1-10 Cases

Labor Law; Managerial and Supervisory Employees; The test of supervisory or managerial
status depends on whether a person possesses authority to act in the interest of his
employer and whether such authority is not merely routinary or clerical in nature, but requires
the use of independent judgment.The Labor Code was further amended by Republic Act
No. 6715. Section 4 of the said Republic Act, amended Article 212 (m), which now contains
separate definitions for managerial and supervisory employees, to wit: Art. 212. Definitions. x
x x x x x x x x (m) Managerial employee is one who is vested with powers or prerogatives to
lay down and execute management policies
Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
_______________
G.R. No. 105223 September 27, 1993
* FIRST DIVISION.
731
PHILIPPINE APPLIANCE CORPORATION, (PHILACOR), petitioner,

vs.
THE HON. BIENVENIDO E. LAGUESMA, in his capacity as Undersecretary of Labor &
Employment, GENUINE LABOR ORGANIZATION OF WORKERS IN HOTEL,
RESTAURANT & ALLIED INDUSTRIES, (GLOWHRAIN) and THE HONORABLE
BERNARDINO B. JULVE in his capacity as DIRECTOR IV, DOLE REGIONAL OFFICE,
NATIONAL CAPITAL REGION (NCR), respondents.
VOL. 226, SEPTEMBER 27, 1993

Augusto S. Sanchez and Associate Law Firm for petitioner.
731
Arellano, Flores, Miralles, Raeses, Taquio and Associates for private respondent.
Philippine Appliance Corporation vs. Laguesma
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in
nature but requires the use of independent judgment, x x x (Italics supplied) The test of
supervisory or managerial status depends on whether a person possesses authority to act
in the interest of his employer in the manner specified in Article 212 (m) of the Labor Code
and Rule l(o) of Book V of its Implementing Rules and whether such authority is not merely
routinary or clerical in nature, but requires the use of independent judgment. Thus, where
such recommendatory powers as in the case before us, are subject to evaluation, review and
final action by the department heads and other higher executives of the company, the same,
although present, are not effective and not an exercise of independent judgment as required
by law (Franklin Baker Company of the Philippines v. Trajano, 157 SCRA 416 [1988] citing
National Warehouse Corp. v. CIR, 7 SCRA 602-603 [1963]). [Philippine Appliance
Corporation vs. Laguesma, 226 SCRA 730(1993)]
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to annul and set
aside the Order dated march 30, 1992 of respondent Bienvenido E. Laguesma, as
Undersecretary of Labor and Employment in NCR-OD-M-90-11-060, entitled "IN RE:
PETITION FOR CERTIFICATION ELECTION OF ALL SUPERVISORY EMPLOYEES OF
THE PHILIPPINE APPLIANCE CORPORATION (PHILACOR). GENUINE LABOR
ORGANIZATION OF WORKERS IN HOTEL, RESTAURANT AND ALLIED INDUSTRIES
(GLOWHRAIN), petitioner." The order complained of, affirmed the Order dated August 14,
1991 of Med-Arbiter Rosadali G. Abdullah, allowing certain employees to participate and cast
their votes in the certification election.
On November 21, 1990, respondent the Genuine Organization of Workers in Hotel,

Restaurant and Allied Industries (GLOWHRAIN) failed with the Department of Labor and
Employment (DOLE) a petition for certification election among the supervisory employees of
petitioner, docketed as Case
No. NCR-OD-M-90-11-060 (Annex "C", Rollo, p. 49).
On January 3, 1991, petitioner filed a "Qualified Opposition," opposing the petition on the
ground that the employees sought to be represented by respondent GLOWHRAIN are not
supervisory employees, as defined by the Labor Code as amended but are, in fact,
managerial employees exercising one or more managerial prerogatives and functions and
that the genuine supervisory employees having the right to join, assist or form a labor
organization are its foremen and linemen who are already members of the rank-and-file union
(Annex "D", Rollo, p. 53).
On January 17, 1991, respondent GLOWHRAIN filed its "COMMENT and POSITION
PAPER" attaching therewith supporting documents to show that union members claimed by
petitioner to be managerial employees are supervisors with recommendatory powers (Rollo,
p. 117).
On February 5, 1991, petitioner filed a "Supplement to Qualified Opposition," presenting
specific instances as evidenced by company memoranda whereby petitioning employees
were shown to have exercised managerial powers, functions and prerogatives whose
decisions were instantly effective and not merely recommendatory. In said supplemental
opposition, petitioner also alleged that the issue of whether petitioning employees are
managerial employees constituted a prejudicial question, which should be resolved before
any further proceedings could continue (Annex "E", Rollo, p. 66).
On February 25, 1991 respondent GLOWHRAIN filed a "Reply" stating that no prejudicial
question existed.
On March 14, 1991, petitioner filed a "Rejoinder," explaining the nature of the documents
attached to respondent GLOWHRAIN's reply and describing petitioner's company structure,
as well as the corresponding tasks, duties and responsibilities of petitioning employees in
such structure. It also emphasized that as can be gleaned from the company structure and
the actual functions being performed by the petitioning employees, the supervisory
employees of said company were the linemen and foreman who were already members of
the rank-and-file union (Annex "F", Rollo, p. 121).
On March 6, 1991, Med-Arbiter Rosadali C. Abdullah issued an order directing the holding of
a certification election among the supervisory employees of petitioner. The dispositive portion
said order reads:
WHEREFORE, on the foregoing consideration, let a certification election
be conducted among the supervisory employees of the Philippine
Appliance Corporation (PHILACOR) within twenty (20) days from receipt
hereof, subject to the usual pre-election conference of the parties to
thresh out the mechanics of the election. The payroll of the company
three (3) months prior to the filing of the petition shall be used as the
basis in determining the list of eligible voters.
The choices are:
(a) GLOWHRAIN Philippine Appliance Corporation Supervisor's
Association; and
(b) No union (Rollo, p. 177).
Pursuant to the aforestated order, petitioner was required to submit a list of all supervisory
employees of the company based on the payroll three months prior to the date of the petition.
On April 29, 1991, petitioner filed a "Compliance and Manifestation," (Annex "H", Rollo, p.
178), attaching two separate lists of employees. The first list (Annex "1", Rollo, p. 208)
contained the list of employees designated as supervisors or equivalent rank. The second list
(Annex "1-A", Rollo, p. 214) contained the names of employees designated as foremen and
linemen whom petitioner deemed as its genuine supervisory employees.
On May 3, 1991, petitioner filed a "Motion to Exclude" those employees listed in Annex "1"
alleging that these employees though occupying positions designated as "Supervisor" are in
reality, managerial employees by virtue of their exercise of managerial functions and
prerogatives which are not merely recommendatory. Petitioner reiterated its claim that the
true supervisors of the company falling within the scope and definition of the Labor Code are
the company foremen and linemen and some who are occupying the title of "Supervisor"
(Annex "I", Rollo, p. 187).
After respondent GLOWHRAIN and petitioner submitted their respective position papers, the
Med-Arbiter issued on August 14, 1991 an order, the dispositive portion of which reads:
WHEREFORE, premises considered, an Order is hereby issued,

allowing the employees listed in Annex "1" of the company's Motion to
Exclude dated May 3, 1991, with Nos. 2, 3, 8, 9, 11, 12, 13, 14, 16, 17,
18, 19, 20, 23, 24, 26, 28, 29, 31, 33, 35, 36, 37, 39, 41, 43, 44, 45, 46,
48, 50, 51, 53, 56, 58, 59, 60, 61, 63, 64, 66, 67, 69, 72, 76, 78, 79, 80,
81, 82, 86, 87, 89, 90, 91, 92, 93, 94, 95, 98, 99, 100, 103, 104, 105,
106, 108, 110, 111, 112, 116, 117, 119, 120, 121, 122, 123, 124, 125,
126, 127, 128, 129, 130, 131, 132, 133, 134, 136, 139, 140, 146, 149,
151, 154, 155, 157, 161, 162, 163, 164, 167, 170, 174, 176, 177, 178,
182, 184, 185, 187, 188, 192, and those listed in Annex "1-A" of the
same motion with Nos. 2, 12, 13, 14, 31, 34, 36, 37, 38, 52, 57, 58, 71,
74, 76, 85, 87, to participate and cast their votes in the certification
election ordered in this case.
Let the record of this case be forwarded to the representation officer
concerned and be guided accordingly (Rollo, p. 224-225).
Petitioner assailed before the Office of the Secretary of Labor, the Med-Arbiter's decision
allowing petitioning employees to participate in the certification election.
It claimed that the true determination of the nature of the employment is based on the actual
powers and prerogative exercised by the employees and not the job titles or descriptions. It
further questioned the Med-Arbiter's decision as contradictory to his own express finding of
fact that petitioning employees exercise managerial prerogatives or functions (Annex "L",
Rollo, p. 226).
On November 22, 1991, petitioner's appeal was denied for lack of merit and the Order of the
Med-Arbiter dated August 14, 1991 was affirmed (Annex "M", Rollo, p. 248).
On December 6, 1991, petitioner filed a motion for reconsideration (Annex "N", Rollo, p. 249).
In said motion, petitioner attached for the first time the job descriptions of its Production
Supervisor (Annex "A", Rollo, pp. 259-261), Superintendent (Production) (Annex "B", Rollo,
pp. 262-264) and Manager (Production) (Annex "C", Rollo, p. 265-267).
In its Resolution dated December 23, 1991, PHILACOR's Motion for Reconsideration
modified the Resolution dated November 22, 1991 by finding that the employees occupying
the job titles of "Production Supervisor," "Superintendent Production" and "Production
Manager" are managerial employees imbued with managerial prerogatives, and therefore are
ineligible to participate in the certification election among the supervisory employees (Annex
"O", Rollo, pp. 269-270).
Respondent GLOWHRAIN filed a motion for reconsideration, to which petitioner filed an

