of service incentive leave

5. Underpayment of Night-Shift Differential
6. Frequency of Payment
7. Nonpayment of 13th month pay
8. No emergency medicines2
Hearings were scheduled by the DOLE-CAR to give petitioners the
opportunity to present their side.
In the meantime, two significant events apparently took place.
First, private respondents signed and submitted a resignation letter
addressed to the personnel manager of petitioner Rizal Security on 10 July

1995, to be effective 1 September 1995.3

And second, a notice of Termination of Services dated 25 July 1995 was sent
by Dominador N. Valmonte, Jr., Resident Manager of Rainbow End Village to
petitioner Antonio, President of co-petitioner Rizal Security.4 Through the said
Notice, Rainbow End Village informed petitioner Rizal Security of the
termination of their Security Services also effective 1 September 1995.
In a hearing conducted on 23 October 1995 before the DOLE-CAR Regional
Office, petitioner Rizal Security submitted a Manifestation and Motion
assailing the jurisdiction of the DOLE-CAR Regional Office over the case.
Petitioner Rizal Security alleged that the DOLE-CAR Regional Office had lost
its jurisdiction to try the case considering there was no longer any employeremployee relationship between petitioner Rizal Security and private
respondents when the latter ceased to be employees of petitioner Rizal
Security due to their resignation effective 1 September 1995.
Thereafter, on 24 January 1996, the DOLE-CAR Regional Office, through
public respondent Director Maraan, issued the assailed Order denying
petitioner Rizal Securitys Manifestation and Motion. It further ordered the
payment of the deficiencies owing the private respondents amounting to
P560,989.70. The Order reads:
WHEREFORE, in the light of the foregoing, the manifestation and motion
filed by the respondent, Rizal Security & Protective Service, through Atty.
Salvador M. Solis, is hereby DENIED and is hereby ORDERED to pay the
computed deficiencies owing to the affected Security Guards in the total
amount of FIVE HUNDRED SIXTY THOUSAND, NINE HUNDRED EIGHTYNINE PESOS & 70/100 (P560,989.70) covering eight (8) guards which is
hereto itemized as to the following employees, to wit:
NAME

TOTAL

1. Rico E. Gomez

P 99,088.125

2. Rolando Tupas

P110,377.170

5. Roberto P. Ruiz

P110,604.92

6. Ronnie Llabres

P 9,608.25

7. Dennis Llabres

P 6,626.60

8. Sandy Figer

P 3,247.05
P560,989.705

This office further holds Mr. Dominador Valmonte, Resident Manager of

Rainbow End Village, to be jointly and severally liable pursuant to Articles
107 and 109 of the Labor Code of the Philippines.
In view hereof, respondents Mr. Rufino Antonio of Rizal Security and
Protective Service and Mr. Dominador Valmonte, of Rainbow End Village, are
directed to pay the above-stated amount within ten (10) calendar days from
receipt hereof. Otherwise, this Office shall be constrained to issue a Writ of
Execution resulting from non-compliance thereof.5
Petitioners deny that a copy of such Order was ever officially sent to their
undersigned counsel. According to petitioners counsel:
Despite the fact that the records of the said case disclose that the
appearance of the undersigned as counsel for the petitioner has
been duly acknowledged and recognized, no copy of such Order was
ever sent officially to the undersigned counsel. The undersigned
counsel was able to secure a copy thereof from the DOLE Regional
Office in Baguio City only on June 18, 1996.6
On 8 May 1996, counsel for petitioners received a copy of the Writ of
Execution dated 12 March 1996 issued by public respondent DOLE-CAR
Director Maraan ordering the Regional Sheriff to enforce the Order dated 24
January 1996. Pertinent portions of the Writ of Execution are quoted below:

3. Detecio S. Vicente

P107,904.92

WHEREAS, a copy of said Order was received by respondent on

February 1, 1996.

4. Edwin Tupas

P113,532.67

WHEREAS, the period for appeal has already expired without

respondent having perfected an appeal from said decision.

WHEREAS, the Order has now become final and executory but
respondent has not yet effected the necessary payments of the
Monetary Awards due the employee/s concerned.
NOW THEREFORE, pursuant to the provisions of the Labor Code as
amended as well as the Rules in the disposition of Labor Standard
Cases in the Regional Office, you are hereby directed to cause
Messers. Rufino Antonio/ Dominador Valmonte and/or Rizal Security
and Protective Service with business address at 37 Rainbow End
Village, Tacay Road, Pinsao Proper, Baguio City or wherever
they/he/it may be found to pay the amount of FIVE HUNDRED
SIXTY THOUSAND NINE HUNDRED EIGHTY-NINE (P560,989.70)
PESOS and 70/100 plus legal fee for execution in the amount of
FIVE THOUSAND ONE HUNDRED (P5,100.00) PESOS from the
goods, chattels or other properties of the respondent/s and to tender
to the concerned employees through the Department of Labor and
Employment their claims as aforementioned.7
Petitioners are now asking for the issuance of a writ of certiorari and a
Temporary Restraining Order to enjoin public respondents from executing the
Order of 24 January 1996 and from enforcing the Writ of Execution.
Petitioners pray that this Court order that the case be endorsed, on the
ground of lack of jurisdiction, from the DOLE-CAR Regional Office to the
National Labor Relations Commission (NLRC) and that judgment be
rendered annulling and setting aside the 24 January 1996 Order and
quashing the 12 March 1996 Writ of Execution.
Petitioners presented the following assignment of errors:
I. THE HONORABLE DOLE REGIONAL DIRECTOR GRAVELY
ERRED IN ISSUING THE ORDER DATED JANUARY 24, 1996
WITHOUT OR IN EXCESS OF HIS JURISDICTION AND IN NOT
ENDORSING THE CASE TO THE APPROPRIATE BRANCH OF
THE NATIONAL LABOR RELATIONS COMMISSION FOR
HEARING.
II. THE HONORABLE DOLE REGIONAL DIRECTOR GRAVELY
ERRED IN ISSUING THE WRIT OF EXECUTION AGAINST
PETITIONERS PREMATURELY AND CONTRARY TO LAW OR
WITHOUT DUE PROCESS OF LAW.
III. GRANTING FOR THE SAKE OF ARGUMENT THAT THE
ORDER DATED JANUARY 24, 1996 IS VALID, THE HONORABLE
DOLE REGIONAL DIRECTOR GRAVELY ERRED IN DECLARING
PETITIONER RUFINO ANTONIO AS LIABLE JOINTLY AND

SEVERALLY FOR THE PAYMENT OF THE MONETARY CLAIMS

OF THE PRIVATE RESPONDENTS.
The Petition was initially dismissed by this Court on 24 July 1996 for failure to
comply strictly with the Rules of Court in not submitting a certified true copy
of the questioned Writ of Execution dated 12 March 1996. However, upon
Motion for Reconsideration and compliance with the foregoing requirement,
this Court resolved to grant the reconsideration, thus reinstating the Petition.
The pivotal issue to be resolved in this Petition is whether public respondent
DOLE-CAR Regional Director Maraan acted without jurisdiction in issuing the
Order dated 24 January 1996.
Certiorari being a remedy narrow in its scope and inflexible in character, it is
limited to the issue of jurisdiction and grave abuse of discretion. 8 This is the
same rule followed in applying the Supreme Courts power to review labor
cases which is limited to the issue of jurisdiction and grave abuse of
discretion.9 As this Court has eloquently explained in Condo Suite Club
Travel, Inc. v. National Labor Relations Commission10:
Resort to a special civil action for certiorari under Rule 65 of the
Rules of Court is limited to the resolution of jurisdictional issues, that
is, lack or excess of jurisdiction and grave abuse of discretion
amounting to lack of jurisdiction. The respondent acts without
jurisdiction if he does not have the legal power to determine the
case. There is excess of jurisdiction where the respondent, being
clothed with the power to determine the case, oversteps his authority
as determined by law. And there is grave abuse of discretion where
the respondent acts in a capricious, whimsical, arbitrary or despotic
manner in the exercise of his judgment as to be said to be equivalent
to lack of jurisdiction. x x x.
This Court has explained the role and function of Rule 65 as an extraordinary
remedy in numerous pronouncements, among which is the case of Caltex
Refinery Employees Association v. Brillantes11 citing Flores v. National Labor
Relations Commission,12 to wit:
It should be noted, in the first place, that the instant petition is a
special civil action for certiorari under Rule 65 of the Revised Rules
of Court. An extraordinary remedy, its use is available only and
restrictively in truly exceptional cases -- those wherein the
action of an inferior court, board or officer performing judicial
or quasi-judicial acts is challenged for being wholly void on
grounds of jurisdiction. The sole office of the writ of certiorari is the
correction of errors of jurisdiction including the commission of grave

abuse of discretion amounting to lack or excess of jurisdiction. It

does not include correction of public respondent NLRCs evaluation
of the evidence and factual findings based thereon, which are
generally accorded not only great respect but even finality.
(Emphasis supplied.)
After a careful scrutiny of petitioners arguments, this Court sustains the
jurisdiction of public respondent DOLE-CAR Director Maraan over CAR009507-CI-25 and, thus, finds that the writ of certiorari does not lie herein.
In support of their position, petitioners call the attention of this Court to the
fact that Rule II, Section 3 of the Rules on the Disposition of Labor Standards
Cases in the Regional Offices stipulates:
Section 3. Complaints where no employer-employee relationship
actually exists. Where employer-employee relationship no longer
exists by reason of the fact that it has already been severed, claims
for payment of monetary benefits fall within the exclusive and original
jurisdiction of the labor arbiters. Accordingly, if on the face of the
complaint, it can be ascertained that employer-employee relationship
no longer exists, the case, whether or not 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).
It follows, petitioners contend, that where the employer-employee
relationship no longer exists by the fact of its severance, claims for payment
of monetary benefits fall within the exclusive and original jurisdiction of the
Labor Arbiters. Petitioners claim that the supervening event of private
respondents voluntarily resigning from petitioners employ in the course of
the proceedings in CAR00-9507-CI-25 automatically ousted public
respondent DOLE-CAR Director Maraan of his jurisdiction to continue to hear
and determine said case. Petitioners insist that public respondent DOLECAR Director Maraan should have desisted from further handling the case
and should have instead indorsed it to the appropriate regional branch of the
NLRC for further hearing, since the jurisdiction over the same belongs to the
Labor Arbiter.
Petitioners reliance on Rule II, Section 3 of the Rules on the Disposition of
Labor Standards Cases in the Regional Offices is inappropriate.
While it is true that the quoted provision states that where employeeemployer relations have been severed, complaints or claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of Labor
Arbiters; however, such is not the case in the present Petition. To emphasize,

at the time private respondents instituted CAR00-9507-CI-25 by filing a

complaint with the DOLE-CAR Regional Office, they were still employees of
petitioners.
Private respondents Gomez and Tupas filed the Complaint on 19 May 1995
before the DOLE-CAR Regional Office, seeking a routine inspection to be
conducted on petitioner Rizal Security relative to underpayment in wages
and nonpayment of other benefits under the Labor Code. At the time of filing
of the Complaint on said date, the employer-employee relationship between
private respondents and petitioner Rizal Security had not yet been severed.
As alleged by petitioner Rizal Security itself, deemed as an admission on its
part, the employer-employee relations between petitioner Rizal Security and
private respondents were terminated on 1 September 1995, or more than
three months after the institution of CAR00-9507-CI-25 before the DOLE
Regional Office.
Well-settled is the rule that the jurisdiction of a court over the subject matter
of an action is determined by the allegations of the complaint at the time of
its filing, irrespective of whether or not the plaintiff is entitled to recover upon
all or some of the claims asserted therein.13 Time and again, this Court has
held that the allegations in the complaint determine the nature of the action
and, consequently, the jurisdiction of the courts.14
It is but axiomatic that the jurisdiction of a tribunal, including a quasi-judicial
officer or government agency, over the nature and subject matter of a petition
or complaint is determined by the material allegations therein, the character
of the relief prayed for, and the law existing at the time of the filing of the
complaint or petition.15
It has already been established in a plethora of cases that once jurisdiction is
vested, the same is retained up to the end of litigation. 16 Neither can it be
ousted by subsequent events, although of a character which would have
prevented jurisdiction from attaching in the first instance. Even subsequent
legislation vesting jurisdiction over such proceedings in another tribunal will
not affect such jurisdiction.17
Considering that it is uncontroverted that there still existed an employeremployee relationship between petitioner Rizal Security and private
respondents at the time of filing of the complaint on 19 May 1995, and that
the case is one involving violations of labor standard provisions of the Labor
Code, this Court finds that DOLE-CAR Director Maraan properly retained
jurisdiction to hear and decide CAR00-9507-CI-25 and issue the assailed
Order dated 24 January 1996, pursuant to the power vested in him by Article
128(b) of the Labor Code, which states:

Art. 128. Visitorial and Enforcement Power.

xxxx
(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.
Secondary to the issue of jurisdiction is the issue of whether or not public
respondent DOLE-CAR Director Maraan acted without or in excess of his
jurisdiction in issuing the Writ of Execution dated 12 March 1996.
Petitioners insist that the issuance of the said Writ of Execution was unlawful
and premature, without legal basis or due process of law, and implemented
against a person not a party litigant.
Petitioners maintain that since the DOLE-CAR Regional Office never
furnished petitioners counsel a copy of the 24 January 1996 Order, then the
said Order never became final with respect to them, and cannot be the
subject of a Writ of Execution.
Rule II, Section 4 of the Rules on the Disposition of Labor Standards Cases
in the Regional Offices provides that notices and copies of orders shall be
served on the parties or their duly authorized representatives at their last
known office or home addresses or, if they are represented by counsel,
through the latter.
This procedure on service of Orders and Decisions as provided under the
Rules on the Disposition of Labor Standards Cases in the Regional Offices is
in line with the established rule that notice to counsel is notice to party and
when a party is represented by counsel, notices should be made upon the
counsel of record at his given address to which notices of all kinds emanating
from the court should be sent.

Petitioners counsel never received an official copy of the 24 January 1996

Order and was only able to personally secure a copy thereof from the DOLECAR Regional Office in Baguio City on 18 June 1996. 18 The records support
this allegation. The following is a quote from an internal DOLE
correspondence attached to the records of the case:
Is it okay with you if we will schedule this for another hearing despite
the Dismissal of respondents petition for certiorari?
In the interest of justice respondents did not receive a copy of our
Order dated 1/24/96 as it was "returned to sender" by the post
office.19
A Notice and a copy of the Order dated 24 January 1996 was sent by the
DOLE-CAR Regional Office through registered mail to the address of
petitioners then counsel-of-record Atty. Salvador Solis (Atty. Solis) on 29
January 1996. However, the same was not received by Atty. Solis. Indicated
on the envelope containing the Notice of the Order dated 24 January 1996
were the following notations by the post office on 5 February 1996:
RTS20 for better address
No #5 at Sto. Nino Street
Not at (illegible)
No such number #5 at Sto. Nino St.
2-5-96
This Court notes that prior notices of the hearings were all sent to the very
same address and were received always by petitioners counsel. It is a
source of no little wonder, therefore, why the post office reported that there
was "[n]o such number #5 at Sto. Nio St." We could only conclude, at this
time, that the notice was not received by the petitioners not through their
fault. Thus, we say that the post office failed to deliver the Notice and copy of
the 24 January 1996 Order thereto. This fact was admitted by public
respondent.21
Private respondents further argue that petitioners may already be deemed
notified of the contents of the 24 January 1996 Order for it merely reiterated
the findings in the report on the inspection conducted on 1 June 1995 which
was served and duly received by petitioners. This Court is very much aware
that the nature of proceedings before the DOLE Regional Office shall be
summary and non-litigious in nature, and that the technicalities of law and
procedure and the rules governing admissibility and sufficiency of evidence
obtaining in the courts of law do not strictly apply thereto, subject, only to the
requirements of due process.22

However, the foregoing is obviously not the notice contemplated under the
Labor Code. The inspection report is undeniably a distinct and separate
document from the Order dated 24 January 1996. More than merely restating the findings on the inspection report, the Order of 24 January 1996
ruled on the Manifestation and Motion of the petitioners assailing the
jurisdiction of the DOLE-CAR Regional Office by refusing to dismiss and
retaining jurisdiction over CAR00-9507-CI-25.

exhaustion of administrative remedies rests on the presumption that when

the administrative body, or grievance machinery, is afforded a chance to pass
upon the matter, it will decide the same correctly. Thus, for reasons of comity
and convenience, our courts of justice will shy away from a dispute until the
system of administrative redress has been completed and complied with so
as to give the administrative agency every opportunity to correct its error and
to dispose of the case.24

Procedural rules are tools designed to facilitate the adjudication of cases and
not defeat justice.23 While the Court, in some instances, allows a relaxation in
the application of the rules, it was never intended to forge a bastion for a
violation of due process. And although it is true that litigation is not a game of
technicalities, it is equally true that every case must be prosecuted in
accordance with the prescribed procedure to insure an orderly and speedy
administration of justice.