"Opposition and Comment."
In its motion for reconsideration, respondent GLOWHRAIN challenged the authenticity of the
job descriptions submitted by petitioner, alleging that the same are irregular having been
issued only for the purpose of buttressing petitioner's motion for reconsideration.
On March 30, 1992, an order was issued granting GLOWHRAIN's motion for reconsideration
and with the following dispositive portion:
WHEREFORE, the Motion for Reconsideration of petitioner Genuine
Labor Organization of Workers in Hotel, Restaurant and Allied Industries
(GLOWHRAIN) is hereby granted and the Order dated
23 December 1991 is hereby SET ASIDE. In lieu thereof, our Resolution
dated 22 November 1991 is hereby REINSTATED and AFFIRMED in
toto.
No further motion of similar nature shall hereinafter be entertained
(Annex "A", Rollo, pp. 43-44).
In his order, respondent Undersecretary of Labor found that the job descriptions submitted by
petitioner were not issued in the regular course of the business and neither were the
concerned employees furnished copies for them to countersign as an affirmation that the job
descriptions are reflective of their true and actual function, duties and responsibilities.
Furthermore, the respondent Undersecretary of Labor said that there was nothing on record
to show that the job descriptions are the actual functions currently being performed by the
concerned employees. Hence, he concluded that the job descriptions submitted by petitioner
were considered belated issuances and a mere afterthought (Rollo, pp. 37-44).
On April 23, 1992, petitioner filed a "Manifestation and Motion (for Reconsideration)" of the
Order dated March 30, 1992, which was denied in an Order dated April 24, 1992.
On May 21, 1992, petitioner filed this petition for certiorari, with prayer for "a restraining order
and/or a writ of preliminary injunction" to restrain or enjoin the holding of the certification
election (Rollo, pp. 2-36).
On June 29, 1992, the Third Division of this Court resolved "to issue a Temporary Restraining
Order effective as of this date and continuing until otherwise ordered by this Court" (Rollo, p.
327).
The main issue to be resolved is whether the petitioning employees are supervisory
employees eligible to form a supervisory union.
Under the old Industrial Peace Act (Republic Act No. 875), the term "supervisor" was denied
as follows:
Sec. 2 Definitions As used in this Act
The test of "supervisory" or "managerial status" depends on whether a person possesses

authority to act in the interest of his employer in the manner specified in Article 212 (m) of the
Labor Code and Rule 1(o) of Book V of its Implementing Rules and whether such authority is
not merely routinary or clerical in nature, but requires the use of independent judgment. Thus,
where such recommendatory powers as in the case before us, are subject to evaluation,
review and final action by the department heads and other higher executives of the company,
the same, although present, are not effective and not an exercise of independent judgment
as required by law (Franklin Baker Company of the Philippines. v. Trajano, 157 SCRA 416
[1988] citing National Warehouse Corp. v. CIR, 7 SCRA 602-603 [1963]).
xxxxxxxxx
(k) "Supervisor" means any person having authority in the interest of an
employer, to hire, transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline, other employees, or responsibly to direct
them, and to adjust their grievances, or effectively to recommend such
acts if, in connection with the foregoing, the exercise of such authority is
not of a merely routinary or clerical nature but requires the use of
independent judgment.
With the enactment of Presidential Decree No. 442 as amended, otherwise known as the
Labor Code of the Philippines, the term "supervisor" was replaced by the term "managerial
employee."
The Labor Code was further amended by Republic Act No. 6715. Section 4 of the said
Republic Act, amended Article 212 (m), which now contains separate definitions for
managerial and supervisory employees, to wit:
Art. 212. Definitions.
xxxxxxxxx
(m) Managerial employee is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to
hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature but requires
the use of independent judgment. . . . (emphasis supplied)
A careful analysis of the record discloses that in the exercise of the above enumerated
managerial powers, petitioning employees are "given policies to executed and standard
policies to observe, thus having little freedom of action" (National Waterworks and Sewerage
Authority v. NWSA Consolidated, 11 SCRA 766 [1964]).
Furthermore, it will be noted that petitioning employees merely recommend the
implementation of management policies or the discipline or dismissal of subordinates, as may
be gleaned from the following:
In the filing/charging of overtime, petitioning employees are guided by Standard Procedure
on Overtime/Charging (Annex "1-A", Rollo, p. 93; Annex "1-B", Rollo, p. 94). The
accomplishment of the "Overtime Work Authority" is the duty of the supervisor who must affix
his signature therein and forward the same to the manager who will likewise sign the same.
After which, it will be sent back to the supervisor concerned. In the formulation and issuance
of this Management Guide, petitioner admits that petitioning employees did not participate
therein (Annex "F", Rollo, p. 131).
With regard to the procedure in the hiring of rank-and-file employees, the immediate
supervisor files a notice in writing with the Personnel Administration asking the latter to find
qualified applicants for a position or job where there is vacancy. The Personnel Department
proceeds with the recruitment of qualified applicants, using as basis the applicable set of
general standards and the job requirements. All applicants who are considered by the
Personnel Department to have met both the general and specific requirements of the job are
referred to a panel of four or five supervisors for interview and determination who among said
applicants should be hired for the particular job. The interview conducted by the panel after
the Personnel Department has already recruited qualified applicants cannot be said to vest in
the supervisors the power to hire. The said interview merely involves the accomplishment of
an Interview Rating Form, which rates the interviewee according to his general appearance,
manner of speaking, alertness, physical condition, confidence, ability to get along with others,
ability to present ideas, maturity judgment and technical competence (Annex "4" & "5", Rollo,
pp. 112-113). The ultimate power to hire still rest with the Manager of the Personnel
Administration (Annex "4", Rollo, p. 111).
No evidence was presented by petitioner to bolster its claim that petitioning employees
exercised the power to shorten employees' probationary period and the power to change the
status of or dismiss a casual employee.
WHEREFORE, the Order dated March 30, 1992 of respondent Undersecretary of Labor and
Employment is AFFIRMED. The Temporary Restraining Order issued by this Court is
LIFTED.
SO ORDERED.
Cruz, Davide, Jr. and Bellosillo, JJ., concur.
As to the power to discipline, suspend and discharge employees, we find that the petitioning
employees merely enforce the company rules and regulations against erring employees.
While it is true that the petitioning employees are the ones who request for a formal
investigation against an erring employee, it is the Corporate Legal Service which actually
conducts the formal investigation and on the basis of the result of the investigation, the
Assistant Vice-President Human Resource Management General Services is the one
who imposes the corresponding penalty. The supervisor is merely furnished a copy of the
result of the investigation (Annex "9", Rollo, p. 368; Annex "9-A", Rollo, p. 369).
As to the power to assign or transfer employees, the petitioning employees merely execute
the shifting rotation made by the Plant Manager (Annex "8", "8-B", "8-D", "8-E", "8-F", "9-G"
"8-H", Rollo, p. 359-367).
Even if petitioner considers petitioning employees as managers, the fact remains that they do
not lay down and execute management policies nor have the power to hire, but merely
recommend such management actions. As such, petitioning employees will still be
considered as supervisors.
PHILACOR belatedly presented the job descriptions of the Production Supervisor,
Superintendent (Production) and Manager (Production) to show that indeed petitioning
employees are exercising managerial powers and prerogatives. As admitted by PHILACOR,
the aforestated job descriptions were relatively new and were documented only on or about
August 1991 after the Med-Arbiter had already ordered the certification election of the
petitioning employees.
We held in the case of Pagkakaisa ng mgaManggagawasa Triumph International United
Lumber and General Workers of the Philippines. v. Ferrer-Calleja, 181 SCRA 119 [1990] that
"the fact that their work descriptions are either managers or supervisors is of no moment
considering that it is the nature of their functions and not the said nomenclatures of titles of
their jobs which determines their statuses.
Grio-Aquino, J., is on leave.
Labor Law; National Labor Relations Commission; There is nothing irregular in the temporary
designation of an NLRC Commissioner from one division to complete another division, for the
law empowers the Chairman to make temporary assignments whenever the required
concurrence is not met; The territorial divisions of the National Labor Relations Commission
do not confer exclusive jurisdiction to each division and are merely designed for
administrative efficiency.It must be remembered that during the pendency of the case in
the First Division of the NLRC, one of the three commissioners, Commissioner Romeo
Putong, retired, leaving Chairman Bartolome Carale and Commissioner Vicente Veloso III.
Subsequently,
441
VOL. 326, FEBRUARY 28, 2000
the enforcement of union security clauses which is the sanctity and inviolability of contracts
cannot override ones right to due process.
Same; Same; Same; Same; An employer cannot rely merely upon a labor federations
allegations in terminating union officers expelled by the federation for allegedly committing
acts of disloyalty and lor inimical to the interest of the federation and in violation of its
Constitution and By-Lawsthe company must also inquire into the cause of the expulsion
and whether or not the federation had sufficient grounds to effect the same.In the case
under scrutiny, petitioner union officers were expelled by the federation for allegedly
committing acts of disloyalty and/or inimical to the interest of ULGWP and in violation of its
Constitution and By-laws. Upon demand of the federation, the company terminated the
petitioners without conducting a separate and independent investigation. Respondent
company did not inquire into the cause of the expulsion and whether or not the federation
had sufficient grounds to effect
442
441
Malayang Samahan ng mga Manggagawa
sa M. Greenfield vs. Ramos
Commissioner Veloso inhibited himself from the case because the counsel for the petitioners
was his former classmate in law school. The First Division was thus left with only one
commissioner. Since the law requires the concurrence of two commissioners to arrive at a
judgment or resolution, the Commission was constrained to temporarily designate a
commissioner from another division to complete the First Division. There is nothing irregular
at all in such a temporary designation for the law empowers the Chairman to make temporary
assignments whenever the required concurrence is not met. The law does not say that a
commissioner from the first division cannot be temporarily assigned to the second or third
division to fill the gap or vice versa. The territorial divisions do not confer exclusive jurisdiction
to each division and are merely designed for administrative efficiency.
Same; Collective Bargaining Agreements; Union Security Clauses; Due Process; Although
union security clauses embodied in the collective bargaining agreement may be validly
enforced and dismissals pursuant thereto may likewise be valid, this does not erode the
fundamental requirement of due process.This ruling of the NLRC is erroneous. Although
this Court has ruled that union security clauses embodied in the collective bargaining
agreement may be validly enforced and that dismissals pursuant thereto may likewise be
valid, this does not erode the fundamental requirement of due process. The reason behind
442
SUPREME COURT REPORTS ANNOTATED
the same. Relying merely upon the federations allegations, respondent company terminated
petitioners from employment when a separate inquiry could have revealed if the federation
had acted arbitrarily and capriciously in expelling the union officers. Respondent companys
allegation that petitioners were accorded due process is belied by the termination letters
received by the petitioners which state that the dismissal shall be immediately effective.
Same; Same; Same; Same; The right of an employee to be informed of the charges against
him and to reasonable opportunity to present his side in a controversy with either the
company or his own union is not wiped away by a union security clause or a union shop
clause in a collective bargaining agreement.As held in the aforecited case of Carino, the
right of an employee to be informed of the charges against him and to reasonable opportunity
to present his side in a controversy with either the company or his own union is not wiped
away by a union security clause or a union shop clause in a collective bargaining agreement.
An employee is entitled to be protected not only from a company which disregards his rights
but also from his own union the leadership of which could yield to the temptation of swift and
arbitrary expulsion from membership and mere dismissal from his job.
Same; Same; Same; Same; Even assuming that a federation had valid grounds to expel
union officers, due process requires that these union officers be accorded a separate hearing
by the company. While respondent company may validly dismiss the employees expelled
by the union for disloyalty under the union security clause of the collective bargaining
agreement upon the recommendation by the union, this dismissal should not be done hastily
and summarily thereby eroding the employees right to due process, self-organization and
security of tenure. The enforcement of union security clauses is authorized by law provided
such enforcement is not characterized by arbitrariness, and always with due process. Even
on the assumption that the federation had valid grounds to expel the union officers, due
process requires that these union officers be accorded a separate hearing by respondent
company.
Same; Same; Same; Intra-Union Disputes; Illegal Dismissal; While it is true that the issue of
expulsion of local union officers is originally between the local union and the federation,
hence, intraunion in character, the issue is later on converted into a termination
443
recourse in law, their right of action is against the federation and not against the company or
its officers, relying on the findings of the Labor Secretary that the issue of expulsion of
petitioner union officers by the federation is a purely intra-union matter. Again, such a
contention is untenable. While it is true that the issue of expulsion of the local union officers is
originally between the local union and the federation, hence, intra-union in character, the
issue was later on converted into a termination dispute when the company dismissed the
petitioners from work without the benefit of a separate notice and hearing. As a matter of fact,
the records reveal that the termination was effective on the same day that the termination
notice was served on the petitioners, x x x Thus, notwithstanding the fact that the dismissal
was at the instance of the federation and that it undertook to hold the company free from any
liability resulting from such a dismissal, the company may still be held liable if it was remiss in
its duty to accord the would-be dismissed employees their right to be heard on the matter.
Same; Same; Same; Same; Jurisdiction; The issue of whether or not the federation had
reasonable grounds to expel the petitioner union officers is properly within the original and
exclusive jurisdiction of the Bureau of Labor Relations, being an intra-union conflict.
Although the issue of whether or not the federation had reasonable grounds to expel the
petitioner union officers is properly within the original and exclusive jurisdiction of the Bureau
of Labor Relations, being an intra-union conflict, this Court deems it justifiable that such issue
be nonetheless ruled upon, as the Labor Arbiter did, for to remand the same to the Bureau of
Labor Relations would be to intolerably delay the case.
Same; Evidence; The Supreme Court will not uphold erroneous conclusions of the National
Labor Relations Commission as when it finds insufficient or insubstantial evidence on record
to support those factual; findings, or when it is perceived that far too much is con444
443
444
dispute when the company dismisses the union officers from work without the benefit of a
separate notice and hearing; Notwithstanding the fact that the dismissal was at the instance
of a labor federation which undertook to hold the company free from any liability resulting
from such a dismissal, the company may still be held liable if it was remiss in its duty to
accord the would-be dismissed employees their right to be heard on the matter.In its
decision, public respondent also declared that if complainants (herein petitioners) have any

eluded, inferred or deduced from the bare or incomplete facts appearing of record.It is
well-settled that findings of facts of the NLRC are entitled to great respect and are generally
binding on this Court, but it is equally well-settled that the Court will not uphold erroneous
conclusions of the NLRC as when the Court finds insufficient or insubstantial evidence on
record to support those factual findings. The same holds true when it is perceived that far too
much is concluded, inferred or deduced from the bare or incomplete facts appearing of
record.
Same; Unions; Disaffiliations; Freedom of Association; A local union has the right to
disaffiliate from its mother union or declare its autonomy, and such disaffiliation cannot be
considered disloyalty; In the absence of specific provisions in the federations constitution
prohibiting disaffiliation or the declaration of autonomy of a local union, a local union may
dissociate from its parent union.A local union has the right to disaffiliate from its mother
union or declare its autonomy. A local union, being a separate and voluntary association, is
free to serve the interests of all its members including the freedom to disaffiliate or declare its
autonomy from the federation to which it belongs when circumstances warrant, in accordance
with the constitutional guarantee of freedom of association, x x x Thus, a local union which
has affiliated itself with a federation is free to sever such affiliation anytime and such
disaffiliation cannot be considered disloyalty. In the absence of specific provisions in the
federations constitution prohibiting disaffiliation or the declaration of autonomy of a local
union, a local may dissociate with its parent union.
Same; Same; Strikes; Unfair Labor Practices; Even if the allegations of unfair labor practice
are subsequently found out to be untrue, the presumption of legality of the strike prevails.
On the submission that the strike was illegal for being grounded on a non-strikeable issue,
that is, the intra-union conflict between the federation and the local union, it bears reiterating
that when respondent company dismissed the union officers, the issue was transformed into
a termination dispute and brought respondent company into the picture. Petitioners believed
in good faith that in dismissing them upon request by the federation, respondent company
was guilty of unfair labor practice in that it violated the petitioners right to self-organization.
The strike was staged to protest respondent companys act of dismissing the union officers.
Even if the allegations of unfair
445

445

labor practice are subsequently found out to be untrue, the presumption of legality of the
strike prevails.
Same; Same; Same; Same; No Strike, No Lockout Clause; A no strike, no lockout provision
can only be invoked when the strike is economic in nature, i.e., to force wage or other
concessions from the employer which he is not required by law to grant.Another reason
why the Labor Arbiter declared the strike illegal is due to the existence of a no strike, no
lockout provision in the CBA. Again, such a ruling is erroneous. A no strike, no lock out
provision can only be invoked when the strike is economic in nature, i.e. to force wage or
other concessions from the employer which he is not required by law to grant. Such a
provision cannot be used to assail the legality of a strike which is grounded on unfair labor
practice, as was the honest belief of herein petitioners. Again, whether or not there was
indeed unfair labor practice does not affect the strike.
Same; Same; Same; Where violence was committed on both sides during a strike, such
violence cannot be a ground for declaring the strike as illegal.On the allegation of violence
committed in the course of the strike, it must be remembered that the Labor Arbiter and the
Commission found that the parties are agreed that there were violent incidents x x x resulting
to injuries to both sides, the union and management. The evidence on record show that the
violence cannot be attributed to the striking employees alone for the company itself employed
hired men to pacify the strikers. With violence committed on both sides, the management and
the employees, such violence cannot be a ground for declaring the strike as illegal.
Same; Abandonment; Requisites.Jurisprudence holds that for abandonment of work to
exist, it is essential (1) that the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and (2) that there must have been a clear
intention to sever the employer-employee relationship manifested by some overt acts.
Deliberate and unjustified refusal on the part of the employee to go back to his work post and
resume his employment must be established. Absence must be accompanied by overt acts
unerringly pointing to the fact that the employee simply does not want to work anymore. And
the burden of proof to show that there was unjustified refusal to go back to work rests on the
employer.
446
446
backwages shall be computed from the time of his dismissal until his actual reinstatement.
In Ruben Serrano vs.