WHEREFORE, premises considered, the Court PARTIALLY GRANTS the

instant Petition and ISSUES a Writ of Certiorari to quash the Writ of
Execution dated 12 March 1996 for being issued prematurely. The
Department of Labor and Employment Cordillera Administrative Region is
further DIRECTED to proceed with CAR00-9507-CI-25 with DISPATCH. No
costs.
SO ORDERED.

The essence of due process is to provide an opportunity to be heard, or as

applied to administrative proceedings, an opportunity to explain ones side or
seek a reconsideration of the action or ruling complained of.
Rule III, Section 17 of the Rules on the Disposition of Labor Standards Cases
in the Regional Offices provides that an aggrieved party may file a motion for
reconsideration of the Order of the Regional Office within seven calendar
days from receipt by him of a copy of said Order. The judgment becomes
"final and executory" when the reglementary period to appeal lapses, and no
appeal is perfected within such period. In this case, petitioners never had the
opportunity to contest the Order of 24 January 1996 considering that they
never received a notice of the issuance thereof nor were they provided with a
copy of the same.
Without receipt by the petitioners of the notice and copy of the Order dated
24 January 1996, the same has not yet become final and executory and the
Writ of Execution issued pursuant thereto on 12 March 1996 was premature
and without legal basis. This renders the Writ of Execution fatally defective
and, thus, null.
Finally, the Court declines from addressing at this point the question of
petitioner Antonios solidary liability with co-petitioner Rizal Security for the
payment of the monetary awards granted to the private respondents.
Considering that the Order dated 24 January 1996 has not yet attained
finality and the Writ of Execution dated 12 March 1996 has been quashed by
reason thereof, to resolve the last issue now would be injudicious and would
pre-empt whatever action public respondent DOLE-CAR Director Maraan
may still take on CAR00-9507-CI-25. The underlying principle of the rule on

G.R. No. 152396

November 20, 2007

EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,

vs.
THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA, REGIONAL
DIRECTOR BRENDA A. VILLAFUERTE, ALEXANDER POCDING, FIDEL
BALANGAY, BUAGEN CLYDE, DENNIS EPI, DAVID MENDOZA, JR.,
GABRIEL TAMULONG, ANTON PEDRO, FRANCISCO PINEDA, GASTON
DUYAO, HULLARUB, NOLI DIONEDA, ATONG CENON, JR., TOMMY
BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY MINO,
ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO,
and P. C. DINTAN, respondents.
The Case
This is a petition for review1 with prayer for the issuance of a temporary
restraining order or writ of preliminary injunction of the 29 May 2001
Decision2 and the 26 February 2002 Resolution3 of the Court of Appeals in
CA-G.R. SP No. 57653. The 29 May 2001 Decision of the Court of Appeals
affirmed the 4 October 1999 Order of the Secretary of Labor in OS-LS-04-4097-280. The 26 February 2002 Resolution denied the motion for
reconsideration.
The Facts

Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of

providing security services while private respondents are EBVSAI's
employees assigned to the National Power Corporation at Ambuklao Hydro
Electric Plant, Bokod, Benguet (Ambuklao Plant).
On 20 February 1996, private respondents led by Alexander Pocding
(Pocding) instituted a complaint4 for underpayment of wages against EBVSAI
before the Regional Office of the Department of Labor and Employment
(DOLE).
On 7 March 1996, the Regional Office conducted a complaint inspection at
the Ambuklao Plant where the following violations were noted: (1) nonpresentation of records; (2) non-payment of holiday pay; (3) non-payment of
rest day premium; (4) underpayment of night shift differential pay; (5) nonpayment of service incentive leave; (6) underpayment of 13 th month pay; (7)
no registration; (8) no annual medical report; (9) no annual work accidental
report; (10) no safety committee; and (11) no trained first aider.5 On the same
date, the Regional Office issued a notice of hearing6 requiring EBVSAI and
private respondents to attend the hearing on 22 March 1996. Other hearings
were set for 8 May 1996, 27 May 1996 and 10 June 1996.

5. DAVID MENDOZA, JR.

6. GABRIEL TAMULONG
7. ANTON PEDRO
8. FRANCISCO PINEDA
9. GASTON DUYAO
10. HULLARUB

36,380.85 11. NOL

36,380.85 12. ATO

On 19 August 1996, the Director of the Regional Office (Regional Director)

issued an Order, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent EX-BATAAN
VETERANS SECURITY AGENCY is hereby ORDERED to pay the
computed deficiencies owing to the affected employees in the total
amount of SEVEN HUNDRED SIXTY THREE THOUSAND NINE
HUNDRED NINETY SEVEN PESOS and 85/PESOS within ten (10)
calendar days upon receipt hereof. Otherwise, a Writ of Execution
shall be issued to enforce compliance of this Order.

36,380.85 13. TOM

14. WILIAM PAPSONGAY
15. RICKY DORIA
16. GEOFREY MINO

NAME

36,380.85 17. ORL

1. ALEXANDER POCDING

36,380.85 18. SIM

2. FIDEL BALANGAY

36,380.85 19. NOC

3. BUAGEN CLYDE

36,380.85 20. ALE

4. DENNIS EPI

36,380.85 21. D[I]N

TOTAL

xxxx
SO ORDERED.7
EBVSAI filed a motion for reconsideration8 and alleged that the Regional
Director does not have jurisdiction over the subject matter of the case
because the money claim of each private respondent exceeded P5,000.
EBVSAI pointed out that the Regional Director should have endorsed the
case to the Labor Arbiter.
In a supplemental motion for reconsideration,9 EBVSAI questioned the
Regional Director's basis for the computation of the deficiencies due to each
private respondent.
In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's
motion for reconsideration and supplemental motion for reconsideration. The
Regional Director stated that, pursuant to Republic Act No. 7730 (RA 7730), 11
the limitations under Articles 12912 and 217(6)13 of the Labor Code no longer
apply to the Secretary of Labor's visitorial and enforcement powers under
Article 128(b).14 The Secretary of Labor or his duly authorized
representatives are now empowered to hear and decide, in a summary
proceeding, any matter involving the recovery of any amount of wages and
other monetary claims arising out of employer-employee relations at the time
of the inspection.
EBVSAI appealed to the Secretary of Labor.
The Ruling of the Secretary of Labor
In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with
modification the Regional Director's 19 August 1996 Order. The Secretary of
Labor ordered that the P1,000 received by private respondents Romeo Alejo,
Atong Cenon, Jr., Geofrey Mino, Dennis Epi, and Ricky Doria be deducted
from their respective claims. The Secretary of Labor ruled that, pursuant to
RA 7730, the Court's decision in the Servando16 case is no longer controlling
insofar as the restrictive effect of Article 129 on the visitorial and enforcement
power of the Secretary of Labor is concerned.
The Secretary of Labor also stated that there was no denial of due process
because EBVSAI was accorded several opportunities to present its side but
EBVSAI failed to present any evidence to controvert the findings of the

Regional Director. Moreover, the Secretary of Labor doubted the veracity and
authenticity of EBVSAI's documentary evidence. The Secretary of Labor
noted that these documents were not presented at the initial stage of the
hearing and that the payroll documents did not indicate the periods covered
by EBVSAI's alleged payments.
EVBSAI filed a motion for reconsideration which was denied by the Secretary
of Labor in his 3 January 2000 Order.17
EBVSAI filed a petition for certiorari before the Court of Appeals.
The Ruling of the Court of Appeals
In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and
affirmed the Secretary of Labor's decision. The Court of Appeals adopted the
Secretary of Labor's ruling that RA 7730 repealed the jurisdictional limitation
imposed by Article 129 on Article 128 of the Labor Code. The Court of
Appeals also agreed with the Secretary of Labor's finding that EBVSAI was
accorded due process.
The Court of Appeals also denied EBVSAI's motion for reconsideration in its
26 February 2002 Resolution.
Hence, this petition.
The Issues
This case raises the following issues:
1. Whether the Secretary of Labor or his duly authorized
representatives acquired jurisdiction over EBVSAI; and
2. Whether the Secretary of Labor or his duly authorized
representatives have jurisdiction over the money claims of private
respondents which exceed P5,000.

The Ruling of the Court

The petition has no merit.
On the Regional Director's Jurisdiction over EBVSAI

EBVSAI claims that the Regional Director did not acquire jurisdiction over
EBVSAI because he failed to comply with Section 11, Rule 14 of the 1997
Rules of Civil Procedure.18 EBVSAI points out that the notice of hearing was
served at the Ambuklao Plant, not at EBVSAI's main office in Makati, and that
it was addressed to Leonardo Castro, Jr., EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the Regional
Offices19 (rules) specifically state that notices and copies of orders shall be
served on the parties or their duly authorized representatives at their last
known address or, if they are represented by counsel, through the latter.20
The rules shall be liberally construed21 and only in the absence of any
applicable provision will the Rules of Court apply in a suppletory character.22
In this case, EBVSAI does not deny having received the notices of hearing.
In fact, on 29 March and 13 June 1996, Danilo Burgos and Edwina Manao,
detachment commander and bookkeeper of EBVSAI, respectively, appeared
before the Regional Director. They claimed that the 22 March 1996 notice of
hearing was received late and manifested that the notices should be sent to
the Manila office. Thereafter, the notices of hearing were sent to the Manila
office. They were also informed of EBVSAI's violations and were asked to
present the employment records of the private respondents for verification.
They were, moreover, asked to submit, within 10 days, proof of compliance
or their position paper. The Regional Director validly acquired jurisdiction
over EBVSAI. EBVSAI can no longer question the jurisdiction of the Regional
Director after receiving the notices of hearing and after appearing before the
Regional Director.
On the Regional Director's Jurisdiction over the Money Claims
EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the
Labor Arbiter, not the Regional Director, has exclusive and original
jurisdiction over the case because the individual monetary claim of private
respondents exceeds P5,000. EBVSAI also argues that the case falls under
the exception clause in Article 128(b) of the Labor Code. EBVSAI asserts
that the Regional Director should have certified the case to the Arbitration
Branch of the National Labor Relations Commission (NLRC) for a full-blown
hearing on the merits.
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code,
the Labor Arbiter has jurisdiction to hear and decide cases where the
aggregate money claims of each employee exceeds P5,000.00, said
provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized

representatives.
Rather, said powers are defined and set forth in Article 128 of the
Labor Code (as amended by R.A. No. 7730) thus:
Art. 128 Visitorial and enforcement power. --- x x x
(b) Notwithstanding the provisions of Article[s] 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.
xxxx
The aforequoted provision explicitly excludes from its coverage
Articles 129 and 217 of the Labor Code by the phrase
"(N)otwithstanding the provisions of Articles 129 and 217of this Code
to the contrary x x x" thereby retaining and further strengthening the
power of the Secretary of Labor or his duly authorized
representatives to issue compliance orders to give effect to the labor
standards provisions of said Code and other labor legislation based
on the findings of labor employment and enforcement officer or
industrial safety engineer made in the course of inspection. 23 (Italics
in the original)
This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v.
Sensing,24 where we sustained the jurisdiction of the DOLE Regional Director
and held that "the visitorial and enforcement powers of the DOLE
Regional Director to order and enforce compliance with labor standard
laws can be exercised even where the individual claim exceeds P5,000."
However, if the labor standards case is covered by the exception clause in
Article 128(b) of the Labor Code, then the Regional Director will have to

endorse the case to the appropriate Arbitration Branch of the NLRC. In order
to divest the Regional Director or his representatives of jurisdiction, the
following elements must be present: (a) that the employer contests the
findings of the labor regulations officer and raises issues thereon; (b) that in
order to resolve such issues, there is a need to examine evidentiary matters;
and (c) that such matters are not verifiable in the normal course of
inspection.25 The rules also provide that the employer shall raise such
objections during the hearing of the case or at any time after receipt of the
notice of inspection results.26
In this case, the Regional Director validly assumed jurisdiction over the
money claims of private respondents even if the claims exceeded P5,000
because such jurisdiction was exercised in accordance with Article 128(b) of
the Labor Code and the case does not fall under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor
regulations officer during the hearing or after receipt of the notice of
inspection results. It was only in its supplemental motion for reconsideration
before the Regional Director that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the
claims of private respondents. But even if this was the case, the Regional
Director and the Secretary of Labor still looked into and considered EBVSAI's
documentary evidence and found that such did not warrant the reversal of
the Regional Director's order. The Secretary of Labor also doubted the
veracity and authenticity of EBVSAI's documentary evidence. Moreover, the
pieces of evidence presented by EBVSAI were verifiable in the normal
course of inspection because all employment records of the employees
should be kept and maintained in or about the premises of the workplace,
which in this case is in Ambuklao Plant, the establishment where private
respondents were regularly assigned.27
WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001
Decision and the 26 February 2002 Resolution of the Court of Appeals in CAG.R. SP No. 57653.
SO ORDERED.

G.R. No. 171275

July 13, 2009

VICTOR METEORO, REY CAGA, JIMMY CORONEL, COSME TAMOR,

FELIXES LATONERO, ENRIQUE SALAZAR, MAYLA LAQUI, ORLY
BANUA, BERNARDO MADRID, ARIEL REYES, ALFREDO REYES,
JAVIER TIMERESA, ARMANDO MACA, JR., ROLANDO FALQUERA,
JOSE BENITEZ, RODOLFO TIMERESA, ROLANDO LUCENA, NOEL
SUBTINIENTE, GUILLERMA QUIMADO, BENIGNO REGALADO, RANDY
DELA CRUZ, JUVY MACA, AMBROSIO CANARIA, JR., FELICIANO
PAJARO, PETER BADIANA, DANILO JORDAN, DENNIS EDIESCA,
JOGIL AVILA, ABRAHAM BURCE, ONOFRE VINAS, DENNIS VITARA,
ARIEL GALUPO and ALBERT AUSTERO, Petitioners,
vs.
CREATIVE CREATURES, INC., Respondent.
DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari are the Court of Appeals
Decision1 dated May 31, 2005 and Resolution2 dated January 27, 2006 in
CA-G.R. SP No. 76942.
The facts of the case are as follows:
Respondent is a domestic corporation engaged in the business of producing,
providing, or procuring the production of set designs and set construction
services for television exhibitions, concerts, theatrical performances, motion
pictures and the like. It primarily caters to the production design requirements
of ABS-CBN Broadcasting Corporation in Metro Manila and nationwide. 3 On
the other hand, petitioners were hired by respondent on various dates as
artists, carpenters and welders. They were tasked to design, create,
assemble, set-up and dismantle props, and provide sound effects to
respondents various TV programs and movies.4
Sometime in February and March 1999, petitioners filed their respective
complaints for non-payment of night shift differential pay, overtime pay,
holiday pay, 13th month pay, premium pay for Sundays and/or rest days,
service incentive leave pay, paternity leave pay, educational assistance, rice
benefits, and illegal and/or unauthorized deductions from salaries against
respondent, before the Department of Labor and Employment (DOLE),
National Capital Region (NCR). Their complaints were consolidated and

docketed as NCR00-9902-IS-011.5
After the inspection conducted at respondents premises, the labor inspector
noted that "the records were not made available at the time of the
inspection;" that respondent claimed that petitioners were contractual
employees and/or independent talent workers; and that petitioners were
required to punch their cards.6
In its position paper, respondent argued that the DOLE-NCR had no
jurisdiction over the complaint of the petitioners because of the absence of
an employer-employee relationship. It added that petitioners were free-lance
individuals, performing special services with skills and expertise inherently
exclusive to them like actors, actresses, directors, producers, and script
writers, such that they were treated as special types of workers. 7
Petitioners, on the other hand, averred that they were employees of
respondent, as the elements of an employer-employee relationship existed.
Meanwhile, on April 12, 1999, petitioners filed a complaint for illegal dismissal
against petitioner, with prayer for payment of overtime pay, premium pay for
holiday and rest day, holiday pay, service incentive leave pay, 13th month
pay and attorneys fees before the National Labor Relations Commission
(NLRC). The case was docketed as NLRC-NCR Case No. 00-04-04459-9. 8
On October 11, 1999, DOLE Regional Director Maximo Baguyot Lim issued
an Order9 directing respondent to pay petitioners the total amount of
P2,694,709.00. The dispositive portion of the Order reads as follows:
WHEREFORE, premises considered, this Office finds merit in the complaint.
Accordingly, Respondent Creative Creatures, Inc. and/or Mr. Edmond Ty, is
hereby ordered to pay thirty three (33) Complainants, within ten (10) days
from receipt hereof, the total amount of TWO MILLION SIX HUNDRED
NINETY FOUR THOUSAND SEVEN HUNDRED NINE PESOS
(P2,694,709.00) representing unpaid 13th month pay, vacation and sick
leave benefits, regular holiday pay, rest day and holiday premiums, overtime
pay, educational allowance, and rice allowance presented as follows:
xxxx
Failure to pay Complainants within the given period will constrain this Office
to issue a WRIT OF EXECUTION for the immediate enforcement of this
order.
SO ORDERED.