447
Same; Same; The filing of a complaint for illegal dismissal is inconsistent with the allegation
of abandonment.This Court has ruled that an employee who took steps to protest his layoff cannot be said to have abandoned his work. The filing of a complaint for illegal dismissal
is inconsistent with the allegation of abandonment. In the case under consideration, the
petitioners did, in fact, file a complaint when they were refused reinstatement by respondent
company.
Same; Union Security Clauses; Unfair Labor Practices; Due Process; Dismissals pursuant to
union security clauses are valid and legal subject only to the requirement of due process;
Dismissal of an employee by the company pursuant to a labor unions demand in accordance
with a union security agreement does not constitute unfair labor practice.Anent public
respondents finding that there was no unfair labor practice on the part of respondent
company and federation officers, the Court sustains the same. As earlier discussed, union
security clauses in collective bargaining agreements, if freely and voluntarily entered into, are
valid and binding. Corrolarily, dismissals pursuant to union security clauses are valid and
legal subject only to the requirement of due process, that is, notice and hearing prior to
dismissal. Thus, the dismissal of an employee by the company pursuant to a labor unions
demand in accordance with a union security agreement does not constitute unfair labor
practice.
447
Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos
NLRC and Isetann Department Store (G.R. No. 117040, January 27, 2000), the Court ruled
that an employee who is dismissed, whether or not for just or authorized cause but without
prior notice of his termination, is entitled to full backwages from the time he was terminated
until the decision in his case becomes final, when the dismissal was for cause; and in case
the dismissal was without just or valid cause, the backwages shall be computed from the time
of his dismissal until his actual reinstatement. In the case at bar, where the requirement of
notice and hearing was not complied with, the aforecited doctrine laid down in the Serrano
case applies. [Malayang Samahan ng mga Manggagawa sa M. Greenfield vs. Ramos, 326
SCRA 428(2000)]

SUPREME COURT
Manila
Same; Corporation Law; Company officials cannot be held personally liable for damages on
account of the employees dismissal because the employer corporation has a personality
separate and distinct from its officers who merely acted as its agents.The Court is of the
opinion, and so holds, that respondent company officials cannot be held personally liable for
damages on account of the employees dismissal because the employer corporation has a
personality separate and distinct from its officers who merely acted as its agents.
Same; Illegal Dismissal; Backwages; An employee who is dismissed, whether or not for just
or authorized cause but without prior notice of his termination, is entitled to full backwages
from the time he was terminated until the decision in his case becomes final, when the
dismissal was for cause; and in case the dismissal was without just or valid cause, the
THIRD DIVISION
G.R. No. 113907
February 28, 2000
MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP) et

al, petitioners,
vs.
HON. CRESENCIO J. RAMOS, NATIONAL LABOR RELATIONS COMMISSION, M.

GREENFIELD (B), INC., SAUL TAWIL, CARLOS T. JAVELOSA, RENATO C. PUANGCO,
WINCEL LIGOT, MARCIANO HALOG, GODOFREDO PACENO, SR., GERVACIO
CASILLANO, LORENZO ITAOC, ATTY. GODOFREDO PACENO, JR., MARGARITO
CABRERA, GAUDENCIO RACHO, SANTIAGO IBANEZ, AND RODRIGO AGUILING,
respondents.
Sec. 1.Coverage and Scope. All employees who are covered by this Agreement
and presently members of the UNION shall remain members of the UNION for the
duration of this Agreement as a condition precedent to continued employment with
the COMPANY.
PURISIMA, J.:
Sec. 4.Dismissal. Any such employee mentioned in Section 2 hereof, who fails to
maintain his membership in the UNION for non-payment of UNION dues, for
resignation and for violation of UNION's Constitution and By-Laws and any new
employee as defined in Section 2 of this Article shall upon written notice of such
failure to join or to maintain membership in the UNION and upon written
recommendation to the COMPANY by the UNION, be dismissed from the
employment by the COMPANY; provided, however, that the UNION shall hold the
COMPANY free and blameless from any and all liabilities that may arise should the
dismissed employee question, in any manner, his dismissal; provided, further that
the matter of the employee's dismissal under this Article may be submitted as a
grievance under Article XIII and, provided, finally, that no such written
recommendation shall be made upon the COMPANY nor shall COMPANY be
compelled to act upon any such recommendation within the period of sixty (60)
days prior to the expiry date of this Agreement conformably to law.
At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court to annul the
decision of the National Labor Relations Commission in an unfair labor practice case
instituted by a local union against its employer company and the officers of its national
federation.
The petitioner, MalayangSamahan ng mgaManggagawasa M. Greenfield, Inc., (B) (MSMG),
hereinafter referred to as the "local union", is an affiliate of the private respondent, United
Lumber and General Workers of the Philippines (ULGWP), referred to as the "federation".
The collective bargaining agreement between MSMG and M. Greenfield, Inc., names the
parties as follows:
This agreement made and entered into by and between:
M. GREENFIELD, INC. (B) a corporation duly organized in accordance with the
laws of the Republic of the Philippines with office address at Km. 14, Merville
Road, Paraaque, Metro Manila, represented in this act by its General manager,
Mr. Carlos T. Javelosa, hereinafter referred to as the Company;
-andMALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (B)
(MSMG)/UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES
(ULGWP), a legitimate labor organization with address at Suite 404, Trinity
Building, T. M. Kalaw Street, Manila, represented in this act by a Negotiating
Committee headed by its National President, Mr. GodofredoPaceno, Sr., referred to
in this Agreement as the UNION.1
The CBA includes, among others, the following pertinent provisions:
Art. II-Union Security
x xx
x xx
x xx
Art. IX
Sec. 4.Program Fund The Company shall provide the amount of P10,000.00 a
month for a continuing labor education program which shall be remitted to the
Federation . . .2
On September 12, 1986, a local union election was held under the auspices of the ULGWP
wherein the herein petitioner, Beda Magdalena Villanueva, and the other union officers were
proclaimed as winners. Minutes of the said election were duly filed with the Bureau of Labor
Relations on September 29, 1986.
On March 21, 1987, a Petition for Impeachment was filed with the national federation
ULGWP by the defeated candidates in the aforementioned election.
On June 16, 1987, the federation conducted an audit of the local union funds. The
investigation did not yield any unfavorable result and the local union officers were cleared of
the charges of anomaly in the custody, handling and disposition of the union
funds.1wphi1.nt
The 14 defeated candidates filed a Petition for Impeachment/Expulsion of the local union
officers with the DOLE NCR on November 5, 1987, docketed as NCR-OD-M-11-780-87.
However, the same was dismissed on March 2, 1988, by Med-Arbiter Renato Parungo for
failure to substantiate the charges and to present evidence in support of the allegations.
On April 17, 1988, the local union held a general membership meeting at the Caruncho
Complex in Pasig. Several union members failed to attend the meeting, prompting the
Executive Board to create a committee tasked to investigate the non-attendance of several
union members in the said assembly, pursuant to Sections 4 and 5, Article V of the
Constitution and By-Laws of the union, which read:
Seksyon 4.Angmgakinukusanghindipagdalo o hindipaglahoksalahat ng hakbangin
ng unyon ng sinumangkasapi o pinuno ay maaaringmagingsanhi ng pagtitiwalag o
pagpapataw ng multa ng hindihihigitsa P50.00 sabawatarawnanagkulang.
Seksyon 5.Angsinumangdadalonaaalis ng hindi pa natataposangpulong ay
ituturingnapagliban at maparusahanitongalinsunodsa Article V, Seksyong 4 ng
Saligang Batas naito. Sino mangkasapi o pisyalesnamahuli and dating
satakdangoras ng di lalampassaisangoras ay magmumulta ng P25.00 at
babawasinsasahodsapamamagitan ng salary deduction at higitsaisangoras ng
pagdating ng huli ay ituturingna pagliban.3
On June 27, 1988, the local union wrote respondent company a letter requesting it to deduct
the union fines from the wages/salaries of those union members who failed to attend the
general membership meeting. A portion of the said letter stated:
x xx
x xx
x xx
In connection with Section 4 Article II of our existing Collective Bargaining