10

The Regional Director sustained petitioners claim on the existence of an

employer-employee relationship using the determinants set forth by the
Labor Code, specifically, the elements of control and supervision, power of
dismissal, payment of wages, and the selection and engagement of
employees. He added that since the petitioners had worked for more than
one year doing the same routine work, they were regular employees with
respect to the activity in which they were employed. Lastly, he upheld the
DOLE-NCRs jurisdiction to hear and determine cases in violation of labor
standards law.11
On appeal, then DOLE Secretary Patricia A. Sto. Tomas affirmed the findings
of the DOLE Regional Director.12 In upholding the jurisdiction of the DOLENCR, she explained that the Secretary of Labor or his duly authorized
representative is allowed to use his visitorial and enforcement powers to give
effect to labor legislation, regardless of the amount involved, pursuant to
Article 128 of the Labor Code, as amended by Republic Act (R.A.) No. 7730.
For failure to obtain a favorable decision, respondent elevated the matter to
the Court of Appeals in CA-G.R. SP No. 76942. On May 31, 2005, the
appellate court rendered the assailed decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, the instant petition is GRANTED. For
lack of jurisdiction, the Orders dated October 18, 2002 and February 5, 2003,
issued by respondent Secretary are hereby declared NULL and VOID.
However, in view of the filing of a similar case before the NLRC, referral of
the instant case to the NLRC for appropriate determination is no longer
necessary.
SO ORDERED.13
While recognizing the visitorial and enforcement powers of the Regional
Director and his jurisdiction to entertain money claims, the appellate court
noted that Article 128 of the Labor Code provides an instance when he
(Regional Director) may be divested of jurisdiction. The CA pointed out that
respondent had consistently disputed the existence of employer-employee
relationship, thereby placing the case beyond the jurisdiction of the Regional
Director.
Petitioners now come before this Court in this petition for review on certiorari
raising the lone issue of:
Whether or not the Court of Appeals committed an error when it ruled that the
instant case falls within the exception clause of Article 128 (b) of the Labor
Code, as amended, and in annulling and setting aside the Orders of the

Secretary of Labor which affirmed the Order of the Regional Director of

DOLE-NCR awarding the claims of the petitioners for benefits under the
Labor Standards laws, namely, 13th month benefit, overtime pay, night shift
differentials, premium on rest days, vacation and sick leave and other
benefits accorded to employees of the responden[t] in the exercise of its
visitorial powers pursuant to Article 128 (b) of the Labor Code as
amended.141avvphi1
In fine, we are tasked to determine which body/tribunal has jurisdiction over
petitioners money claims --- the DOLE Secretary or his duly authorized
representative, or the NLRC.
We sustain the appellate courts conclusion that the instant case falls within
the exclusive jurisdiction of the NLRC.
The DOLE Secretary and her authorized representatives, such as the DOLENCR Regional Director, have jurisdiction to enforce compliance with labor
standards laws under the broad visitorial and enforcement powers conferred
by Article 128 of the Labor Code, and expanded by Republic Act (R.A.) No.
7730,15 to wit:16

course of inspection.
xxxx
As it is now worded, and as consistently held in a number of cases, 17 the
visitorial and enforcement powers of the Secretary, exercised through his
representatives, encompass compliance with all labor standards laws and
other labor legislation, regardless of the amount of the claims filed by
workers.
It is well to note that the Regional Directors visitorial and enforcement
powers have undergone a series of amendments. Confusion was
engendered with the promulgation of the decision in Servandos Inc. v.
Secretary of Labor and Employment.18 In that case, this Court held that to
harmonize Articles 217 (a) (6),19 129,20 and 128 of the Labor Code, the
Secretary of Labor should be deemed as clothed with plenary visitorial
powers to order the inspection of all establishments where labor is employed,
and to look into all possible violations of labor laws and regulations; but the
power to hear and decide employees claims exceeding P5,000.00 for each
employee should be left to the Labor Arbiter as the exclusive repository of the
power to hear and decide such claims.

Art. 128. Visitorial and Enforcement Power

(a) The Secretary of Labor or his duly authorized representatives,
including labor regulation officers, shall have access to employers
records and premises at anytime 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 Article 129 and 217 of this
Code to the contrary, and in cases where the relationship of
employer-employee relation 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

Jurisprudence, however, rendered the Servando ruling inapplicable. In Guico,

Jr. v. Quisumbing,21 Allied Investigation Bureau, Inc. v. Sec. of Labor,22 and
Cirineo Bowling Plaza, Inc. v. Sensing,23 we had occasion to explain that
while it is true that under Articles 129 and 217 of the Labor Code, the Labor
Arbiter has jurisdiction to hear and decide cases where the aggregate money
claim of each employee exceeds P5,000.00, these provisions of law do not
contemplate or cover the visitorial and enforcement powers of the Secretary
of Labor or his duly authorized representatives. Thus, we upheld the
jurisdiction of the Regional Director, notwithstanding the fact that the amount
awarded exceeded P5,000.00 per employee.
In order to do away with the jurisdictional limitations imposed by the
Servando ruling and to finally settle any lingering doubts on the extent of the
visitorial and enforcement powers of the Secretary of Labor and
Employment, R.A. 7730 was enacted, amending Article 128 (b) to its present
formulation, so as to free it from the jurisdictional restrictions found in Articles
129 and 217.
This notwithstanding, the power of the Regional Director to hear and decide
the monetary claims of employees is not absolute. The last sentence of
Article 128 (b) of the Labor Code, otherwise known as the "exception
clause," provides an instance when the Regional Director or his
representatives may be divested of jurisdiction over a labor standards case.

Under prevailing jurisprudence, the so-called "exception clause" has the

following elements, all of which must concur:
(a) that the employer contests the findings of the labor regulations
officer and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and
(c) that such matters are not verifiable in the normal course of
inspection.24
In the present case, the CA aptly applied the "exception clause." At the
earliest opportunity, respondent registered its objection to the findings of the
labor inspector. The labor inspector, in fact, noted in its report that
"respondent alleged that petitioners were contractual workers and/or
independent and talent workers without control or supervision and also
supplied with tools and apparatus pertaining to their job." 25 In its position
paper, respondent again insisted that petitioners were not its employees. It
then questioned the Regional Directors jurisdiction to entertain the matter
before it, primarily because of the absence of an employer-employee
relationship. Finally, it raised the same arguments before the Secretary of
Labor and the appellate court. It is, therefore, clear that respondent
contested and continues to contest the findings and conclusions of the labor
inspector.
To resolve the issue raised by respondent, that is, the existence of an
employer-employee relationship, there is need to examine evidentiary
matters. The following elements constitute the reliable yardstick to determine
such relationship: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power
to control the employees conduct.26 There is no hard and fast rule designed
to establish the aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts,
payrolls, organization charts, and personnel lists, serve as evidence of
employee status.27 These pieces of evidence are readily available, as they
are in the possession of either the employee or the employer; and they may
easily be looked into by the labor inspector (in the course of inspection) when
confronted with the question of the existence or absence of an employeremployee relationship.
Some businessmen, however, try to avoid an employer-employee
relationship from arising in their enterprises, because that juridical relation
spawns obligations connected with workmens compensation, social security,

medicare, termination pay, and unionism.28 Thus, in addition to the abovementioned documents, other pieces of evidence are considered in
ascertaining the true nature of the parties relationship. This is especially true
in determining the element of "control." The most important index of an
employer-employee relationship is the so-called "control test," that is,
whether the employer controls or has reserved the right to control the
employee, not only as to the result of the work to be done, but also as to the
means and methods by which the same is to be accomplished. 29
In the case at bar, whether or not petitioners were independent
contractors/project employees/free lance workers is a question of fact that
necessitates the examination of evidentiary matters not verifiable in the
normal course of inspection. Indeed, the contracts of independent services,
as well as the check vouchers, were kept and maintained in or about the
premises of the workplace and were, therefore, verifiable in the course of
inspection. However, respondent likewise claimed that petitioners were not
precluded from working outside the service contracts they had entered into
with it (respondent); and that there were instances when petitioners
abandoned their service contracts with the respondent, because they had to
work on another project with a different company. Undoubtedly, the resolution
of these issues requires the examination of evidentiary matters not verifiable
in the normal course of inspection. Verily, the Regional Director and the
Secretary of Labor are divested of jurisdiction to decide the case.
We would like to emphasize that "to contest" means to raise questions as to
the amounts complained of or the absence of violation of labor standards
laws; or, as in the instant case, issues as to the complainants right to labor
standards benefits. To be sure, raising lack of jurisdiction alone is not the
"contest" contemplated by the exception clause.30 It is necessary that the
employer contest the findings of the labor regulations officer during the
hearing or after receipt of the notice of inspection results. 31 More importantly,
the key requirement for the Regional Director and the DOLE Secretary to be
divested of jurisdiction is that the evidentiary matters be not verifiable in the
course of inspection. Where the evidence presented was verifiable in the
normal course of inspection, even if presented belatedly by the employer, the
Regional Director, and later the DOLE Secretary, may still examine it; and
these officers are not divested of jurisdiction to decide the case. 32
In sum, respondent contested the findings of the labor inspector during and
after the inspection and raised issues the resolution of which necessitated
the examination of evidentiary matters not verifiable in the normal course of
inspection. Hence, the Regional Director was divested of jurisdiction and
should have endorsed the case to the appropriate Arbitration Branch of the
NLRC.33 Considering, however, that an illegal dismissal case had been filed
by petitioners wherein the existence or absence of an employer-employee
relationship was also raised, the CA correctly ruled that such endorsement

was no longer necessary.

During the proceedings a quo, herein respondents submitted the following

averments:

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

The Court of Appeals Decision dated May 31, 2005 and its Resolution dated
January 27, 2006 in CA-G.R. SP No. 76942, are AFFIRMED.
SO ORDERED.

The respondents were hired by Norkis Trading, a domestic corporation

engaged in the business of manufacturing and marketing of Yamaha
motorcycles and multi-purpose vehicles, on separate dates and for various
positions, particularly:
Name

G.R. No. 182018

October 10, 2012

NORKIS TRADING CORPORATION, Petitioner,

vs.
JOAQUIN BUENA VISTA, HENRY FABROA, RICARDO CAPE,
BERTULDO TULOD, WILLY DONDOY ANO and GLEN VILLARASA,
Respondents.
DECISION
REYES, J.:
Before us is a Petition for Review on Certiorari filed by petitioner Norkis
Trading Corporation (Norkis Trading) to assail the Decision1 dated May 7,
2007 and Resolution2 dated March 4, 2008 of the Court of Appeals (CA) in
CA-G.R. SP No. 84041.
The Facts
The petition stems from an amended complaint for illegal suspension, illegal
dismissal, unfair labor practice and other monetary claims filed with the
National Labor Relations Commission (NLRC) by herein respondents
Joaquin Buenavista (Buenavista), Henry Fabroa (Fabroa), Ricardo Cape
(Cape), Bertuldo Tulod (Tulod), Willy Dondoyano (Dondoyano) and Glen
Villariasa (Villariasa) against Norkis Trading and Panaghiusa sa Kauswagan
Multi-Purpose Cooperative (PASAKA). The complaint was docketed as
NLRC-RAB-VII Case No. 09-1402-99.

Date of
Hiring

Position

Joaquin
Buenavista

March 14,
1994

Operator

January 5,
1993

Welder

Henry
Fabroa

January
1993

Welder/Ope
rator

Ricardo
Cape

Bertuldo
Tulod

Welder/Assi
stant
Operator

November
13, 1994

Willy
Dondoyano

Welder

January
1993

Glen
Villariasa

Welder3

February
1993

Although they worked for Norkis Trading as skilled workers assigned in the
operation of industrial and welding machines owned and used by Norkis
Trading for its business, they were not treated as regular employees by
Norkis Trading. Instead, they were regarded by Norkis Trading as members
of PASAKA, a cooperative organized under the Cooperative Code of the
Philippines, and which was deemed an independent contractor that merely
deployed the respondents to render services for Norkis Trading. 4 The
respondents nonetheless believed that they were regular employees of
Norkis Trading, citing in their Position Paper5 the following circumstances that
allegedly characterized their employment with the company:
The work of the operators involves operating industrial machines, such as,
press machine, hydraulic machine, and spotweld machine. On the other
hand, the welders used the welding machines. The machines used by
complainants herein respondents in their work are all owned by respondent

Norkis Trading herein petitioner and these are installed and located in the
working area of the complainants inside the companys premises.
The complainants produced steel crates which are exported directly by
respondent Norkis Trading to Japan. These crates are used as containers of
motorcycle machines and are shipped from Japan back to respondent Norkis
Trading.

from PASAKA, now charging them with the following violations of the
cooperatives rules and regulations: (1) serious misconduct or willful
disobedience of superiors instructions or orders; (2) gross and habitual
neglect of duties by abandoning work without permission; (3) absences
without filing leave of absence; and (4) wasting time or loitering on
companys time or leaving their post temporarily without permission during
office hours.11 Copies of the memoranda12 sent to Fabroa and Cape form part
of the records.

The materials and supplies used by complainants in their work are supplied
by respondent Norkis Trading through Benjamin Gulbin, the companys
Stockman, upon the request of Tirso Maslog, a Leadman also employed by
respondent Norkis Trading.

On August 26, 1999, PASAKA informed the respondents of the cooperatives

decision to suspend them for fifteen (15) working days, to be effective from
September 1 to 21, 1999, for violation of PASAKA rules.

Respondent Norkis Trading gave instructions and supervised the work of

complainants through Edwin Ponce and Kiven Alilin, who are both Leadmen,
and Rico Cabanas, who is the Production Supervisor, of the former.

The records include copies of the memoranda13 sent to Fabroa and Cape.
The suspension prompted the respondents to file with the NLRC the
complaint for illegal suspension against Norkis Trading and PASAKA.

The salaries of complainants are paid inside the premises of respondent

Norkis Trading by Dalia Rojo and Belen Rubio, who are also employees of
the said company assigned at the accounting office.

The 15-day suspension of the respondents was extended for another period
of 15 days, from September 22, 1999 to October 12, 1999. 14 Copies of
PASAKAs separate letters15 to Buenavista, Fabroa, Cape and Dondoyano on
the cooperatives decision to extend the suspension form part of the records.

Despite having served respondent Norkis Trading for many years and
performing the same functions as regular employees, complainants were not
accorded regular status. It was made to appear that complainants are not
employees of said company but that of respondent PASAKA. 6
Against the foregoing scenario, the respondents, together with several other
complainants,7 filed on June 9, 1999 with the Department of Labor and
Employment (DOLE) a complaint against Norkis Trading and PASAKA for
labor-only contracting and non-payment of minimum wage and overtime pay.
The complaint was docketed as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting allegedly led to the
suspension of the respondents membership with PASAKA. On July 22,
1999, they were served by PASAKA with memoranda charging them with a
violation of the rule against commission of acts injurious or prejudicial to the
interest or welfare of the cooperative. The memoranda cited that the
respondents filing of a case against Norkis Trading had greatly prejudiced
the interest and welfare of the cooperative.8 In their answer9 to the
memoranda, the respondents explained that they merely wanted to be
recognized as regular employees of Norkis Trading. The case records
include copies of the memoranda sent to respondents Buenavista, Fabroa
and Dondoyano.10
On August 16, 1999, the respondents received another set of memoranda

On October 13, 1999, the respondents were to report back to work but during
the hearing in their NLRC case, they were informed by PASAKA that they
would be transferred to Norkis Tradings sister company, Porta Coeli
Industrial Corporation (Porta Coeli), as washers of Multicab vehicles.
The respondents opposed the transfer as it would allegedly result in a
change of employers, from Norkis Trading to Porta Coeli. The respondents
also believed that the transfer would result in a demotion since from being
skilled workers in Norkis Trading, they would be reduced to being utility
workers.These circumstances made the respondents amend their complaint
for illegal suspension, to include the charges of unfair labor practice, illegal
dismissal, damages and attorneys fees.
For their part, both Norkis Trading and PASAKA claimed that the respondents
were not employees of Norkis Trading. They insisted that the respondents
were members of PASAKA, which served as an independent contractor that
merely supplied services to Norkis International Co., Inc. (Norkis
International) pursuant to a job contract16 which PASAKA and Norkis
International executed on January 14, 1999 for 121,500 pieces of F/GFSeries Reinforcement Production. After PASAKA received reports from its
coordinator at Norkis International of the respondents low efficiency and
violation of the cooperatives rules, and after giving said respondents the
chance to present their side, a penalty of suspension was imposed upon

them by the cooperative. The illegal suspension being complained of was

then not linked to the respondents employment, but to their membership with
PASAKA.
Norkis Trading stressed that the respondents were deployed by PASAKA to
Norkis International, a company that is entirely separate and distinct from
Norkis Trading.

amounting to dismissal. We do not however, agree as their transfer to

another post was only the best option available in order to save the
contractual relations between their cooperative (PASAKA) and Norkis
Trading.19
The allegation of unfair labor practice and claim for monetary awards were
likewise rejected by the LA. Feeling aggrieved, the respondents appealed
from the decision of the LA to the NLRC.

The Ruling of the Labor Arbiter

On June 1, 2000, Labor Arbiter Jose G. Gutierrez (LA Gutierrez) dismissed
the complaint via a Decision17 with decretal portion that reads:
WHEREFORE, the foregoing premises considered, judgment is hereby
rendered DISMISSING this case for lack of merit. Complainants herein
respondents are however directed to report back to respondent PASAKA for
work assignment within ten (10) days from receipt of this decision. Likewise,
respondent PASAKA is directed to accept the complainants back for work.
SO ORDERED.18
LA Gutierrez sustained the suspension imposed by PASAKA upon the
respondents, taking into account the offenses that the said respondents were
found to have committed. He likewise rejected the respondents claim of
illegal dismissal. He ruled that to begin with, the respondents had failed to
prove with convincing evidence that they were dismissed from employment.
The Decision reads in part:

In the meantime, DOLE Regional Director Melencio Q. Balanag (Regional

Director Balanag) issued on August 22, 2000 his Order20 in LSED Case No.
RO700-9906-CI-CS-168. Regional Director Balanag ruled that PASAKA was
engaged in labor-only contracting.21 The other findings in his Order that are
significant to this case are as follows: (1) PASAKA had failed to prove that it
had substantial capital;22 (2) the machineries, equipment and supplies used
by the respondents in the performance of their duties were all owned by
Norkis Trading and not by PASAKA;23 (3) the respondents membership with
PASAKA as a cooperative was inconsequential to their employment with
Norkis Trading;24 (4) Norkis Trading and PASAKA failed to prove that their
sub-contracting arrangements were covered by any of the conditions set
forth in Section 6 of Department Order No. 10, Series of 1997; 25 (5) Norkis
Trading and PASAKA failed to dispute the respondents claim that their work
was supervised by leadmen and production supervisors of Norkis Trading; 26
and (6) Norkis Trading and PASAKA failed to dispute the respondents
allegation that their salaries were paid by employees of Norkis Trading. 27
Norkis Trading and PASAKA were then declared solidarily liable for the
monetary claims of therein complainants, as provided in the dispositive
portion of Regional Director Balanags Order, to wit:

Before the legality or illegality of a dismissal can be put in issue, the fact of
dismissal itself must, first, be clearly established. In the instant case, We find
that complainants herein respondents failed to prove with convincing
evidence the fact that they were dismissed from employment. This
observation is derived from their very own allegation in their position paper.
The first paragraph of page 5 of the complainants position paper clearly
shows that they were not yet dismissed from their employment. The said
paragraph states:

WHEREFORE, respondent PANAGHIUSA SA KAUSWAGAN

MULTIPURPOSE COOPERATIVE and/or NORKIS TRADING
CORPORATION are hereby ORDERED to pay solidarily the amount of
THREE HUNDRED THIRTEEN THOUSAND THREE HUNDRED FIFTYFOUR AND 50/100 ([P]313,354.50) PESOS, Philippine Currency, within ten
(10) calendar days from receipt hereof to herein complainants x x x:

"Convinced that the company is bent on terminating their services,

complainants amended their complaint to include the charges of unfair labor
practice, illegal dismissal, damages and attorneys fees."

SO ORDERED.28

The truth, as the record would show is that, complainants were only offered
another post in order to save the contractual relations between their
cooperative and Norkis Trading as the latter finds the complainants
performance not satisfactory. The complainants took this offer as a demotion

xxxx

The respondents informed the NLRC of Regional Director Balanags Order

by filing a Manifestation29 dated September 11, 2000, attaching thereto a
copy of the Order dated August 22, 2000.
It bears mentioning that Regional Director Balanags Order was later affirmed

by then DOLE Secretary Patricia Sto. Tomas (Sec. Sto. Tomas) in her Orders
dated February 7, 2002 and October 14, 2002.30 When the rulings of the
DOLE Secretary were appealed before the CA via the petitions for certiorari
docketed as CA-G.R. SP No. 73880 and CA-G.R. SP No. 74619, the CA
affirmed the Orders of the DOLE Secretary.31 A motion for reconsideration of
the CA decision was denied in a Resolution32 dated October 9, 2007. The two
petitions docketed as G.R. Nos. 180078-79, which were brought before this
Court to question the CAs rulings, were later denied with finality by this Court
in the Resolutions dated December 5, 200733 and April 14, 2008.34
The Ruling of the NLRC
On April 18, 2002, the NLRC rendered its Decision35 affirming with
modification the decision of LA Gutierrez. It held that the respondents were
not illegally suspended from work, as it was their membership in the
cooperative that was suspended after they were found to have violated the
cooperatives rules and regulations. It also declared that the respondents
dismissal was not established by substantial evidence. The NLRC however
declared that the LA had no jurisdiction over the dispute because the
respondents were not employees, but members of PASAKA. The suspension
of the respondents as members of PASAKA for alleged violation of the
cooperatives rules and regulations was not a labor dispute, but an intracorporate dispute.36 The complaint was also declared to have been filed
against the wrong party because the respondents were found by the NLRC
to have been deployed by PASAKA to Norkis International pursuant to a job
contract.
The dispositive portion of the NLRCs Decision reads:
WHEREFORE, the Decision dated June 1, 2000 of the Labor Arbiter is
AFFIRMED, with respect to the DISMISSAL of the complainants herein
respondents for lack of merit [sic], but deleting the portion directing the
complainants to report back to respondent PASAKA for work assignment and
to accept them back to work being an internal concern of PASAKA.
SO ORDERED.37
The respondents motion for reconsideration was denied by the NLRC in a
Resolution38 dated December 18, 2003. Undaunted, the respondents
questioned the NLRCs rulings before the CA via a petition for certiorari.
The Ruling of the CA
Finding merit in the petition for certiorari, the CA rendered its decision
reversing and setting aside the decision and resolution of the NLRC. The

dispositive portion of its Decision dated May 7, 2007 reads:

WHEREFORE, the petition is GRANTED. The assailed Decision and
Resolution of the NLRC, are hereby REVERSED and SET ASIDE, and a new
judgment is hereby rendered ordering the private respondents to:
(1) Reinstate petitioners to their former positions without loss of seniority
rights, and to pay full backwages inclusive of allowances and their other
benefits or their monetary equivalent computed from the time of illegal
dismissal to the time of actual reinstatement; and
(2) Alternatively, if reinstatement is not possible, to pay full backwages
inclusive of other benefits or their monetary equivalent from the time of illegal
dismissal until the same is paid in full, and pay petitioners separation pay
equivalent to one months salary for every year of service.
SO ORDERED.39
The CA rejected the argument of PASAKA and Norkis Trading that by virtue
of a job contract executed on January 14, 1999, the respondents were
deployed to Norkis International and not to Norkis Trading. The CA held:
We are not convinced. Private respondents among them, herein petitioner
own evidence belie their claim.
In its Comment, NORKIS TRADING attached the Payroll Registers for
PANAGHIUSA SA KAUSWAGAN (PASAKA) MULTIPURPOSE
COOPERATIVE-NICI Tin Plate covering the payroll periods "12/28/9801/07/99" and "01/08/99-01/14/99". Included among the payees therein were
the petitioners herein respondents. x x x Why were petitioners included in
said payrolls for said payroll periods when the supposed Contract with
NORKIS INTERNATIONAL was not yet executed? Apparently, private
respondents slipped. Thus, we hold that the much ballyhooed January 14,
1999 Contract between PASAKA and NORKIS INTERNATIONAL, is but a
mere afterthought, a concoction designed by private respondents to evade
their obligations to petitioners.40 (Citations omitted and emphasis supplied)
The CA also considered Regional Director Balanags finding in LSED Case
No. RO700-9906-CI-CS-168 that PASAKA was engaged in labor-only
contracting. In ruling that the respondents were illegally dismissed, the CA
held that Norkis Tradings refusal to accept the respondents back to their
former positions, offering them instead to accept a new assignment as
washers of vehicles in its sister company, was a demotion that amounted to a
constructive dismissal.

Norkis Tradings motion for reconsideration was denied by the CA in its

Resolution41 dated March 4, 2008. Hence, this petition.

when there is a showing that they

were arrived at arbitrarily or in
disregard of evidence on record.

The Present Petition

The petition is founded on the following grounds:
1) THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS WHEN IT MADE ITS OWN
FACTUAL FINDINGS AND DISREGARDED THE UNIFORM AND
CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE
NLRC, WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND
EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS EXCEEDED
ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF
COURT BECAUSE SUCH FACTUAL FINDINGS WERE BASED ON
SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC] ON RECORD.
2) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION
IN ALLEGEDLY IGNORING THE RULING OF THE REGIONAL DIRECTOR.
3) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT PETITIONER IS THE EMPLOYER OF RESPONDENTS.
4) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN
RULING THAT THE RESPONDENTS WERE CONSTRUCTIVELY
DISMISSED CONTRARY TO THE FACTUAL FINDINGS OF THE LABOR
ARBITER AND THE NLRC AND WITHOUT SHOWING ANY EVIDENCE TO
OVERTURN SUCH FINDING OF FACT.42
The respondents oppose these grounds in their Comment. 43 In support of
their arguments, the respondents submit with their Comment copies of the
CAs Decision44 and Resolution45 in CA-G.R. SP No. 73880 and CA-G.R. SP
No. 74619, and this Courts Resolutions46 in G.R. Nos. 180078-79.
This Courts Ruling
The Court resolves to deny the petition.
Factual findings of labor officials
may be examined by the courts

As regards the first ground, the petitioner questions the CAs reversal of LA
Gutierrezs and the NLRCs rulings, and argues that said rulings should have
been accorded great weight and finality by the appellate court as these were
allegedly supported by substantial evidence.
On this matter, the settled rule is that factual findings of labor officials, who
are deemed to have acquired expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality by the courts when
supported by substantial evidence, i.e., the amount of relevant evidence
which a reasonable mind might accept as adequate to support a conclusion.
We emphasize, nonetheless, that these findings are not infallible. When
there is a showing that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts. The CA can then
grant a petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, has made a factual finding that is not supported by substantial
evidence. It is within the jurisdiction of the CA, whose jurisdiction over labor
cases has been expanded to review the findings of the NLRC. 47
We have thus explained in Cocomangas Hotel Beach Resort v. Visca 48 that
the CA can take cognizance of a petition for certiorari if it finds that the NLRC
committed grave abuse of discretion by capriciously, whimsically, or arbitrarily
disregarding evidence which are material to or decisive of the controversy.
The CA cannot make this determination without looking into the evidence
presented by the parties. The appellate court needs to evaluate the
materiality or significance of the evidence, which are alleged to have been
capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to
all other evidence on record.
This case falls within the exception to the general rule that findings of fact of
labor officials are to be accorded respect and finality on appeal. As our
discussions in the other grounds that are raised in this petition will
demonstrate, the CA has correctly held that the NLRC has disregarded facts
and evidence that are material to the outcome of the respondents case. No
error can be ascribed to the appellate court for making its own assessment of
the facts that are significant to the case to determine the presence or
absence of grave abuse of discretion on the part of the NLRC, even if the
CAs findings turn out to be different from the factual findings of both the LA
and NLRC.
Norkis Trading is the principal
employer of the respondents,

considering that PASAKA is a mere

labor-only contractor.
The second and third grounds, being interrelated as they both pertain to the
CAs finding that an employer-employee relationship existed between the
petitioner and the respondents, shall be discussed jointly. In its decision, the
CA cited the findings of the Regional Director in LSED Case No. RO7009906-CI-CS-168 and declared that the NLRC committed a grave abuse of
discretion when it ignored said findings.
The issue of whether or not the respondents shall be regarded as employees
of the petitioner hinges mainly on the question of whether or not PASAKA is a
labor-only contractor. Labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor merely recruits, supplies,
or places workers to perform a job, work, or service for a principal. In laboronly contracting, the following elements are present: (a) the contractor or
subcontractor does not have substantial capital or investment to actually
perform the job, work, or service under its own account and responsibility;
and (b) the employees recruited, supplied or placed by such contractor or
subcontractor perform activities which are directly related to the main
business of the principal. These differentiate it from permissible or legitimate
job contracting or subcontracting, which refers to an arrangement whereby a
principal agrees to put out or farm out with the contractor or subcontractor
the performance or completion of a specific job, work, or service within a
definite or predetermined period, regardless of whether such job, work, or
service is to be performed or completed within or outside the premises of the
principal. A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur: (a) the contractor carries on
a distinct and independent business and partakes the contract work on his
account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all
matters connected with the performance of his work except as to the results
thereof; (b) the contractor has substantial capital or investment; and (c) the
agreement between the principal and the contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety
and health standards, free exercise of the right to self-organization, security
of tenure, and social welfare benefits.49
We emphasize that the petitioners arguments against the respondents claim
that PASAKA is a labor-only contractor, which is thus to be regarded as a
mere agent of Norkis Trading for which the respondents rendered service,
are already mooted by the finality of this Courts Resolutions dated
December 5, 2007 and April 14, 2008 in G.R. Nos. 180078-79, which stems
from the CAs and the DOLE Secretarys review of the DOLE Regional
Directors Order dated August 22, 2000 in LSED Case No. RO700-9906-CICS-168.

To recapitulate, Regional Director Balanag issued on August 22, 2000 its

Order50 in LSED Case No. RO700-9906-CI-CS-168 and declared PASAKA as
a mere labor-only contractor, and Norkis Trading as the true employer of
herein respondents. He explained that PASAKA failed to prove during the
conduct of a summary investigation that the cooperative had substantial
capital or investment sufficient to enable it to perform the functions of an
independent contractor. The respondents claim that the machinery,
equipment and supplies they used to perform their duties were owned by
Norkis Trading, and not by PASAKA, was undisputed. While PASAKA
reflected in its Statement of Financial Condition for the year 1996 property
and equipment net of accumulated depreciation at P 344,273.02, there was
no showing that the properties covered thereby were actually and directly
used in the conduct of PASAKAs business.51 The DOLE Regional Director
explained:
Herein respondents among them, herein petitioner failed to prove that their
sub-contracting arrangements fall under any of the conditions set forth in
Sec. 6 of D.O. # 10 S. 1997 to qualify as permissible contracting or
subcontracting as provided for as follows:
Sec. 6. Permissible contracting or subcontracting. Subject to conditions set
forth in Sec. 4 (d) and (e) and Section 5 hereof, the principal may engage the
services of a contractor or subcontractor for the performance of any of the
following:
a.) Works or services temporarily or occasionally needed to meet abnormal
increase in the demand of products or services...
b) Works or services temporarily or occasionally needed by the principal for
undertakings requiring expert or highly technical personnel to improve the
management or operations of an enterprise;
c) Services temporarily needed for the introduction or promotion of new
products...;
d) Works or services not directly related or not integral to main business or
operation of the principal including casual work, janitorial, security,
landscaping and messengerial services and work not related to
manufacturing processes in manufacturing establishments.
e) Services involving the public display of manufacturers products...;
f) Specialized works involving the use of some particular, unusual or peculiar
skills... and

g) Unless a reliever system is in place among the regular workforce,

substitute services for absent regular employees...
It is therefore evident that herein respondents are engaged in "labor-only"
contracting as defined in Art. 106 of the Labor Code. Furthermore, such
contracting/sub-contracting arrangement not only falls under labor-only
contracting but also fails to qualify as legitimate subcontracting as defined
under Sec. 4 par. e of D.O. #10 S. 1997, to wit:
"Sec. 4. Definition of terms.
d)
Subject to the provisions of Sections 6, 7 and 8 of this Rule, contracting or
subcontracting shall be legitimate if the following circumstances concur:
i) The contractor or subcontractor 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, and free from the control and direction of the principal in all matters
connected with the performance of the work except to the results thereof;

This Court agrees with the finding of the DOLE Regional Director, as affirmed
by the Secretary of Labor in her assailed Order, that petitioners among them,
herein petitioner were engaged in labor-only contracting.
First. PASAKA failed to prove that it has substantial capitalization or
investment in the form of tools, equipment, machineries, work premises,
among others, to qualify as an independent contractor. PASAKAs claim that
it has machineries and equipment worth P 344,273.02 as reflected in its
Financial Statements and Supplementary Schedules is belied by private
respondents among them, herein respondents evidence which consisted of
pictures showing machineries and equipment which were owned by and
located at the premises of petitioner NORKIS TRADING (as earlier noted,
some of the pictures showed some of the private respondents operating said
machines). Indeed it makes one wonder why, if PASAKA indeed had such
machineries and equipment worth P 344,273.02, private respondents were
using machineries and equipment owned by and located at the premises of
NORKIS TRADING.
Even granting that indeed PASAKA had machineries and equipment worth P
344,273.02, it was not shown that said machineries and equipment were
actually used in the performance or completion of the job, work, or service
that it was contracted to render under its supposed job contract.

ii) The contractor or subcontractor has substantial capital or investment; and

xxxx

iii) The agreement between the principal and contractor or subcontractor

assures the contractual employees entitlement to all labor and occupational
and safety and health standards, free exercise of the right to selforganization, security of tenure and social and welfare benefits." 52 (Emphasis
supplied)

Second. PASAKA likewise did not carry out an independent business from
NORKIS TRADING. While PASAKA was issued its Certificate of Registration
on July 18, 1991, all it could show to prove that it carried out an independent
business as a job contractor were the Project Contract dated January 2,
1998 with NORKIS TRADING, and the Project Contract dated December 18,
1998 with NORKIS INTERNATIONAL. However, as earlier discussed, the
Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL
is nothing more than an afterthought by the petitioners to confuse its workers
and defeat their rightful claims. The same can be said of the Project Contract
with WICKER and VINE, INC., considering that it was executed only on
February 1, 2000. Verily, said contract was submitted only to strengthen
PASAKAs claim that it is a legitimate job contractor.