Agreement, please deduct the amount of P50.00 from each of the union members
named in said annexes on the payroll of July 2-8, 1988 as fine for their failure to
attend said general membership meeting.4
In a Memorandum dated July 3, 1988, the Secretary General of the national federation,
GodofredoPaceo, Jr. disapproved the resolution of the local union imposing the P50.00 fine.
The union officers protested such action by the Federation in a Reply dated July 4, 1988.
On July 11, 1988, the Federation wrote respondent company a letter advising the latter not to
deduct the fifty-peso fine from the salaries of the union members requesting that:
. . . any and all future representations by MSMG affecting a number of members be

first cleared from the federation before corresponding action by the Company.5
The following day, respondent company sent a reply to petitioner union's request in a letter,
stating that it cannot deduct fines from the employees' salary without going against certain
laws. The company suggested that the union refer the matter to the proper government office
for resolution in order to avoid placing the company in the middle of the issue.
The imposition of P50.00 fine became the subject of bitter disagreement between the
Federation and the local union culminating in the latter's declaration of general autonomy
from the former through Resolution No. 10 passed by the local executive board and ratified
by the general membership on July 16, 1988.
In retaliation, the national federation asked respondent company to stop the remittance of the
local union's share in the education funds effective August 1988. This was objected to by the
local union which demanded that the education fund be remitted to it in full.
The company was thus constrained to file a Complaint for Interpleader with a Petition for
Declaratory Relief with the Med-Arbitration Branch of the Department of Labor and
Employment, docketed as Case No. OD-M-8-435-88. This was resolved on October 28,
1988, by Med-Arbiter AnastacioBactin in an Order, disposing thus:
WHEREFORE, premises considered, it is hereby ordered:
1. That the United Lumber and General Workers of the Philippines (ULGWP)
through its local union officers shall administer the collective bargaining agreement
(CBA).
2. That petitioner company shall remit the P10,000.00 monthly labor education
program fund to the ULGWP subject to the condition that it shall use the said
amount for its intended purpose.
3. That the Treasurer of the MSMG shall be authorized to collect from the 356
union members the amount of P50.00 as penalty for their failure to attend the
general membership assembly on April 17, 1988.
However, if the MSMG Officers could present the individual written authorizations
of the 356 union members, then the company is obliged to deduct from the salaries
of the 356 union members the P50.00 fine.6
On appeal, Director Pura-Ferrer Calleja issued a Resolution dated February 7, 1989, which
modified in part the earlier disposition, to wit:
WHEREFORE, premises considered, the appealed portion is hereby modified to
the extent that the company should remit the amount of five thousand pesos
(P5,000.00) of the P10,000.00 monthly labor education program fund to ULGWP
and the other P5,000.00 to MSMG, both unions to use the same for its intended
purpose.7
Meanwhile, on September 2, 1988, several local unions (Top Form, M. Greenfield, Grosby,
Triumph International, General Milling, and Vander Hons chapters) filed a Petition for Audit
and Examination of the federation and education funds of ULGWP which was granted by
Med-Arbiter Rasidali Abdullah on December 25, 1988 in an Order which directed the audit
and examination of the books of account of ULGWP.
On September 30, 1988, the officials of ULGWP called a Special National Executive Board
Meeting at Nasipit, Agusandel Norte where a Resolution was passed placing the MSMG
under trusteeship and appointing respondent Cesar Clarete as administrator.
On October 27, 1988, the said administrator wrote the respondent company informing the
latter of its designation of a certain Alfredo Kalingking as local union president and
"disauthorizing" the incumbent union officers from representing the employees. This action by
the national federation was protested by the petitioners in a letter to respondent company
dated November 11, 1988.
On November 13, 1988, the petitioner union officers received identical letters from the
administrator requiring them to explain within 72 hours why they should not be removed from
their office and expelled from union membership.
On November 26, 1988, petitioners replied:
(a) Questioning the validity of the alleged National Executive Board Resolution
placing their union under trusteeship;
(b) Justifying the action of their union in declaring a general autonomy from
ULGWP due to the latter's inability to give proper educational, organizational and
legal services to its affiliates and the pendency of the audit of the federation funds;
(c) Advising that their union did not commit any act of disloyalty as it has remained
an affiliate of ULGWP;
(d) Giving ULGWP a period of five (5) days to cease and desist from further
committing acts of coercion, intimidation and harassment.8
However, as early as November 21, 1988, the officers were expelled from the ULGWP. The
termination letter read:
Effective today, November 21, 1988, you are hereby expelled from UNITED
LUMBER AND GENERAL WORKERS OF THE PHILIPPINES (ULGWP) for
committing acts of disloyalty and/or acts inimical to the interest and violative to the
Constitution and by-laws of your federation.
You failed and/or refused to offer an explanation inspite of the time granted to you.
Since you are no longer a member of good standing, ULGWP is constrained to
recommend for your termination from your employment, and provided in Article II
Section 4, known as UNION SECURITY, in the Collective Bargaining agreement.9
On the same day, the federation advised respondent company of the expulsion of the 30
union officers and demanded their separation from employment pursuant to the Union
Security Clause in their collective bargaining agreement. This demand was reiterated twice,
through letters dated February 21 and March 4, 1989, respectively, to respondent company.
Thereafter, the Federation filed a Notice of Strike with the National Conciliation and Mediation
Board to compel the company to effect the immediate termination of the expelled union
officers.
On March 7, 1989, under the pressure of a threatened strike, respondent company
terminated the 30 union officers from employment, serving them identical copies of the
termination letter reproduced below:
We received a demand letter dated 21 November 1988 from the United Lumber
and General Workers of the Philippines (ULGWP) demanding for your dismissal
from employment pursuant to the provisions of Article II, Section 4 of the existing
Collective Bargaining Agreement (CBA). In the said demand letter, ULGWP
informed us that as of November 21, 1988, you were expelled from the said
federation "for committing acts of disloyalty and/or acts inimical to the interest of
ULGWP and violative to its Constitution and By-laws particularly Article V, Section
6, 9, and 12, Article XIII, Section 8.
In subsequent letters dated 21 February and 4 March 1989, the ULGWP reiterated
its demand for your dismissal, pointing out that notwithstanding your expulsion from
the federation, you have continued in your employment with the company in
violation of Sec. 1 and 4 of Article II of our CBA, and of existing provisions of law.
In view thereof, we are left with no alternative but to comply with the provisions of
the Union Security Clause of our CBA. Accordingly, we hereby serve notice upon
you that we are dismissing you from your employment with M. Greenfield, Inc.,
pursuant to Sections 1 and 4, Article II of the CBA effective immediately.10
On that same day, the expelled union officers assigned in the first shift were physically or
bodily brought out of the company premises by the company's security guards. Likewise,
those assigned to the second shift were not allowed to report for work. This provoked some
of the members of the local union to demonstrate their protest for the dismissal of the said
union officers. Some union members left their work posts and walked out of the company
premises.
On the other hand, the Federation, having achieved its objective, withdrew the Notice of
Strike filed with the NCMB.
On March 8, 1989, the petitioners filed a Notice of Strike with the NCMB, DOLE, Manila,
docketed as Case No. NCMB-NCR-NS-03-216-89, alleging the following grounds for the
strike:
(a) Discrimination
(b) Interference in union activities
(c) Mass dismissal of union officers and shop stewards
On March 10, 1989, the thirty (30) dismissed union officers filed an urgent petition, docketed
as Case No. NCMB-NCR-NS-03-216-89, with the Office of the Secretary of the Department
of Labor and Employment praying for the suspension of the effects of their termination from
employment. However, the petition was dismissed by then Secretary Franklin Drilon on April
11, 1989, the pertinent portion of which stated as follows:
At this point in time, it is clear that the dispute at M. Greenfield is purely an intraunion matter. No mass lay-off is evident as the terminations have been limited to
those allegedly leading the secessionist group leaving MSMG-ULGWP to form a
union under the KMU. . . .
x xx
x xx
WHEREFORE, finding no sufficient jurisdiction to warrant the exercise of our

extraordinary authority under Article 277 (b) of the Labor Code, as amended, the
instant Petition is hereby DISMISSED for lack of merit.
SO ORDERED.11
On March 13 and 14, 1989, a total of 78 union shop stewards were placed under preventive
suspension by respondent company. This prompted the union members to again stage a
walk-out and resulted in the official declaration of strike at around 3:30 in the afternoon of
March 14, 1989. The strike was attended with violence, force and intimidation on both sides
resulting to physical injuries to several employees, both striking and non-striking, and
damage to company properties.
The employees who participated in the strike and allegedly figured in the violent incident were
placed under preventive suspension by respondent company. The company also sent returnto-work notices to the home addresses of the striking employees thrice successively, on
March 27, April 8 and April 31, 1989, respectively. However, respondent company admitted
that only 261 employees were eventually accepted back to work. Those who did not respond
to the return-to-work notice were sent termination letters dated May 17, 1989, reproduced
below:
(d) Threats, coercion and intimidation
M. Greenfield Inc., (B)
(e) Union busting
Km. 14, Merville Rd., Paraaque, M.M.
The following day, March 9, 1989, a strike vote referendum was conducted and out of 2, 103
union members who cast their votes, 2,086 members voted to declare a strike.
x xx
May 17, 1989
x xx
x xx
x xx
On March 14, 1989, without justifiable cause and without due notice, you left your
work assignment at the prejudice of the Company's operations. On March 27, April
11, and April 21, 1989, we sent you notices to report to the Company. Inspite of
your receipt of said notices, we have not heard from you up to this date.
Accordingly, for your failure to report, it is construed that you have effectively
abandoned your employment and the Company is, therefore, constrained to
dismiss you for said cause.
Very truly yours,
M. GREENFIELD, INC., (B)
By:
WENZEL STEPHEN LIGOT
Asst. HRD Manager12
On August 7, 1989, the petitioners filed a verified complaint with the Arbitration Branch,
National Capital Region, DOLE, Manila, docketed as Case No. NCR-00-09-04199-89,
charging private respondents of unfair labor practice which consists of union busting, illegal
dismissal, illegal suspension, interference in union activities, discrimination, threats,
intimidation, coercion, violence, and oppression.
After the filing of the complaint, the lease contracts on the respondent company's office and
factory at Merville Subdivision, Paraaque expired and were not renewed. Upon demand of
the owners of the premises, the company was compelled to vacate its office and factory.
Thereafter, the company transferred its administration and account/client servicing
department at AFP-RSBS Industrial Park in Taguig, Metro Manila. For failure to find a suitable
place in Metro Manila for relocation of its factory and manufacturing operations, the company
was constrained to move the said departments to Tacloban, Leyte. Hence, on April 16, 1990,
respondent company accordingly notified its employees of a temporary shutdown in
operations. Employees who were interested in relocating to Tacloban were advised to enlist
on or before April 23, 1990.
The complaint for unfair labor practice was assigned to Labor Arbiter Manuel Asuncion but
was thereafter reassigned to Labor Arbiter Cresencio Ramos when respondents moved to
inhibit him from acting on the case.
On December 15, 1992, finding the termination to be valid in compliance with the union
security clause of the collective bargaining agreement, Labor Arbiter Cresencio Ramos
dismissed the complaint.
Petitioners then appealed to the NLRC. During its pendency, Commissioner Romeo Putong
retired from the service, leaving only two commissioners, Commissioner Vicente Veloso III
and Hon. Chairman Bartolome Carale in the First Division. When Commissioner Veloso
inhibited himself from the case, Commissioner Joaquin Tanodra of the Third Division was
temporarily designated to sit in the First Division for the proper disposition of the case.
The First Division affirmed the Labor Arbiter's disposition. With the denial of their motion for
reconsideration on January 28, 1994, petitioners elevated the case to this Court, attributing
grave abuse of discretion to public respondent NLRC in:
I. UPHOLDING THE DISMISSAL OF THE UNION OFFICERS BY RESPONDENT
COMPANY AS VALID;
II. HOLDING THAT THE STRIKE STAGED BY THE PETITIONERS AS ILLEGAL;
III. HOLDING THAT THE PETITIONER EMPLOYEES WERE DEEMED TO HAVE
ABANDONED THEIR WORK AND HENCE, VALIDLY DISMISSED BY
RESPONDENT COMPANY; AND
IV. NOT FINDING RESPONDENT COMPANY AND RESPONDENT FEDERATION
OFFICERS GUILTY OF ACTS OF UNFAIR LABOR PRACTICE.
Notwithstanding the several issues raised by the petitioners and respondents in the
voluminous pleadings presented before the NLRC and this Court, they revolve around and
proceed from the issue of whether or not respondent company was justified in dismissing
petitioner employees merely upon the labor federation's demand for the enforcement of the
union security clause embodied in their collective bargaining agreement.
Before delving into the main issue, the procedural flaw pointed out by the petitioners should
first be resolved.
Petitioners contend that the decision rendered by the First Division of the NLRC is not valid
because Commissioner Tanodra, who is from the Third Division, did not have any lawful
authority to sit, much less write theponencia, on a case pending before the First Division. It is
claimed that a commissioner from one division of the NLRC cannot be assigned or
temporarily designated to another division because each division is assigned a particular
territorial jurisdiction. Thus, the decision rendered did not have any legal effect at all for being
irregularly issued.
Petitioners' argument is misplaced. Article 213 of the Labor Code in enumerating the powers
of the Chairman of the National Labor Relations Commission provides that:
The concurrence of two (2) Commissioners of a division shall be necessary for the
pronouncement of a judgment or resolution. Whenever the required membership in
a division is not complete and the concurrence of two (2) commissioners to arrive
at a judgment or resolution cannot be obtained, the Chairman shall designate such
number of additional Commissioners from the other divisions as may be necessary.
It must be remembered that during the pendency of the case in the First Division of the
NLRC, one of the three commissioners, Commissioner Romeo Putong, retired, leaving
Chairman Bartolome Carale and Commissioner Vicente Veloso III. Subsequently,
Commissioner Veloso inhibited himself from the case because the counsel for the petitioners
was his former classmate in law school. The First Division was thus left with only one
commissioner. Since the law requires the concurrence of two commissioners to arrive at a
judgment or resolution, the Commission was constrained to temporarily designate a
commissioner from another division to complete the First Division. There is nothing irregular
at all in such a temporary designation for the law empowers the Chairman to make temporary
assignments whenever the required concurrence is not met. The law does not say that a
commissioner from the first division cannot be temporarily assigned to the second or third
division to fill the gap or vice versa. The territorial divisions do not confer exclusive jurisdiction
to each division and are merely designed for administrative efficiency.
Going into the merits of the case, the court finds that the Complaint for unfair labor practice
filed by the petitioners against respondent company which charges union busting, illegal
dismissal, illegal suspension, interference in union activities, discrimination, threats,
intimidation, coercion, violence, and oppression actually proceeds from one main issue which
is the termination of several employees by respondent company upon the demand of the
labor federation pursuant to the union security clause embodied in their collective bargaining
agreement.
Petitioners contend that their dismissal from work was effected in an arbitrary, hasty,
capricious and illegal manner because it was undertaken by the respondent company without
any prior administrative investigation; that, had respondent company conducted prior
independent investigation it would have found that their expulsion from the union was
unlawful similarly for lack of prior administrative investigation; that the federation cannot
recommend the dismissal of the union officers because it was not a principal party to the
collective bargaining agreement between the company and the union; that public
respondents acted with grave abuse of discretion when they declared petitioners' dismissals
as valid and the union strike as illegal and in not declaring that respondents were guilty of
unfair labor practice.
Private respondents, on the other hand, maintain that the thirty dismissed employees who
were former officers of the federation have no cause of action against the company, the
termination of their employment having been made upon the demand of the federation
pursuant to the union security clause of the CBA; the expelled officers of the local union were
accorded due process of law prior to their expulsion from their federation; that the strike
conducted by the petitioners was illegal for noncompliance with the requirements; that the
employees who participated in the illegal strike and in the commission of violence thereof
were validly terminated from work; that petitioners were deemed to have abandoned their
employment when they did not respond to the three return to work notices sent to them; that
petitioner labor union has no legal personality to file and prosecute the case for and on behalf
of the individual employees as the right to do so is personal to the latter; and that, the officers
of respondent company cannot be liable because as mere corporate officers, they acted
within the scope of their authority.
Public respondent, through the Labor Arbiter, ruled that the dismissed union officers were
validly and legally terminated because the dismissal was effected in compliance with the
union security clause of the CBA which is the law between the parties. And this was affirmed
by the Commission on appeal. Moreover, the Labor Arbiter declared that notwithstanding the
lack of a prior administrative investigation by respondent company, under the union security
clause provision in the CBA, the company cannot look into the legality or illegality of the
recommendation to dismiss by the union nd the obligation to dismiss is ministerial on the part
of the company.13
This ruling of the NLRC is erroneous. Although this Court has ruled that union security
clauses embodied in the collective bargaining agreement may be validly enforced and that
dismissals pursuant thereto may likewise be valid, this does not erode the fundamental
requirement of due process. The reason behind the enforcement of union security clauses
which is the sanctity and inviolability of contracts14 cannot override one's right to due process.
In the case of Cario vs. National Labor Relations Commission,15 this Court pronounced that
while the company, under a maintenance of membership provision of the collective
bargaining agreement, is bound to dismiss any employee expelled by the union for disloyalty
upon its written request, this undertaking should not be done hastily and summarily. The
company acts in bad faith in dismissing a worker without giving him the benefit of a hearing.
The power to dismiss is a normal prerogative of the employer. However, this is not
without limitation. The employer is bound to exercise caution in terminating the
services of his employees especially so when it is made upon the request of a
labor union pursuant to the Collective Bargaining Agreement, . . . Dismissals must
not be arbitrary and capricious. Due process must be observed in dismissing an
employee because it affects not only his position but also his means of livelihood.
Employers should respect and protect the rights of their employees, which include
the right to labor.
In the case under scrutiny, petitioner union officers were expelled by the federation for
allegedly committing acts of disloyalty and/or inimical to the interest of ULGWP and in
violation of its Constitution and By-laws. Upon demand of the federation, the company
terminated the petitioners without conducting a separate and independent investigation.
Respondent company did not inquire into the cause of the expulsion and whether or not the
federation had sufficient grounds to effect the same. Relying merely upon the federation's
allegations, respondent company terminated petitioners from employment when a separate
inquiry could have revealed if the federation had acted arbitrarily and capriciously in expelling
the union officers. Respondent company's allegation that petitioners were accorded due
process is belied by the termination letters received by the petitioners which state that the
dismissal shall be immediately effective.
As held in the aforecited case of Cario, "the right of an employee to be informed of the
charges against him and to reasonable opportunity to present his side in a controversy with
either the company or his own union is not wiped away by a union security clause or a union
shop clause in a collective bargaining agreement. An employee is entitled to be protected not
only from a company which disregards his rights but also from his own union the leadership
of which could yield to the temptation of swift and arbitrary expulsion from membership and
mere dismissal from his job.
While respondent company may validly dismiss the employees expelled by the union for
disloyalty under the union security clause of the collective bargaining agreement upon the
recommendation by the union, this dismissal should not be done hastily and summarily
thereby eroding the employees' right to due process, self-organization and security of tenure.
The enforcement of union security clauses is authorized by law provided such enforcement is
not characterized by arbitrariness, and always with due process.16 Even on the assumption
that the federation had valid grounds to expel the union officers, due process requires that
these union officers be accorded a separate hearing by respondent company.
In its decision, public respondent also declared that if complainants (herein petitioners) have
any recourse in law, their right of action is against the federation and not against the
company or its officers, relying on the findings of the Labor Secretary that the issue of
expulsion of petitioner union officers by the federation is a purely intra-union matter.
Again, such a contention is untenable. While it is true that the issue of expulsion of the local
union officers is originally between the local union and the federation, hence, intra-union in
character, the issue was later on converted into a termination dispute when the company
dismissed the petitioners from work without the benefit of a separate notice and hearing. As a
matter of fact, the records reveal that the termination was effective on the same day that the
termination notice was served on the petitioners.
In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc.17, the Court
held the company liable for the payment of backwages for having acted in bad faith in
effecting the dismissal of the employees.
. . . Bad faith on the part of the respondent company may be gleaned from the fact
that the petitioner workers were dismissed hastily and summarily. At best, it was
guilty of a tortious act, for which it must assume solidary liability, since it apparently
chose to summarily dismiss the workers at the union's instance secure in the
union's contractual undertaking that the union would hold it "free from any liability"
arising from such dismissal.
Thus, notwithstanding the fact that the dismissal was at the instance of the federation and
that it undertook to hold the company free from any liability resulting from such a dismissal,
the company may still be held liable if it was remiss in its duty to accord the would-be
dismissed employees their right to be heard on the matter.
Anent petitioners contention that the federation was not a principal party to the collective
bargaining agreement between the company and the union, suffice it to say that the matter
was already ruled upon in the Interpleader case filed by respondent company. Med-Arbiter
AnastacioBactin thus ruled:
After a careful examination of the facts and evidences presented by the parties,
this Officer hereby renders its decision as follows:
1.) It appears on record that in Collective Bargaining Agreement (CBA) which took
effect on July 1, 1986, the contracting parties are M. Greenfield, Inc. (B) and
MalayangSamahan ng MgaManggagawasa M. Greenfield, Inc. (B) (MSMG)/United
Lumber and General Workers of the Philippines (ULGWP). However, MSMG was
not yet registered labor organization at the time of the signing of the CBA. Hence,
the union referred to in the CBA is the ULGWP.18
Likewise on appeal, Director Pura Ferrer-Calleja put the issue to rest as follows:
It is undisputed that ULGWP is the certified sole and exclusive collective bargaining
agent of all the regular rank-and-file workers of the company, M. Greenfield, Inc.
(pages 31-32 of the records).
It has been established also that the company and ULGWP signed a 3-year
collective bargaining agreement effective July 1, 1986 up to June 30, 1989.19
Although the issue of whether or not the federation had reasonable grounds to expel the
petitioner union officers is properly within the original and exclusive jurisdiction of the Bureau
of Labor Relations, being an intra-union conflict, this Court deems it justifiable that such issue
be nonetheless ruled upon, as the Labor Arbiter did, for to remand the same to the Bureau of
Labor Relations would be to intolerably delay the case.
The Labor Arbiter found that petitioner union officers were justifiably expelled from the
federation for committing acts of disloyalty when it "undertook to disaffiliate from the
federation by charging ULGWP with failure to provide any legal, educational or organizational
support to the local. . . . and declared autonomy, wherein they prohibit the federation from
interfering in any internal and external affairs of the local union." 20
It is well-settled that findings of facts of the NLRC are entitled to great respect and are
generally binding on this Court, but it is equally well-settled that the Court will not uphold
erroneous conclusions of the NLRC as when the Court finds insufficient or insubstantial
evidence on record to support those factual findings. The same holds true when it is
perceived that far too much is concluded, inferred or deduced from the bare or incomplete
facts appearing of record.21
In its decision, the Labor Arbiter declared that the act of disaffiliation and declaration of
autonomy by the local union was part of its "plan to take over the respondent federation."
This is purely conjecture and speculation on the part of public respondent, totally
unsupported by the evidence.
A local union has the right to disaffiliate from its mother union or declare its autonomy. A local
union, being a separate and voluntary association, is free to serve the interests of all its
members including the freedom to disaffiliate or declare its autonomy from the federation to
which it belongs when circumstances warrant, in accordance with the constitutional