Together with his finding that PASAKA evidently lacked substantial capital or
investment required from legitimate job contractors, Regional Director
Balanag ruled that the cooperative failed to dispute the respondents
allegation that officers of Norkis Trading supervised their work and paid their
salaries. In conclusion, PASAKA and Norkis Trading were declared solidarily
liable for the monetary awards made in favor of therein claimants-employees,
which included herein respondents. A motion for reconsideration of the Order
was denied by the Regional Director.
Upon appeal, then DOLE Sec. Sto. Tomas affirmed the rulings of Regional
Director Balanag. Both Norkis Trading and PASAKA filed their separate
appeals from the orders of the DOLE Secretary to the CA via the petitions for
certiorari docketed as CA-G.R. SP Nos. 73880 and 74619, but said petitions
were dismissed for lack of merit by the CA in its Decision dated May 7, 2007
and Resolution dated October 9, 2007. The CA held:

Third. Private respondents performed activities directly related to the

principal business of NORKIS TRADING. They worked as welders and
machine operators engaged in the production of steel crates which were sent
to Japan for use as containers of motorcycles that are then sent back to
NORKIS TRADING. Private respondents functions therefore are directly
related and vital to NORKIS TRADINGs business of manufacturing of
Yamaha motorcycles.

All the foregoing considerations affirm by more than substantial evidence that
NORKIS TRADING and PASAKA engaged in labor-only contracting. 53
(Citations omitted and emphasis supplied)
When the case was brought before this Court via the petitions for review on
certiorari docketed as G.R. Nos. 180078-79, we resolved to issue on
December 5, 2007 our Resolution dismissing the appeal for, among other
grounds, the failure of Norkis Trading to sufficiently show any reversible error
in the the CA decision. In our Resolution dated April 14, 2008, we denied with
finality Norkis Tradings motion for reconsideration on the ground that no
substantial argument and compelling reason was adduced to warrant a
reconsideration of our dismissal of the petition. This Courts resolutions,
affirming the findings of the CA, had then become final and executory.
Applying the doctrine of res judicata, all matters that have been fully resolved
with finality by this Courts dismissal of the appeal that stemmed from
Regional Director Balanags Order dated August 22, 2000 in LSED Case No.
RO700-9906-CI-CS-168 are already conclusive between the parties. Res
judicata is defined as a matter adjudged; a thing judicially acted upon or
decided; a thing or matter settled by judgment. Under this doctrine, an
existing final judgment or decree rendered on the merits, and without fraud or
collusion, by a court of competent jurisdiction, upon any matter within its
jurisdiction, is conclusive of the rights of the parties or their privies, in all
other actions or suits in the same or any other judicial tribunal of concurrent
jurisdiction on the points and matters in issue in the first suit.
To state simply, a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies
in all later suits on all points and matters determined in the former suit. 54
Res judicata has two aspects: bar by prior judgment and conclusiveness of
judgment as provided under Section 47(b) and (c), Rule 39, respectively, of
the Rules of Court.55 Under the doctrine of conclusiveness of judgment, facts
and issues actually and directly resolved in a former suit cannot be raised in
any future case between the same parties, even if the latter suit may involve
a different cause of action.56
Clearly, res judicata in the concept of conclusiveness of judgment has set in.
In the proceedings before the Regional Director and the LA, there were
identity of parties and identity of issues, although the causes of action in the
two actions were different. First, herein respondents on the one hand, and
Norkis Trading on the other hand, were all parties in the two cases, being
therein complainants and respondent, respectively. As to the second
requisite, the issue of whether PASAKA was a labor-only contractor which
would make Norkis Trading the true employer of the respondents was the

main issue in the two cases, especially since Norkis Trading had been
arguing in both proceedings that it could not be regarded as the herein
respondents employer, harping on the defense that PASAKA was a
legitimate job contractor.
Similarly, in Dole Philippines, Inc. v. Esteva,57 we held that the finding of the
DOLE Regional Director, which had been affirmed by the Undersecretary of
Labor, by authority of the Secretary of Labor, in an Order that has reached
finality and which provided that the cooperative Cannery Multi-Purpose
Cooperative (CAMPCO) was engaged in labor-only contracting should bind
the NLRC in a case for illegal dismissal. We ruled:
While the causes of action in the proceedings before the DOLE and the
NLRC differ, they are, in fact, very closely related. The DOLE Regional Office
conducted an investigation to determine whether CAMPCO was violating
labor laws, particularly, those on labor-only contracting. Subsequently, it ruled
that CAMPCO was indeed engaging in labor-only contracting activities, and
thereafter ordered to cease and desist from doing so. x x x The matter of
whether CAMPCO was a labor-only contractor was already settled and
determined in the DOLE proceedings, which should be conclusive and
binding upon the NLRC. What were left for the determination of the NLRC
were the issues on whether there was illegal dismissal and whether
respondents should be regularized.
x x x For the NLRC to ignore the findings of DOLE Regional Director Parel
and DOLE Undersecretary Trajano is an unmistakable and serious
undermining of the DOLE officials authority.58
The rule on conclusiveness of judgment then now precludes this Court from
re-opening the issues that were already settled with finality in G.R. Nos.
180078-79, which effectively affirmed the CAs findings that PASAKA was
engaged in labor-only contracting, and that Norkis Trading shall be treated as
the employer of the respondents.
In the present petition, Norkis Trading still argues that the NLRC committed
no grave abuse of discretion in ignoring the findings of Regional Director
Balanag considering that his Order had not yet reached finality at the time
the NLRC resolved the appeal from the decision of the LA. This
notwithstanding, this Court holds that the CA still committed no error in
finding grave abuse of discretion on the part of the NLRC by the latters utter
disregard of the findings of the Regional Director that Norkis Trading should
be considered the employer of herein respondents. As correctly observed by
the CA in the assailed Decision dated May 7, 2007:
Surprisingly, the NLRC failed to consider or even make reference to the said

August 22, 2000 Order of the DOLE Regional Director. Considering the
significance of the DOLE Regional Directors findings, the same cannot just
be perfunctorily rejected. For the NLRC to ignore the findings of DOLE
Regional Director is to undermine or disregard of [sic] the visitorial and
enforcement power of the DOLE Secretary and his authorized
representatives under Article 128 of the Labor Code, as amended. It was
grave abuse of discretion then on the part of the NLRC to ignore or simply
sweep under the rug the findings of the DOLE Regional Director.59 (Citation
omitted and emphasis ours)
A reading of the NLRCs Resolution60 dated December 18, 2003 indicates
that while it was confronted with opposing findings of the Regional Director
and the LA on the material issue of labor-only contracting, it failed to even
attempt to review thoroughly the matter, look into the records, reconcile the
differing judgments and make its own appreciation of the evidence presented
by the parties. Instead, it simply brushed aside the rulings of the Regional
Director, without due consideration of the circumstance that said labor official
had the jurisdiction to rule on the issue pursuant to the visitorial and
enforcement powers of the DOLE Secretary and his duly authorized
representatives under Article 12861 of the Labor Code.
The rule in appeals in labor cases provides that the CA can grant a petition
for certiorari if it finds that the NLRC, in its assailed decision or resolution,
committed grave abuse of discretion by capriciously, whimsically or arbitrarily
disregarding evidence which is material or decisive of the controversy.62
Significantly, the Secretary of Labor had already affirmed Regional Director
Balanags Order when the appeal from the LAs rulings was resolved. In the
NLRC Resolution dated December 18, 2003, the Commission nonetheless
merely held:
The photocopies of the Order of the Honorable Secretary of the Department
of Labor and Employment dated February 7, 2002 and the Order of the
Regional Director of the Regional Office of the Department of Labor and
Employment finding the existence of labor-only contracting between
respondent NORKIS [Trading] and respondent PASAKA do not provide
sufficient basis to disturb Our Decision. We are not convinced that the facts
and evidence, which are totally distinct from this case and which were
presented in a separate proceedings and before another Office, would be a
sufficient and valid basis to divest the Labor Arbiter a quo of his authority
which undoubtedly the law vests upon him as his exclusive jurisdiction. The
jurisdiction conferred by Article 217 of the Labor Code upon the Labor Arbiter
is "original and exclusive", and his authority to hear and decide case[s]
vested upon him is to the exclusion of any other court or quasi-judicial body.
By reason of their training, experience, and expertise, Labor Arbiters are in a
better position to resolve controversies, for which they are conferred original
and exclusive jurisdiction by law. Even Article 218 of the Labor Code does

not empower the Regional Director of the Department of Labor and

Employment to share original and exclusive jurisdiction conferred on the
Labor Arbiter by Article 217 x x x.63
Such utter disregard by the NLRC of the findings of the Regional Director
and DOLE Secretary amounts to grave abuse of discretion amounting to lack
or excess of jurisdiction. As this Courts review of the records would confirm,
a judicious study of the evidence presented by the parties would have
supported the finding that Norkis Trading should be treated as the
respondents true employer, with PASAKA being merely an agent of said
employer. PASAKA failed to sufficiently show that it had substantial capital or
investment in the form of tools, equipment, machineries and work premises
required from legitimate job contractors. The work required from the
respondents, being welders and/or operators of industrial machines, were
also directly related to Norkis Tradings principal business of manufacturing.
The job contract supposedly executed by and between PASAKA and Norkis
International in 1999 deserved nil consideration given that the respondents
had claimed early on that they began working for Norkis Trading on various
dates from 1993 to 1994. Moreover, the records confirm that Norkis Trading
was still among the clients of PASAKA as of July 1999, as clearly indicated in
the memoranda it sent to respondents Buenavista, Fabroa and Dondoyano
on July 22, 1999, which provide:
Please take note that the recent action you have done in filing a case against
one of our clients, Norkis Trading Co., Inc., has greatly prejudiced the interest
and welfare of the Cooperative.64 (Emphasis ours)
This categorical statement of PASAKA that Norkis Trading was among its
clients at the time the memoranda were issued only further bolsters the
respondents claim, and Regional Director Balanags finding, that said
respondents were deployed by PASAKA to Norkis Trading. This also
contradicts petitioners argument that its contract with PASAKA had ended in
1998.65
Finally, contrary to the insinuations of Norkis Trading, the fact that PASAKA
was a duly-registered cooperative did not preclude the possibility that it was
engaged in labor-only contracting, as confirmed by the findings of the
Regional Director. An entity is characterized as a labor-only contractor based
on the elements and guidelines established by law and jurisprudence,
judging primarily on the relationship that the said entity has with the company
to which the workers are deployed, and not on any special arrangement that
the entity has with said workers.
Termination of an employment for
no just or authorized cause

amounts to an illegal dismissal.

As to the issue of whether the respondents were illegally dismissed by Norkis
Trading, we answer in the affirmative, although not by constructive dismissal
as declared by the CA, but by actual dismissal.
Where an entity is declared to be a labor-only contractor, the employees
supplied by said contractor to the principal employer become regular
employees of the latter. Having gained regular status, the employees are
entitled to security of tenure and can only be dismissed for just or authorized
causes and after they had been afforded due process.66 Termination of
employment without just or authorized cause and without observing
procedural due process is illegal.1wphi1
In claiming that they were illegally dismissed from their employment, the
respondents alleged having been informed by PASAKA that they would be
transferred, upon the behest of Norkis Trading, as Multicab washers or utility
workers to Porta Coeli, a sister company of Norkis Trading. Norkis Trading
does not dispute that such job transfer was relayed by PASAKA unto the
respondents, although the company contends that the transfer was merely
an "offer" that did not constitute a dismissal. It bears mentioning, however,
that the respondents were not given any other option by PASAKA and Norkis
Trading but to accede to said transfer. In fact, there is no showing that Norkis
Trading would still willingly accept the respondents to work for the company.
Worse, it still vehemently denies that the respondents had ever worked for it.
Again, all defenses of Norkis Trading that anchor on the alleged lack of
employer-employee relationship between it and the respondents no longer
merit any consideration, given that this Courts findings in G.R. Nos. 18007879 have become conclusive. Thus, the respondents transfer to Porta Coeli,
although relayed to the respondents by PASAKA was effectively an act of
Norkis Trading. Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer and
the employees of the labor-only contractor. The statute establishes this
relationship for a comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal
employer.67
No further evidence or document should then be required from the
respondents to prove such fact of dismissal, especially since Norkis Trading
maintains that it has no duty to admit and treat said respondents as its
employees. Considering that Porta Coeli is an entity separate and distinct
from Norkis Trading, the respondents employment with Norkis Trading was
necessarily severed by the change in work assignment. It then did not even
matter whether or not the transfer involved a demotion in the respondents

rank and work functions; the intention to dismiss, and the actual dismissal of
the respondents were sufficiently established.
In the absence of a clear showing that the respondents dismissal was for just
or authorized causes, the termination of the respondents employment was
illegal. What may be reasonably deduced from the records was that Norkis
Trading decided on the transfer, after the respondents had earlier filed their
complaint for labor-only contracting against the company. Even Norkis
Tradings contention that the transfer may be deemed a valid exercise of
management prerogative is misplaced. First, the exercise of management
prerogative presupposes that the transfer is only for positions within the
business establishment. Second, the exercise of management prerogative by
employers is not absolute, as it is limited by law and the general principles of
fair play and justice.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.
BIENVENIDO L. REYES

G.R. No. 158620

October 11, 2006

DEL MONTE PHILIPPINES, INC. and WARFREDO C. BALANDRA,

petitioners,
vs.
MARIANO SALDIVAR, NENA TIMBAL, VIRGINIO VICERA, ALFREDO
AMONCIO and NAZARIO S. COLASTE, respondents.
The main issue for resolution herein is whether there was sufficient cause for
the dismissal of a rank-and-file employee effectuated through the
enforcement of a closed-shop provision in the Collective Bargaining
Agreement (CBA) between the employer and the union.
The operative facts are uncomplicated.
The Associated Labor Union (ALU) is the exclusive bargaining agent of
plantation workers of petitioner Del Monte Philippines, Inc. (Del Monte) in
Bukidnon. Respondent Nena Timbal (Timbal), as a rank-and-file employee of
Del Monte plantation in Bukidnon, is also a member of ALU. Del Monte and
ALU entered into a Collective Bargaining Agreement (CBA) with an effective

term of five (5) years from 1 September 1988 to 31 August 1993. 1

Timbal, along with four other employees (collectively, co-employees), were
charged by ALU for disloyalty to the union, particularly for encouraging
defections to a rival union, the National Federation of Labor (NFL). The
charge was contained in a Complaint dated 25 March 1993, which
specifically alleged, in relation to Timbal: "That on July 13, 1991 and the
period prior or after thereto, said Nena Timbal personally recruited other
bonafide members of the ALU to attend NFL seminars and has actually
attended these seminars together with the other ALU members." 2 The matter
was referred to a body within the ALU organization, ominously named
"Disloyalty Board."
The charge against Timbal was supported by an affidavit executed on 23
March 1993 by Gemma Artajo (Artajo), also an employee of Del Monte.
Artajo alleged that she was personally informed by Timbal on 13 July 1991
that a seminar was to be conducted by the NFL on the following day. When
Artajo demurred from attending, Timbal assured her that she would be given
honorarium in the amount of P500.00 if she were to attend the NFL meeting
and bring new recruits. Artajo admitted having attended the NFL meeting
together with her own recruits, including Paz Piquero (Piquero). Artajo stated
that after the meeting she was given P500.00 by Timbal.3
Timbal filed an Answer before the Disloyalty Board, denying the allegations in
the complaint and the averments in Artajo's Affidavit. She further alleged that
her husband, Modesto Timbal, had filed a complaint against Artajo for
collection of a sum of money on 17 March 1993, or just six (6) days before
Artajo executed her affidavit. She noted that the allegations against her were
purportedly committed nearly two (2) years earlier, and that Artajo's act was
motivated by hate and revenge owing to the filing of the aforementioned civil
action.4
Nevertheless, the ALU Disloyalty Board concluded that Timbal was guilty of
acts or conduct inimical to the interests of ALU, through a Resolution dated 7
May 1993.5 It found that the acts imputed to Timbal were partisan activities,
prohibited since the "freedom period" had not yet commenced as of that time.
Thus, the Disloyalty Board recommended the expulsion of Timbal from
membership in ALU, and likewise her dismissal from Del Monte in
accordance with the Union Security Clause in the existing CBA between ALU
and Del Monte. The Disloyalty Board also reached the same conclusions as
to the co-employees, expressed in separate resolutions also recommending
their expulsion from ALU.6
On 21 May 1993, the Regional Vice President of ALU adopted the
recommendations of the Disloyalty Board and expelled Timbal7 and her co-