guarantee of freedom of association.22
The purpose of affiliation by a local union with a mother union or a federation.
. . . is to increase by collective action the bargaining power in respect of the terms
and conditions of labor. Yet the locals remained the basic units of association, free
to serve their own and the common interest of all, subject to the restraints imposed
by the Constitution and By-Laws of the Association, and free also to renounce the
affiliation for mutual welfare upon the terms laid down in the agreement which
brought it into existence.23
Thus, a local union which has affiliated itself with a federation is free to sever such affiliation
anytime and such disaffiliation cannot be considered disloyalty. In the absence of specific
provisions in the federation's constitution prohibiting disaffiliation or the declaration of
autonomy of a local union, a local may dissociate with its parent union.24
The evidence on hand does not show that there is such a provision in ULGWP's constitution.
Respondents' reliance upon Article V, Section 6, of the federation's constitution is not right
because said section, in fact, bolsters the petitioner union's claim of its right to declare
autonomy:
Sec. 6. The autonomy of a local union affiliated with ULGWP shall be respected
insofar as it pertains to its internal affairs, except as provided elsewhere in this
Constitution.
There is no disloyalty to speak of, neither is there any violation of the federation's constitution
because there is nothing in the said constitution which specifically prohibits disaffiliation or
declaration of autonomy. Hence, there cannot be any valid dismissal because Article II,
Section 4 of the union security clause in the CBA limits the dismissal to only three (3)
grounds, to wit: failure to maintain membership in the union (1) for non-payment of union
dues, (2) for resignation; and (3) for violation of the union's Constitution and By-Laws.
To support the finding of disloyalty, the Labor Arbiter gave weight to the fact that on February
26, 1989, the petitioners declared as vacant all the responsible positions of ULGWP, filled
these vacancies through an election and filed a petition for the registration of UWP as a
national federation. It should be pointed out, however, that these occurred after the federation
had already expelled the union officers. The expulsion was effective November 21, 1988.
Therefore, the act of establishing a different federation, entirely separate from the federation
which expelled them, is but a normal retaliatory reaction to their expulsion.
With regard to the issue of the legality or illegality of the strike, the Labor Arbiter held that the
strike was illegal for the following reasons: (1) it was based on an intra-union dispute which
cannot properly be the subject of a strike, the right to strike being limited to cases of
bargaining deadlocks and unfair labor practice (2) it was made in violation of the "no strike,
no lock-out" clause in the CBA, and (3) it was attended with violence, force and intimidation
upon the persons of the company officials, other employees reporting for work and third
persons having legitimate business with the company, resulting to serious physical injuries to
several employees and damage to company property.
However, jurisprudence holds that for abandonment of work to exist, it is essential (1) that the
employee must have failed to report for work or must have been absent without valid or
justifiable reason; and (2) that there must have been a clear intention to sever the employeremployee relationship manifested by some overt acts.28 Deliberate and unjustified refusal on
the part of the employee to go back to his work post amd resume his employment must be
established. Absence must be accompanied by overt acts unerringly pointing to the fact that
the employee simply does not want to work anymore.29And the burden of proof to show that
there was unjustified refusal to go back to work rests on the employer.
On the submission that the strike was illegal for being grounded on a non-strikeable issue,
that is, the intra-union conflict between the federation and the local union, it bears reiterating
that when respondent company dismissed the union officers, the issue was transformed into
a termination dispute and brought respondent company into the picture. Petitioners believed
in good faith that in dismissing them upon request by the federation, respondent company
was guilty of unfair labor practice in that it violated the petitioner's right to self-organization.
The strike was staged to protest respondent company's act of dismissing the union officers.
Even if the allegations of unfair labor practice are subsequently found out to be untrue, the
presumption of legality of the strike prevails.25
In the present case, respondents failed to prove that there was a clear intention on the part of
the striking employees to sever their employer-employee relationship. Although admittedly
the company sent three return to work notices to them, it has not been substantially proven
that these notices were actually sent and received by the employees. As a matter of fact,
some employees deny that they ever received such notices. Others alleged that they were
refused entry to the company premises by the security guards and were advised to secure a
clearance from ULGWP and to sign a waiver. Some employees who responded to the notice
were allegedly told to wait for further notice from respondent company as there was lack of
work.
Another reason why the Labor Arbiter declared the strike illegal is due to the existence of a
no strike no lockout provision in the CBA. Again, such a ruling is erroneous. A no strike, no
lock out provision can only be invoked when the strike is economic in nature, i.e. to force
wage or other concessions from the employer which he is not required by law to grant. 26 Such
a provision cannot be used to assail the legality of a strike which is grounded on unfair labor
practice, as was the honest belief of herein petitioners. Again, whether or not there was
indeed unfair labor practice does not affect the strike.
Furthermore, this Court has ruled that an employee who took steps to protest his lay-off
cannot be said to have abandoned his work.30The filing of a complaint for illegal dismissal is
inconsistent with the allegation of abandonment. In the case under consideration, the
petitioners did, in fact, file a complaint when they were refused reinstatement by respondent
company.
On the allegation of violence committed in the course of the strike, it must be remembered
that the Labor Arbiter and the Commission found that "the parties are agreed that there were
violent incidents . . . resulting to injuries to both sides, the union and management." 27 The
evidence on record show that the violence cannot be attributed to the striking employees
alone for the company itself employed hired men to pacify the strikers. With violence
committed on both sides, the management and the employees, such violence cannot be a
ground for declaring the strike as illegal.
With respect to the dismissal of individual petitioners, the Labor Arbiter declared that their
refusal to heed respondent's recall to work notice is a clear indication that they were no
longer interested in continuing their employment and is deemed abandonment. It is admitted
that three return to work notices were sent by respondent company to the striking employees
on March 27, April 11, and April 21, 1989 and that 261 employees who responded to the
notice were admitted back to work.
Anent public respondent's finding that there was no unfair labor practice on the part of
respondent company and federation officers, the Court sustains the same. As earlier
discussed, union security clauses in collective bargaining agreements, if freely and voluntarily
entered into, are valid and binding. Corollary, dismissals pursuant to union security clauses
are valid and legal subject only to the requirement of due process, that is, notice and hearing
prior to dismissal. Thus, the dismissal of an employee by the company pursuant to a labor
union's demand in accordance with a union security agreement does not constitute unfair
labor practice.31
However, the dismissal was invalidated in this case because of respondent company's failure
to accord petitioners with due process, that is, notice and hearing prior to their termination.
Also, said dismissal was invalidated because the reason relied upon by respondent
Federation was not valid. Nonetheless, the dismissal still does not constitute unfair labor
practice.
Lastly, the Court is of the opinion, and so holds, that respondent company officials cannot be
held personally liable for damages on account of the employees' dismissal because the
employer corporation has a personality separate and distinct from its officers who merely
acted as its agents.
It has come to the attention of this Court that the 30-day prior notice requirement for the
dismissal of employees has been repeatedly violated and the sanction imposed for such
violation enunciated in Wenphil Corporation vs. NLRC32 has become an ineffective deterrent.
Thus, the Court recently promulgated a decision to reinforce and make more effective the
requirement of notice and hearing, a procedure that must be observed before termination of
employment can be legally effected.
In Ruben Serrano vs. NLRC and Isetann Department Store (G.R. No. 117040, January 27,
2000), the Court ruled that an employee who is dismissed, whether or not for just or
authorized cause but without prior notice of his termination, is entitled to full backwages from
the time he was terminated until the decision in his case becomes final, when the dismissal
was for cause; and in case the dismissal was without just or valid cause, the backwages shall
be computed from the time of his dismissal until his actual reinstatement. In the case at bar,
where the requirement of notice and hearing was not complied with, the aforecited doctrine
laid down in the Serrano case applies.
WHEREFORE, the Petition is GRANTED; the decision of the National Labor Relations
Commission in Case No. NCR-00-09-04199-89 is REVERSED and SET ASIDE; and the
respondent company is hereby ordered to immediately reinstate the petitioners to their
respective positions. Should reinstatement be not feasible, respondent company shall pay
separation pay of one month salary for every year of service. Since petitioners were
terminated without the requisite written notice at least 30 days prior to their termination,
following the recent ruling in the case of Ruben Serrano vs. National Labor Relations
Commission and Isetann Department Store, the respondent company is hereby ordered to
pay full backwages to petitioner-employees while the Federation is also ordered to pay full
backwages to petitioner-union officers who were dismissed upon its instigation. Since the
dismissal of petitioners was without cause, backwages shall be computed from the time the
herein petitioner employees and union officers were dismissed until their actual
reinstatement. Should reinstatement be not feasible, their backwages shall be computed from
the time petitioners were terminated until the finality of this decision. Costs against the
respondent company.1wphi1.nt
SO ORDERED.
Gonzaga-Reyes, J., concur.
Melo.J., in the result.
Vitug, J., I reiterate my separate opinion in Seranno vs. NLRC (G.R. No. 114070, 27 Jan.
2000).
Panganiban, J., I reiterate my Separate Opinion in Seranno vs. NLRC. G.R. No. 117040 Jan
27, 2000.
Labor Law; Republic Act 6715; National Labor Relations Commission; RA 6715, did not
abolish the NLRC, or change its essential character as a supervisory and adjudicatory body.
Republic Act No. 6715 did not abolish the NLRC, or change its essential character as a
supervisory and adjudicatory body. Under said Act, as under the former law, the NLRC
continues to act collegially, whether it performs administrative or rule-making functions or
exercises appellate jurisdiction to review decisions and final orders of the Labor Arbiters. The
provisions conferring a somewhat greater measure of autonomy; requiring that its
membership be drawn from tripartite sectors (workers, employees and the public sector);
changing the official stations of the Commissions divisions; and even those prescribing
higher or other qualifications for the positions of Commissioner which, if at all, should operate
only prospectively, not to mention the fact that the petitioners (in G.R. No. 91547) have
asserted without dispute that they possess the new qualificationsnone of these can be said
to work so essential or radical a revision of the nature, powers and duties of the NLRC as to
justify a conclusion that the Act in truth did not merely declare vacant but actually abolished
the offices of commissioners and created others in their place.