employees from ALU.8 The ALU National President affirmed the expulsion.9
On 17 June 1993, Del Monte terminated Timbal and her co-employees
effective 19 June 1993, noting that the termination was "upon demand of
[ALU] pursuant to Sections 4 and 5 of Article III of the current Collective
Bargaining Agreement."10
Timbal and her co-employees filed separate complaints against Del Monte
and/or its Personnel Manager Warfredo C. Balandra and ALU with the
Regional Arbitration Branch (RAB) of the National Labor Relations
Commission (NLRC) for illegal dismissal, unfair labor practice and
damages.11 The complaints were consolidated and heard before Labor
Arbiter Irving Pedilla. The Labor Arbiter affirmed that all five (5) were illegally
dismissed and ordered Del Monte to reinstate complainants, including
Timbal, to their former positions and to pay their full backwages and other
allowances, though the other claims and charges were dismissed for want of
basis.12
Only Del Monte interposed an appeal with the NLRC. 13 The NLRC reversed
the Labor Arbiter and ruled that all the complainants were validly dismissed. 14
On review, the Court of Appeals ruled that only Timbal was illegally
dismissed.15 At the same time, the appellate court found that Del Monte had
failed to observe procedural due process in dismissing the co-employees,
and thus ordered the company to pay P30,000.00 to each of the coemployees as penalties. The co-employees sought to file a Petition for
Review16 with this Court assailing the ruling of the Court of Appeals affirming
their dismissal, but the petition was denied because it was not timely filed. 17
On the other hand, Del Monte, through the instant petition, assails the Court
of Appeals decision insofar as it ruled that Timbal was illegally dismissed.
Notably, Del Monte does not assail in this petition the award of P30,000.00 to
each of the co-employees, and the ruling of the Court of Appeals in that
regard should now be considered final.
The reason offered by the Court of Appeals in exculpating Timbal revolves
around the problematic relationship between her and Artajo, the complaining
witness against her. As explained by the appellate court:
However, the NLRC should have considered in a different light the
situation of petitioner Nena Timbal. Timbal asserted before the
NLRC, and reiterates in this petition, that the statements of Gemma
Artajo, ALU's sole witness against her, should not be given weight
because Artajo had an ax[e] to grind at the time when she made the
adverse statements against her. Respondents never disputed the
claim of Timbal that in the two (2) collection suits initiated by Timbal
and her husband, Artajo testified for the defendant in the first case

and she was even the defendant in the second case which was won
by Timbal. We find it hard to believe that Timbal would so willingly
render herself vulnerable to expulsion from the Union by revealing to
an estranged colleague her desire to shift loyalty. The strained
relationship between Timbal and Artajo renders doubtful the charge
against the former that she attempted to recruit Artajo to join a rival
union. Inasmuch as the respondents failed to justify the termination
of Timbal's employment, We hold that her reinstatement to her
former position in accordance with the September 27, 1996 decision
of the Labor Arbiter is appropriate.18
The Labor Arbiter, in his favorable ruling to the dismissed employees, had
noted that "complainant Timbal['s] x x x accuser has an axe to grind against
her for an unpaid debt so that her testimony cannot be given credit." 19 The
NLRC, in reversing the Labor Arbiter, did not see it fit to mention the
circumstances of the apparent feud between Timbal and Artajo, except in the
course of narrating Timbal's allegations.
However, in the present petition, Del Monte utilizes a new line of argument in
justifying Timbal's dismissal. While it does not refute the contemporaneous illwill between Timbal and Artajo, it nonetheless alleges that there was a
second witness, Paz Piquero, who testified against Timbal before the
Disloyalty Board.20 Piquero had allegedly corroborated Artajo's allegations
and positively identified Timbal as among those present during the seminar
of the NFL conducted on 14 July 1992 and as having given her transportation
money after the seminar was finished. Del Monte asserts that Piquero was a
disinterested witness against Timbal.21
Del Monte also submits two (2) other grounds for review. It argues that the
decision of the Labor Arbiter, which awarded Timbal full backwages and other
allowances, was inconsistent with jurisprudence which held that an employer
who acted in good faith in dismissing employees on the basis of a closedshop provision is not liable to pay full backwages.22 Finally, Del Monte asserts
that it had, from the incipience of these proceedings consistently prayed that
in the event that it were found with finality that the dismissal of Timbal and
the others is illegal, ALU should be made liable to Del Monte pursuant to the
CBA. The Court of Appeals is faulted for failing to rule upon such claim.
For her part, Timbal observes that Piquero's name was mentioned for the first
time in Del Monte's Motion for Partial Reconsideration of the decision of the
Court of Appeals.23 She claims that both Piquero and Artajo were not in good
terms with her after she had won a civil suit for the collection of a sum of
money against their immediate superior, one Virgie Condeza. 24
The legality of Timbal's dismissal is obviously the key issue in this case. We

are particularly called upon to determine whether at this late stage, the Court
may still give credence to the purported testimony of Piquero and justify
Timbal's dismissal based on such testimony.
It bears elaboration that Timbal's dismissal is not predicated on any of the
just or authorized causes for dismissal under Book Six, Title I of the Labor
Code,25 but on the union security clause in the CBA between Del Monte and
ALU. Stipulations in the CBA authorizing the dismissal of employees are of
equal import as the statutory provisions on dismissal under the Labor Code,
since "[a] CBA is the law between the company and the union and
compliance therewith is mandated by the express policy to give protection to
labor."26 The CBA, which covers all regular hourly paid employees at the
pineapple plantation in Bukidnon,27 stipulates that all present and subsequent
employees shall be required to become a member of ALU as a condition of
continued employment. Sections 4 and 5, Article II of the CBA further state:
ARTICLE II
Section 4. Loss of membership in the UNION shall not be a ground
for dismissal by the Company except where loss of membership is
due to:
1. Voluntary resignation from [ALU] earlier than the expiry
date of this [CBA];
2. Non-payment of duly approved and ratified union dues
and fees; and
3. Disloyalty to [ALU] in accordance with its Constitution and
By-Laws as duly registered with the Department of Labor
and Employment.
Section 5. Upon request of [ALU], [Del Monte] shall dismiss from its
service in accordance with law, any member of the bargaining unit
who loses his membership in [ALU] pursuant to the provisions of the
preceding section. [ALU] assumes full responsibility for any such
termination and hereby agrees to hold [Del Monte] free from any
liability by judgment of a competent authority for claims arising out of
dismissals made upon demand of [ALU], and [the] latter shall
reimburse the former of such sums as it shall have paid therefor.
Such reimbursement shall be deducted from union dues and agency
fees until duly paid.28
The CBA obviously adopts a closed-shop policy which mandates, as a
condition of employment, membership in the exclusive bargaining agent. A

"closed-shop" may be defined as an enterprise in which, by agreement

between the employer and his employees or their representatives, no person
may be employed in any or certain agreed departments of the enterprise
unless he or she is, becomes, and, for the duration of the agreement,
remains a member in good standing of a union entirely comprised of or of
which the employees in interest are a part.29 A CBA provision for a closedshop is a valid form of union security and it is not a restriction on the right or
freedom of association guaranteed by the Constitution. 30
Timbal's expulsion from ALU was premised on the ground of disloyalty to the
union, which under Section 4(3), Article II of the CBA, also stands as a
ground for her dismissal from Del Monte. Indeed, Section 5, Article II of the
CBA enjoins Del Monte to dismiss from employment those employees
expelled from ALU for disloyalty, albeit with the qualification "in accordance
with law."
Article 279 of the Labor Code ordains that "in cases of regular employment,
the employer shall not terminate the services of an employee except for a
just cause or when authorized by [Title I, Book Six of the Labor Code]."
Admittedly, the enforcement of a closed-shop or union security provision in
the CBA as a ground for termination finds no extension within any of the
provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has
consistently recognized, thus: "It is State policy to promote unionism to
enable workers to negotiate with management on an even playing field and
with more persuasiveness than if they were to individually and separately
bargain with the employer. For this reason, the law has allowed stipulations
for 'union shop' and 'closed shop' as means of encouraging workers to join
and support the union of their choice in the protection of their rights and
interests vis-a-vis the employer."31
It might be suggested that since Timbal was expelled from ALU on the
ground of disloyalty, Del Monte had no choice but to implement the CBA
provisions and cause her dismissal. Similarly, it might be posited that any
tribunal reviewing such dismissal is precluded from looking beyond the
provisions of the CBA in ascertaining whether such dismissal was valid. Yet
deciding the problem from such a closed perspective would virtually
guarantee unmitigated discretion on the part of the union in terminating the
employment status of an individual employee. What the Constitution does
recognize is that all workers, whether union members or not, are "entitled to
security of tenure."32 The guarantee of security of tenure itself is implemented
through legislation, which lays down the proper standards in determining
whether such right was violated.33
Agabon v. NLRC34 did qualify that constitutional due process or security of
tenure did not shield from dismissal an employee found guilty of a just cause
for termination even if the employer failed to render the statutory notice and

hearing requirement. At the same time, it should be understood that in the

matter of determining whether cause exists for termination, whether under
Book Six, Title I of the Labor Code or under a valid CBA, substantive due
process must be observed as a means of ensuring that security of tenure is
not infringed.
Agabon observed that due process under the Labor Code comprised of two
aspects: "substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of
dismissal."35 No serious dispute arose in Agabon over the observance of
substantive due process in that case, or with the conclusion that the
petitioners therein were guilty of abandonment of work, one of the just
causes for dismissal under the Labor Code. The controversy in Agabon
centered on whether the failure to observe procedural due process, through
the non-observance of the two-notice rule, should lead to the invalidation of
the dismissals. The Court ruled, over the dissents of some Justices, that the
failure by the employer to observe procedural due process did not invalidate
the dismissals for just cause of the petitioners therein. However, Agabon did
not do away with the requirement of substantive due process, which is
essentially the existence of just cause provided by law for a valid dismissal.
Thus, Agabon cannot be invoked to validate a dismissal wherein substantive
due process, or the proper determination of just cause, was not observed.
Even if the dismissal of an employee is conditioned not on the grounds for
termination under the Labor Code, but pursuant to the provisions of a CBA, it
still is necessary to observe substantive due process in order to validate the
dismissal. As applied to the Labor Code, adherence to substantive due
process is a requisite for a valid determination that just or authorized causes
existed to justify the dismissal.36 As applied to the dismissals grounded on
violations of the CBA, observance of substantial due process is
indispensable in establishing the presence of the cause or causes for
dismissal as provided for in the CBA.
Substantive due process, as it applies to all forms of dismissals,
encompasses the proper presentation and appreciation of evidence to
establish that cause under law exists for the dismissal of an employee. This
holds true even if the dismissal is predicated on particular causes for
dismissal established not by the Labor Code, but by the CBA. Further, in
order that any CBA-mandated dismissal may receive the warrant of the
courts and labor tribunals, the causes for dismissal as provided for in the
CBA must satisfy to the evidentiary threshold of the NLRC and the courts.
It is necessary to emphasize these principles since the immutable truth under
our constitutional and labor laws is that no employee can be dismissed
without cause. Agabon may have tempered the procedural due process
requirements if just cause for dismissal existed, but in no way did it eliminate

the existence of a legally prescribed cause as a requisite for any dismissal.

The fact that a CBA may provide for additional grounds for dismissal other
than those established under the Labor Code does not detract from the
necessity to duly establish the existence of such grounds before the
dismissal may be validated. And even if the employer or, in this case, the
collective bargaining agent, is satisfied that cause has been established to
warrant the dismissal, such satisfaction will be of no consequence if, upon
legal challenge, they are unable to establish before the NLRC or the courts
the presence of such causes.

April 1993, during a hearing before the Disloyalty Board. The transcription is
not wholly legible, but there appears to be references therein to the name
"Paz Piquero," and her apparent testimony before the Disloyalty Board. We
are unable to reproduce with accuracy, based on the handwritten
stenographic notes, the contents of this seeming testimony of Piquero,
although Del Monte claims before this Court that Piquero had corroborated
Artajo's claims during such testimony, "positively identified [Timbal's]
presence in the NFL seminar on 14 July 1992," and "confirmed that Timbal
gave Artajo P500.00 for recruiting participants in the NFL seminar." 37

In the matter at bar, the Labor Arbiterthe proximate trier of factsand the
Court of Appeals both duly appreciated that the testimony of Artajo against
Timbal could not be given credence, especially in proving Timbal's disloyalty
to ALU. This is due to the prior animosity between the two engendered by the
pending civil complaint filed by Timbal's husband against Artajo. Considering
that the civil complaint was filed just six (6) days prior to the execution of
Artajo's affidavit against Timbal, it would be plainly injudicious to presume
that Artajo possessed an unbiased state of mind as she executed that
affidavit. Such circumstance was considered by the Labor Arbiter, and
especially the Court of Appeals, as they rendered a favorable ruling to
Timbal. The NLRC may have decided against Artajo, but in doing so, it failed
to provide any basis as to why Artajo's testimony should be believed, instead
of disbelieved. No credible disputation was offered by the NLRC to the claim
that Artajo was biased against Timbal; hence, we should adjudge the findings
of the Labor Arbiter and the Court of Appeals as more cogent on that point.

There are evident problems on our part, at this late stage, in appreciating
these raw stenographic notes adverting to the purported testimony of
Piquero, especially as a means of definitively concluding that Timbal was
guilty of disloyalty. Certainly, these notes cannot be appreciated as entries in
the official record, which are presumed prima facie evidence of the facts
therein stated,38 as such records can only be made by a public officer of the
Philippines or by a person in the performance of a duty specially enjoined by
law. These transcripts were not taken during a hearing conducted by any
public office in the Philippines, but they were committed in the course of an
internal disciplinary mechanism devised by a privately organized labor union.
Unless the authenticity of these notes is duly proven before, and appreciated
by the triers of fact, we cannot accord them any presumptive or conclusive
value.

Before this Court, Del Monte does not even present any serious argument
that Artajo's testimony against Timbal was free from prejudice. Instead, it
posits that Piquero's alleged testimony against Timbal before the Disloyalty
Board should be given credence, and that taken with Artajo's testimony,
should sufficiently establish the ground of disloyalty for which Timbal should
be dismissed.
The Court sees the danger to jurisprudence and the rights of workers in
acceding to Del Monte's position. The dismissal for cause of employees must
be justified by substantial evidence, as appreciated by an impartial trier of
facts. None of the trier of facts belowthe Labor Arbiter, the NLRC and the
Court of Appealssaw fit to accord credence to Piquero's testimony, even
assuming that such testimony was properly contained in the record. Even the
NLRC decision, which was adverse to Timbal, made no reference at all to
Piquero's alleged testimony.
Del Monte is able to point to only one instance wherein Piquero's name and
testimony appears on the record. It appears that among the several
attachments to the position paper submitted by the ALU before the NLRCRAB was a copy of the raw stenographic notes transcribed, apparently on 17

Moreover, despite the fact that the apparent record of Piquero's testimony
was appended to ALU's position paper, the position paper itself does not
make any reference to such testimony, or even to Piquero's name for that
matter. The position paper observes that "[t]his testimony of [Artajo] was
directly corroborated by her actual attendance on July 14, 1992 at the agreed
[venue]," but no mention is made that such testimony was also "directly
corroborated" by Piquero. Then again, it was only Artajo, and not Piquero,
who executed an affidavit recounting the allegations against Timbal.
Indeed, we are inclined to agree with Timbal's observation in her Comment
on the present petition that from the time the complaint was filed with the
NLRC-RAB, Piquero's name and testimony were invoked for the first time
only in Del Monte's motion for reconsideration before the Court of Appeals.
Other than the handwritten reference made in the raw stenographic notes
attached to ALU's position paper before the NLRC-RAB, Piquero's name or
testimony was not mentioned either by ALU or Del Monte before any of the
pleadings filed before the NLRC-RAB, the NLRC, and even with those
submitted to the Court of Appeals prior to that court's decision.
In order for the Court to be able to appreciate Piquero's testimony as basis
for finding Timbal guilty of disloyalty, it is necessary that the fact of such
testimony must have been duly established before the NLRC-RAB, the

NLRC, or at the very least, even before the Court of Appeals. It is only after
the fact of such testimony has been established that the triers of fact can
come to any conclusion as to the veracity of the allegations in the testimony.
It should be mentioned that the Disloyalty Board, in its Resolution finding
Timbal guilty of disloyalty, did mention that Artajo's testimony "was
corroborated by Paz Piquero who positively identified and testified that Nena
Timbal was engaged in recruitment of ALU members at [Del Monte] to attend
NFL seminars."39
The Disloyalty Board may have appreciated Piquero's testimony in its own
finding that Timbal was guilty, yet the said board cannot be considered as a
wholly neutral or dispassionate tribunal since it was constituted by the very
organization that stood as the offended party in the disloyalty charge. Without
impugning the integrity of ALU and the mechanisms it has employed for the
internal discipline of its members, we nonetheless hold that in order that the
dismissal of an employee may be validated by this Court, it is necessary that
the grounds for dismissal are justified by substantial evidence as duly
appreciated by an impartial trier of facts.40 The existence of Piquero's
testimony was appreciated only by the Disloyalty Board, but not by any of the
impartial tribunals which heard Timbal's case. The appreciation of such
testimony by the Disloyalty Board without any similar affirmation or
concurrence by the NLRC-RAB, the NLRC, or the Court of Appeals, cannot
satisfy the substantive due process requirement as a means of upholding
Timbal's dismissal.
All told, we see no error on the part of the Court of Appeals when it held that
Timbal was illegally dismissed.
We now turn to the second issue raised, whether the Labor Arbiter correctly
awarded full backwages to Timbal.
Del Monte cites a jurisprudential rule that an employer who acted in good
faith in dismissing employees on the basis of a closed- shop provision may
not be penalized even if the dismissal were illegal. Such a doctrine is
admittedly supported by the early case of National Labor Union v. Zip
Venetian Blind41 and the later decision in 1989 of Soriano v. Atienza,42
wherein the Court affirmed the disallowance of backwages or "financial
assistance" in dismissals under the aforementioned circumstance.
However, the Court now recognizes that this doctrine is inconsistent with
Article 279 of the Labor Code, as amended by Republic Act No. 6715, which
took effect just five (5) days after Soriano was promulgated. It is now
provided in the Labor Code that "[a]n 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." Thus, where reinstatement is adjudged, the award of
backwages and other benefits continues beyond the date of the labor
arbiter's decision ordering reinstatement and extends up to the time said
order of reinstatement is actually carried out.43
Rep. Act No. 6715 effectively mitigated previous jurisprudence which had
limited the extent to which illegally dismissed employees could claim for
backwages. We explained in Ferrer v. NLRC:44
With the passage of Republic Act No. 6715 which took effect on
March 21, 1989, Article 279 of the Labor Code was amended to read
as follows:
Security of Tenure. In cases of regular employment, the
employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. 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.
and as implemented by Section 3, Rule 8 of the 1990 New Rules of
Procedure of the National Labor Relations Commission, it would
seem that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court
of Industrial Relations, 56 SCRA 694 [1974]) which limited the award
of back wages of illegally dismissed workers to three (3) years
"without deduction or qualification" to obviate the need for further
proceedings in the course of execution, is no longer applicable.
A legally dismissed employee may now be paid his back wages,
allowances, and other benefits for the entire period he was out of
work subject to the rule enunciated before the Mercury Drug Rule,
which is that the employer may, however, deduct any amount which
the employee may have earned during the period of his illegal
termination (East Asiatic Company, Ltd. vs. Court of Industrial
Relations, 40 SCRA 521 [1971]). Computation of full back wages and
presentation of proof as to income earned elsewhere by the illegally
dismissed employee after his termination and before actual
reinstatement should be ventilated in the execution proceedings
before the Labor Arbiter concordant with Section 3, Rule 8 of the

1990 New Rules of Procedure of the National Labor Relations

Commission.
Inasmuch as we have ascertained in the text of this discourse that
the OFC whimsically dismissed petitioners without proper hearing
and has thus opened OFC to a charge of unfair labor practice, it
ineluctably follows that petitioners can receive their back wages
computed from the moment their compensation was withheld after
their dismissal in 1989 up to the date of actual reinstatement. In such
a scenario, the award of back wages can extend beyond the 3-year
period fixed by the Mercury Drug Rule depending, of course, on
when the employer will reinstate the employees.
It may appear that Article 279 of the Labor Code, as amended by
Republic Act No. 6715, has made the employer bear a heavier
burden than that pronounced in the Mercury Drug Rule, but perhaps
Republic Act No. 6715 was enacted precisely for the employer to
realize that the employee must be immediately restored to his former
position, and to impress the idea that immediate reinstatement is
tantamount to a cost-saving measure in terms of overhead expense
plus incremental productivity to the company which lies in the hands
of the employer.45
The Labor Arbiter's ruling, which entitled Timbal to claim full backwages and
other allowances, "without qualifications and diminutions, computed from the
time [she was] illegally dismisse[d] up to the time [she] will be actually
reinstated," conforms to Article 279 of the Labor Code. Hence, the Court of
Appeals was correct in affirming the Labor Arbiter insofar as Timbal was
concerned.
Finally, we address the claim that the Court of Appeals erred when it did not
rule on Del Monte's claim for reimbursement against ALU. We do observe
that Section 5 of the CBA stipulated that "[ALU] assumes full responsibility of
any such termination [of any member of the bargaining unit who loses his
membership in ALU] and hereby agrees to hold [Del Monte] free from any
liability by judgment of a competent authority for claims arising out of
dismissals made upon demand of [ALU], and latter shall reimburse the
former of such sums as it shall have paid therefore." 46
This stipulation does present a cause of action in Del Monte's favor should it
be held financially liable for the dismissal of an employee by reason of
expulsion from ALU. Nothing in this decision should preclude the operation of
this provision in the CBA. At the same time, we are unable to agree with Del
Monte that the Court of Appeals, or this Court, can implement this provision
of the CBA and accordingly directly condemn ALU to answer for the financial

remuneration due Timbal.

Before the Labor Arbiter, Del Monte had presented its cross-claim against
ALU for reimbursement should it be made liable for illegal dismissal or unfair
labor practice, pursuant to the CBA. The Labor Arbiter had actually passed
upon this claim for reimbursement, stating that "[as] for the cross-claims of
respondent DMPI and Tabusuares against the respondent ALU-TUCP, this
Branch cannot validly entertain the same in the absence of employeremployee relationship between the former and the latter." 47 We have
examined Article 217 of the Labor Code,48 which sets forth the original
jurisdiction of the Labor Arbiters. Article 217(c) states:
Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of
by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements. [Emphasis supplied.]
In contrast, Article 261 of the Labor Code indubitably vests on the Voluntary
Arbitrator or panel of Voluntary Arbitrators the "original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement." 49
Among those areas of conflict traditionally within the jurisdiction of Voluntary
Arbitrators are contract-interpretation and contract-implementation, 50 the
questions precisely involved in Del Monte's claim seeking enforcement of the
CBA provision mandating restitution by ALU should the company be held
financially liable for dismissals pursuant to the union security clause.
In reconciling the grants of jurisdiction vested under Articles 261 and 217 of
the Labor Code, the Court has pronounced that "the original and exclusive
jurisdiction of the Labor Arbiter under Article 217(c) for money claims is
limited only to those arising from statutes or contracts other than a Collective
Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary
Arbitrators will have original and exclusive jurisdiction over money claims
'arising from the interpretation or implementation of the Collective Bargaining
Agreement and, those arising from the interpretation or enforcement of
company personnel policies', under Article 261."51
Our conclusion that the Labor Arbiter in the instant case could not properly
pass judgment on the cross-claim is further strengthened by the fact that Del
Monte and ALU expressly recognized the jurisdiction of Voluntary Arbitrators
in the CBA. Section 2, Article XXXI of the CBA provides:
Section 2. In the event a dispute arises concerning the application of,

or interpretation of this Agreement which cannot be settled pursuant

to the [grievance procedure set forth in the] preceding Section, the
dispute shall be submitted to an arbitrator agreed to by [Del Monte]
and [ALU].

vs.
ABOITIZ JEBSEN MARITIME, INC. and GENERAL CHARTERERS, INC.,
Respondents.
DECISION

Should the parties fail to agree on the arbitrator, the same shall be
drawn by lottery from a list of arbitrators furnished by the Bureau of
Labor Relations of the Department of Labor and Employment.
xxxx
Thus, as the law indubitably precludes the Labor Arbiter from enforcing
money claims arising from the implementation of the CBA, the CBA herein
complementarily recognizes that it is the Voluntary Arbitrators which have
jurisdiction to hear the claim. The Labor Arbiter correctly refused to exercise
jurisdiction over Del Monte's cross-claim, and the Court of Appeals would
have no basis had it acted differently. At the same time, even as we affirm the
award of backwages against Del Monte, our ruling should not operate to
prejudice in any way whatever causes of action Del Monte may have against
ALU, in accordance with the CBA.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the
Court of Appeals dated 26 August 2002 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr., JJ.,
concur.

PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to reverse and set aside the Decision 1 and
Resolution2 dated July 11, 2005 and April 18, 2006 of the Court of Appeals
(CA) in CA-G.R. SP No. 76489.
The factual and procedural antecedents of the case, as summarized by the
CA, are as follows:
Nelson R. Dulay (Nelson, for brevity) was employed by [herein respondent]
General Charterers Inc. (GCI), a subsidiary of co-petitioner [herein corespondent] Aboitiz Jebsen Maritime Inc. since 1986. He initially worked as
an ordinary seaman and later as bosun on a contractual basis. From
September 3, 1999 up to July 19, 2000, Nelson was detailed in petitioners
vessel, the MV Kickapoo Belle.
On August 13, 2000, or 25 days after the completion of his employment
contract, Nelson died due to acute renal failure secondary to septicemia. At
the time of his death, Nelson was a bona fide member of the Associated
Marine Officers and Seamans Union of the Philippines (AMOSUP), GCIs
collective bargaining agent. Nelsons widow, Merridy Jane, thereafter claimed
for death benefits through the grievance procedure of the Collective
Bargaining Agreement (CBA) between AMOSUP and GCI. However, on
January 29, 2001, the grievance procedure was "declared deadlocked" as
petitioners refused to grant the benefits sought by the widow.
On March 5, 2001, Merridy Jane filed a complaint with the NLRC SubRegional Arbitration Board in General Santos City against GCI for death and
medical benefits and damages.

G.R. No. 172642

June 13, 2012

ESTATE OF NELSON R. DULAY, represented by his wife MERRIDY JANE

P. DULAY, Petitioner,

On March 8, 2001, Joven Mar, Nelsons brother, received P20,000.00 from

[respondents] pursuant to article 20(A)2 of the CBA and signed a
"Certification" acknowledging receipt of the amount and releasing AMOSUP
from further liability. Merridy Jane contended that she is entitled to the
aggregate sum of Ninety Thousand Dollars ($90,000.00) pursuant to [A]rticle
20 (A)1 of the CBA x x x
xxxx

Merridy Jane averred that the P20,000.00 already received by Joven Mar
should be considered advance payment of the total claim of US$90,000.[00].
[Herein respondents], on the other hand, asserted that the NLRC had no
jurisdiction over the action on account of the absence of employer-employee
relationship between GCI and Nelson at the time of the latters death. Nelson
also had no claims against petitioners for sick leave allowance/medical
benefit by reason of the completion of his contract with GCI. They further
alleged that private respondent is not entitled to death benefits because
petitioners are only liable for such "in case of death of the seafarer during the
term of his contract pursuant to the POEA contract" and the cause of his
death is not work-related. Petitioners admitted liability only with respect to
article 20(A)2 [of the CBA]. x x x
xxxx
However, as petitioners stressed, the same was already discharged.
The Labor Arbiter ruled in favor of private respondent. It took cognizance of
the case by virtue of Article 217 (a), paragraph 6 of the Labor Code and the
existence of a reasonable causal connection between the employeremployee relationship and the claim asserted. It ordered the petitioner to pay
P4,621,300.00, the equivalent of US$90,000.00 less P20,000.00, at the time
of judgment x x x
xxxx
The Labor Arbiter also ruled that the proximate cause of Nelsons death was
not work-related.
On appeal, [the NLRC] affirmed the Labor Arbiters decision as to the grant of
death benefits under the CBA but reversed the latters ruling as to the
proximate cause of Nelsons death.3
Herein respondents then filed a special civil action for certiorari with the CA
contending that the NLRC committed grave abuse of discretion in affirming
the jurisdiction of the NLRC over the case; in ruling that a different provision
of the CBA covers the death claim; in reversing the findings of the Labor
Arbiter that the cause of death is not work-related; and, in setting aside the
release and quitclaim executed by the attorney-in-fact and not considering
the P20,000.00 already received by Merridy Jane through her attorney-infact.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED

and the case is REFERRED to the National Conciliation and Mediation Board
for the designation of the Voluntary Arbitrator or the constitution of a panel of
Voluntary Arbitrators for the appropriate resolution of the issue on the matter
of the applicable CBA provision.
SO ORDERED.4
The CA ruled that while the suit filed by Merridy Jane is a money claim, the
same basically involves the interpretation and application of the provisions in
the subject CBA. As such, jurisdiction belongs to the voluntary arbitrator and
not the labor arbiter.
Petitioner filed a Motion for Reconsideration but the CA denied it in its
Resolution of April 18, 2006.
Hence, the instant petition raising the sole issue of whether or not the CA
committed error in ruling that the Labor Arbiter has no jurisdiction over the
case.
Petitioner contends that Section 10 of Republic Act (R.A.) 8042, otherwise
known as the Migrant Workers and Overseas Filipinos Act of 1995, vests
jurisdiction on the appropriate branches of the NLRC to entertain disputes
regarding the interpretation of a collective bargaining agreement involving
migrant or overseas Filipino workers. Petitioner argues that the
abovementioned Section amended Article 217 (c) of the Labor Code which,
in turn, confers jurisdiction upon voluntary arbitrators over interpretation or
implementation of collective bargaining agreements and interpretation or
enforcement of company personnel policies.
The pertinent provisions of Section 10 of R.A. 8042 provide as follows:
SEC. 10. Money Claims. - Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.
Article 217(c) of the Labor Code, on the other hand, states that:
xxxx

On July 11, 2005, the CA promulgated its assailed Decision, the dispositive
portion of which reads as follows:

(c) Cases arising from the interpretation or implementation of

collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements.
On their part, respondents insist that in the present case, Article 217,
paragraph (c) as well as Article 261 of the Labor Code remain to be the
governing provisions of law with respect to unresolved grievances arising
from the interpretation and implementation of collective bargaining
agreements. Under these provisions of law, jurisdiction remains with
voluntary arbitrators.
Article 261 of the Labor Code reads, thus:
ARTICLE 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary
Arbitrators. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall
have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining
Agreement, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this article, gross
violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.

workers for overseas deployment including claims for actual, moral,

exemplary and other forms of damages." On the other hand, Articles 217(c)
and 261 of the Labor Code are very specific in stating that voluntary
arbitrators have jurisdiction over cases arising from the interpretation or
implementation of collective bargaining agreements. Stated differently, the
instant case involves a situation where the special statute (R.A. 8042) refers
to a subject in general, which the general statute (Labor Code) treats in
particular.5 In the present case, the basic issue raised by Merridy Jane in her
complaint filed with the NLRC is: which provision of the subject CBA applies
insofar as death benefits due to the heirs of Nelson are concerned. The
Court agrees with the CA in holding that this issue clearly involves the
interpretation or implementation of the said CBA. Thus, the specific or special
provisions of the Labor Code govern.
In any case, the Court agrees with petitioner's contention that the CBA is the
law or contract between the parties. Article 13.1 of the CBA entered into by
and between respondent GCI and AMOSUP, the union to which petitioner
belongs, provides as follows:
The Company and the Union agree that in case of dispute or conflict in
the interpretation or application of any of the provisions of this
Agreement, or enforcement of Company policies, the same shall be
settled through negotiation, conciliation or voluntary arbitration. The
Company and the Union further agree that they will use their best endeavor
to ensure that any dispute will be discussed, resolved and settled amicably
by the parties hereof within ninety (90) days from the date of filing of the
dispute or conflict and in case of failure to settle thereof any of the parties
retain their freedom to take appropriate action. 6 (Emphasis supplied)

The Commission, its Regional Offices and the Regional Directors of the
Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the
Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary
Arbitration provided in the Collective Bargaining Agreement.

From the foregoing, it is clear that the parties, in the first place, really
intended to bring to conciliation or voluntary arbitration any dispute or conflict
in the interpretation or application of the provisions of their CBA. It is settled
that when the parties have validly agreed on a procedure for resolving
grievances and to submit a dispute to voluntary arbitration then that
procedure should be strictly observed.7

The petition is without merit.

It may not be amiss to point out that the abovequoted provisions of the CBA
are in consonance with Rule VII, Section 7 of the present Omnibus Rules
and Regulations Implementing the Migrant Workers and Overseas Filipinos
Act of 1995, as amended by Republic Act No. 10022, which states that "[f]or
OFWs with collective bargaining agreements, the case shall be submitted for
voluntary arbitration in accordance with Articles 261 and 262 of the Labor
Code." The Court notes that the said Omnibus Rules and Regulations were
promulgated by the Department of Labor and Employment (DOLE) and the
Department of Foreign Affairs (DFA) and that these departments were
mandated to consult with the Senate Committee on Labor and Employment

It is true that R.A. 8042 is a special law governing overseas Filipino workers.
However, a careful reading of this special law would readily show that there
is no specific provision thereunder which provides for jurisdiction over
disputes or unresolved grievances regarding the interpretation or
implementation of a CBA. Section 10 of R.A. 8042, which is cited by
petitioner, simply speaks, in general, of "claims arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino

and the House of Representatives Committee on Overseas Workers Affairs.

settling labor disputes.10

In the same manner, Section 29 of the prevailing Standard Terms and

Conditions Governing the Employment of Filipino Seafarers on Board Ocean
Going Vessels, promulgated by the Philippine Overseas Employment
Administration (POEA), provides as follows:

No less than the Philippine Constitution provides, under the third paragraph,
Section 3, Article XIII, thereof that "[t]he State shall promote the principle of
shared responsibility between workers and employers and the preferential
use of voluntary modes in settling disputes, including conciliation, and shall
enforce their mutual compliance therewith to foster industrial peace."

Section 29. Dispute Settlement Procedures. In cases of claims and

disputes arising from this employment, the parties covered by a
collective bargaining agreement shall submit the claim or dispute to the
original and exclusive jurisdiction of the voluntary arbitrator or panel of
arbitrators. If the parties are not covered by a collective bargaining
agreement, the parties may at their option submit the claim or dispute to
either the original and exclusive jurisdiction of the National Labor Relations
Commission (NLRC), pursuant to Republic Act (RA) 8042, otherwise known
as the Migrant Workers and Overseas Filipinos Act of 1995 or to the original
and exclusive jurisdiction of the voluntary arbitrator or panel of arbitrators. If
there is no provision as to the voluntary arbitrators to be appointed by the
parties, the same shall be appointed from the accredited voluntary arbitrators
of the National Conciliation and Mediation Board of the Department of Labor
and Employment.
The Philippine Overseas Employment Administration (POEA) shall exercise
original and exclusive jurisdiction to hear and decide disciplinary action on
cases, which are administrative in character, involving or arising out of
violations of recruitment laws, rules and regulations involving employers,
principals, contracting partners and Filipino seafarers. (Emphasis supplied)
It is clear from the above that the interpretation of the DOLE, in consultation
with their counterparts in the respective committees of the Senate and the
House of Representatives, as well as the DFA and the POEA is that with
respect to disputes involving claims of Filipino seafarers wherein the parties
are covered by a collective bargaining agreement, the dispute or claim
should be submitted to the jurisdiction of a voluntary arbitrator or panel of
arbitrators. It is only in the absence of a collective bargaining agreement that
parties may opt to submit the dispute to either the NLRC or to voluntary
arbitration. It is elementary that rules and regulations issued by
administrative bodies to interpret the law which they are entrusted to enforce,
have the force of law, and are entitled to great respect. 8 Such rules and
regulations partake of the nature of a statute and are just as binding as if
they have been written in the statute itself.9 In the instant case, the Court
finds no cogent reason to depart from this rule.1wphi1
The above interpretation of the DOLE, DFA and POEA is also in consonance
with the policy of the state to promote voluntary arbitration as a mode of

Consistent with this constitutional provision, Article 211 of the Labor Code
provides the declared policy of the State "[t]o promote and emphasize the
primacy of free collective bargaining and negotiations, including voluntary
arbitration, mediation and conciliation, as modes of settling labor or industrial
disputes."
On the basis of the foregoing, the Court finds no error in the ruling of the CA
that the voluntary arbitrator has jurisdiction over the instant case.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 76489 dated July 11, 2005 and April 18,
2006, respectively, are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA*
Associate Justice

was intrinsically civil in nature.

Petitioner Primero was discharged from his employment as bus driver of DM
Transit Corporation (hereafter, simply DM) in August, 1974 after having been
employed therein for over 6 years. The circumstances attendant upon that
dismissal are recounted by the Court of Appeals 1 as follows:
Undisputably, since August 1, 1974, appellee's bus
dispatcher did not assign any bus to be driven by appellant
Primero. No reason or cause was given by the dispatcher to
appellant for not assigning a bus to the latter for 23 days (pp.
6-14, 21-22, tsn, May 15, 1979).
Also, for 23 days, appellant was given a run-around from
one management official to another, pleading that he be
allowed to work as his family was in dire need of money and
at the same time inquiring (why) he was not allowed to work
or drive a bus of the company. Poor appellant did not only
get negative results but was given cold treatment, oftentimes
evaded and given confusing information, or ridiculed,
humiliated, or sometimes made to wait in the offices of some
management personnel of the appellee (pp. 2-29, tsn, May
15, 1979).

G.R. No. 72644 December 14, 1987

ALFREDO F. PRIMERO, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DM TRANSIT, respondents.

NARVASA, J.:
The question on which the petitioner's success in the instant appeal
depends, and to which he would have us give an affirmative answer, is
whether or not, having recovered separation pay by judgment of the Labor
Arbiter which held that he had been fired by respondent DM Transit
Corporation without just cause he may subsequently recover moral
damages by action in a regular court, upon the theory that the manner of his
dismissal from employment was tortious and therefore his cause of action

(The) General Manager and (the) Vice-President and

Treasurer ... wilfully and maliciously made said appellant ...
seesaw or ... go back and forth between them for not less
than ten (10) times within a period of 23 days ... but (he) got
negative results from both corporate officials. Worse, on the
23rd day of his ordeal appellant was suddenly told by
General Manager Briones to seek employment with other
bus companies because he was already dismissed from his
job with appellee (without having been) told of the cause of
his hasty and capricious dismissal ... (pp. 8, 11-13, 25, tsn,
May 15, 1979).
Impelled to face the harsh necessities of life as a jobless
person and worried by his immediate need for money,
appellant pleaded with Corporate President Demetrio
Munoz, Jr. for his reinstatement and also asked P300.00 as
financial assistance, but the latter told the former that he
(Munoz, Jr.) will not give him even one centavo and that
should appellant sue him in court, then that will be the time
President Munoz, Jr. will pay him, if Munoz, Jr. loses the
case x x (pp. 21-22, tsn, May 15, 1979).

Appellant also advised (the) President of the oppressive,

anti-social and inhumane acts of subordinate officers ... (but)
Munoz, Jr. did nothing to resolve appellant's predicament
and ... just told the latter to go back ... to ... Briones, who
insisted that appellant seek employment with other bus firms
in Metro Manila ... (but) admitted that the appellant has not
violated any company rule or regulation ... (pp. 23-26, tsn,
May 15, 1979).
... In pursuance (of) defendant's determination to oppress
plaintiff and cause further loss, irreparable injury, prejudice
and damage, (D.M. Transit) in bad faith and with malice
persuaded other firms (California Transit, Pascual Lines, De
Dios Transit, Negrita Corporation, and MD Transit) not to
employ (appellant) in any capacity after he was already
unjustly dismissed by said defendant ... (paragraph 8 of
plaintiff's complaint).
These companies with whom appellant applied for a job
called up the D.M. Transit Office (which) ... told them ... that
they should not accept (appellant) because (he) was
dismissed from that Office.
Primero instituted proceedings against DM with the Labor Arbiters of the
Department of Labor, for illegal dismissal, and for recovery of back wages
and reinstatement. It is not clear from the record whether these proceedings
consisted of one or two actions separately filed. What is certain is that he
withdrew his claims for back wages and reinstatement, "with the end in view
of filing a damage suit" "in a civil court which has exclusive jurisdiction over
his complaint for damages on causes of action founded on tortious acts,
breach of employment contract ... and consequent effects (thereof ). 2
In any case, after due investigation, the Labor Arbiter rendered judgment
dated January 24, 1977 ordering DM to pay complainant Primero P2,000.00
as separation pay in accordance with the Termination Pay Law. 3 The
judgment was affirmed by the National Labor Relations Commission and
later by the Secretary of Labor, the case having been concluded at this level
on March 3, 1978. 4
Under the provisions of the Labor Code in force at that time, Labor Arbiters
had jurisdiction inter alia over
1) claims involving non-payment or underpayment of wages,
overtime compensation, social security and medicare
benefits, and

2) all other cases or matters arising from employer-employee

relations, unless otherwise expressly excluded. 5
And we have since held that under these "broad and comprehensive" terms
of the law, Labor Arbiters possessed original jurisdiction over claims for moral
and other forms of damages in labor disputes. 6
The jurisdiction of Labor Arbiters over such claims was however removed by
PD 1367, effective May 1, 1978, which explicitly provided that "Regional
Directors shall not indorse and Labor Arbiters shall not entertain claims for
moral or other forms of damages." 7
Some three months afterwards, Primero brought suit against DM in the Court
of First Instance of Rizal seeking recovery of damages caused not only by
the breach of his employment contract, but also by the oppressive and
inhuman, and consequently tortious, acts of his employer and its officers
antecedent and subsequent to his dismissal from employment without just
cause. 8
While this action was pending in the CFI, the law governing the Labor
Arbiters' jurisdiction was once again revised. The amending act was PD
1691, effective May 1, 1980. It eliminated the restrictive clause placed by PD
1367, that Regional Directors shall not indorse and Labor Arbiters entertain
claims for moral or other forms of damages. And, as we have had occasion
to declare in several cases, it restored the principle that "exclusive and
original jurisdiction for damages would once again be vested in labor
arbiters;" eliminated "the rather thorny question as to where in labor matters
the dividing line is to be drawn between the power lodged in an
administrative body and a court;' " and, "in the interest of greater promptness
in the disposition of labor matters, ... spared (courts of) the often onerous
task of determining what essentially is a factual matter, namely, the damages
that may be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations." 9 Parenthetically,
there was still another amendment of the provision in question which,
however, has no application to the case at bar. The amendment was
embodied in B.P. Blg. 227, effective June 1, 1982. 10
On August 11, 1980 the Trial Court rendered judgment dismissing the
complaint on the ground of lack of jurisdiction, for the reason that at the time
that the complaint was filed. on August 17, 1978, the law the Labor Code
as amended by PD 1367, eff. May 1, 1978 conferred exclusive, original
jurisdiction over claims for moral or other damages, not on ordinary courts,
but on Labor Arbiters.
This judgment was affirmed by the Intermediate Appellate Court, by Decision

rendered on June 29, 1984. This is the judgment now subject of the present
petition for review on certiorari. The decision was reached by a vote of 3 to 2.
The dissenters, placing reliance on certain of our pronouncements, opined
that Primero's causes of action were cognizable by the courts, that existence
of employment relations was not alone decisive of the issue of jurisdiction,
and that such relations may indeed give rise to "civil" as distinguished from
purely labor disputes, as where an employer's right to dismiss his employee
is exercised tortiously, in a manner oppressive to labor, contrary to morals,
good customs or public policy. 11
Primero has appealed to us from this judgment of the IAC praying that we
overturn the majority view and sustain the dissent.
Going by the literal terms of the law, it would seem clear that at the time that
Primero filed his complaints for illegal dismissal and recovery of backwages,
etc. with the Labor Arbiter, the latter possessed original and exclusive
jurisdiction also over claims for moral and other forms of damages; this, in
virtue of Article 265 12 of PD 442, otherwise known as the Labor Code,
effective from May 1, 1974. In other words, in the proceedings before the
Labor Arbiter, Primero plainly had the right to plead and prosecute a claim
not only for the reliefs specified by the Labor Code itself for unlawful
termination of employment, but also for moral or other damages under the
Civil Code arising from or connected with that termination of employment.
And this was the state of the law when he moved for the dismissal of his
claims before the Labor Arbiter, for reinstatement and recovery of back
wages, so that he might later file a damage suit "in a civil court which has
exclusive jurisdiction over his complaint ... founded on tortious acts, breach
of employment contract ... and consequent effects (thereof)." 13
The legislative intent appears clear to allow recovery in proceedings before
Labor Arbiters of moral and other forms of damages, in all cases or matters
arising from employer-employee relations. This would no doubt include,
particularly, instances where an employee has been unlawfully dismissed. In
such a case the Labor Arbiter has jurisdiction to award to the dismissed
employee not only the reliefs specifically provided by labor laws, but also
moral and other forms of damages governed by the Civil Code. Moral
damages would be recoverable, for example, where the dismissal of the
employee was not only effected without authorized cause and/or due process
for which relief is granted by the Labor Code but was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public policy 14 for which the
obtainable relief is determined by the Civil Code 15 (not the Labor Code).
Stated otherwise, if the evidence adduced by the employee before the Labor
Arbiter should establish that the employer did indeed terminate the
employee's services without just cause or without according him due
process, the Labor Arbiter's judgment shall be for the employer to reinstate

the employee and pay him his back wages or, exceptionally, for the
employee simply to receive separation pay. These are reliefs explicitly
prescribed by the Labor Code. 16 But any award of moral damages by the
Labor Arbiter obviously cannot be based on the Labor Code but should be
grounded on the Civil Code. Such an award cannot be justified solely upon
the premise (otherwise sufficient for redress under the Labor Code) that the
employer fired his employee without just cause or due process. Additional
facts must be pleaded and proven to warrant the grant of moral damages
under the Civil Code, these being, to repeat, that the act of dismissal was
attended by bad faith or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy; and, of course,
that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom. 17

It is clear that the question of the legality of the act of dismissal is intimately
related to the issue of the legality of the manner by which that act of
dismissal was performed. But while the Labor Code treats of the nature of,
and the remedy available as regards the first the employee's separation
from employment it does not at all deal with the second the manner of
that separation which is governed exclusively by the Civil Code. In
addressing the first issue, the Labor Arbiter applies the Labor Code; in
addressing the second, the Civil Code. And this appears to be the plain and
patent intendment of the law. For apart from the reliefs expressly set out in
the Labor Code flowing from illegal dismissal from employment, no other
damages may be awarded to an illegally dismissed employee other than
those specified by the Civil Code. Hence, the fact that the issue-of whether or
not moral or other damages were suffered by an employee and in the
affirmative, the amount that should properly be awarded to him in the
circumstances-is determined under the provisions of the Civil Code and not
the Labor Code, obviously was not meant to create a cause of action
independent of that for illegal dismissal and thus place the matter beyond the
Labor Arbiter's jurisdiction.
Thus, an employee who has been illegally dismissed (i.e., discharged without
just cause or being accorded due process), in such a manner as to cause
him to suffer moral damages (as determined by the Civil Code), has a cause
of action for reinstatement and recovery of back wages and damages. When
he institutes proceedings before the Labor Arbiter, he should make a claim
for all said reliefs. He cannot, to be sure, be permitted to prosecute his claims

piecemeal. He cannot institute proceedings separately and

contemporaneously in a court of justice upon the same cause of action or a
part thereof. He cannot and should not be allowed to sue in two forums: one,
before the Labor Arbiter for reinstatement and recovery of back wages, or for
separation pay, upon the theory that his dismissal was illegal; and two,
before a court of justice for recovery of moral and other damages, upon the
theory that the manner of his dismissal was unduly injurious, or tortious. This
is what in procedural law is known as splitting causes of action, engendering
multiplicity of actions. It is against such mischiefs that the Labor Code
amendments just discussed are evidently directed, and it is such duplicity
which the Rules of Court regard as ground for abatement or dismissal of
actions, constituting either litis pendentia (auter action pendant) or res
adjudicata, as the case may be. 18

But this was precisely what Primero's counsel did. He split Primero's cause
of action; and he made one of the split parts the subject of a cause of action
before a court of justice. Consequently, the judgment of the Labor Arbiter
granting Primero separation pay operated as a bar to his subsequent action
for the recovery of damages before the Court of First Instance under the
doctrine of res judicata, The rule is that the prior "judgment or order is, with
respect to the matter directly adjudged or as to any other matter that could
have been raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of the action
or special proceeding, litigating for the same thing and under the same title
and in the same capacity. 19
We are not unmindful of our previous rulings on the matter cited in the
dissent to the decision of the Court of Appeals subject of the instant petition,
20
notably, Quisaba v. Sta Ines-Melale Veneer & Plywood Inc., where a
distinction was drawn between the right of the employer to dismiss an
employee, which was declared to be within the competence of labor
agencies to pass upon, and the "manner in which the right was exercised
and the effects flowing therefrom," declared to be a matter cognizable only by
the regular courts because "intrinsically civil." 21 We opine that it is this very
distinction which the law has sought to eradicate as being so tenuous and so
difficult to observe, 22 and, of course, as herein pointed out, as giving rise to
split jurisdiction, or to multiplicity of actions, "a situation obnoxious to the
orderly administration of justice. 23 Actually we merely reiterate in this
decision the doctrine already laid down in other cases (Garcia v. Martinez, 84
SCRA 577; Ebon v. de Guzman, 13 SCRA 52; Bengzon v. Inciong, 91 SCRA
248; Pepsi-Cola Bottling Co. v. Martinez, 112 SCRA 578; Aguda v. Vallejos,
113 SCRA 69; Getz v. C.A., 116 SCRA 86; Cardinal Industries v. Vallejos, 114

SCRA 471; Sagmit v. Sibulo, 133 SCRA 359) to the effect that the grant of
jurisdiction to the Labor Arbiter by Article 217 of the Labor Code is sufficiently
comprehensive to include claims for moral and exemplary damages sought
to be recovered from an employer by an employee upon the theory of his
illegal dismissal. Rulings to the contrary are deemed abandoned or modified
accordingly.
WHEREFORE, the petition is DISMISSED, without pronouncement as to
costs.
Teehankee, C.J., Cruz, Paras, * and Gancayco, JJ., concur.