SUPREME COURT
Manila
EN BANC
G.R. No. 87211
March 5, 1991
JOVENCIO L. MAYOR petitioner,

vs.
HON. CATALINO MACARAIG, HON. GUILLERMO CARAGUE, HON. RIZALINA
CAJUCOM, HON. FRANKLIN DRILON, respondents. LOURDES A. SALES and RICARDO
OLAIREZ, petitioners-intervenors.
G.R. No. 90044
March 5, 1991
674
674
Mayor vs. Macaraig
Same; Same; Same; Labor Arbiters; Under RA 6715, Labor Arbiters shall continue to
exercise the same basic power and function: the adjudication, in the first instance, of certain
classes of labor disputes.Similar considerations yield the same conclusion as far as the
positions of Labor Arbiters are concerned, there being no essential inconsistency on that
score between Republic Act No. 6715 and the old law. The Labor Arbiters continue to
exercise the same basic power and function: the adjudication, in the first instance, of certain
classes of labor disputes. Their original and exclusive jurisdiction remains substantially the
same under both the old law and the new. Again, their incumbents constitutionally
guaranteed security of tenure cannot be defeated by the provision for higher or other
qualifications than were prescribed under the old law; said provision can only operate
prospectively and as to new appointees to positions regularly vacated; and there is, besides,
also no showing that the petitioning Arbiters do not qualify under the new law. [Mayor vs.
Macaraig, 194 SCRA 672(1991)]
PASCUAL V. REYES, petitioner,

vs.
HON. FRANKLIN DRILON, respondent.
G.R. No. 91547
March 5, 1991
CEFERINO E. DULAY, ROSARIO G. ENCARNACION and DANIEL LUCAS, JR.,

petitioners,
vs.
HON. CATALINO MACARAIG, JR., as Executive Secretary, HON. GUILLERMO N.
CARAGUE, as Secretary of Budget and Management, HON. DIONISIO DE LA SERNA,
as Acting Secretary of Labor & Employment, BARTOLOME CARALE, VICENTE S.E.
VELOSO III, ROMEO B. TUOMO, EDNA BONTO PEREZ, DOMINGO H. ZAPANTA,
RUSTICO L. DIOKNO, LOURDES C. JAVIER, IRINEO B. BARNALDO, ROGELIO I.
RAYALA, ERNESTO G. LADRINO III, IRENEA E. CENIZA, BERNABE S. BATUHAN,
MUSIB M. BUAT, L.B. GONZAGA, JR. and OSCAR ABELLA, respondents.
G.R. No. 91730
March 5, 1991
CONRADO B. MAGLAYA, petitioner,

vs.
HON. CATALINO MACARAEG, HON. GUILLERMO CARAGUE, HON. RIZALINA
CAJOCUM, and the HONORABLE SECRETARY OF LABOR, respondents.
G.R. No. 94518
March 5, 1991
ROLANDO D. GAMBITO, petitioner,

vs.
THE SECRETARY OF LABOR AND EMPLOYMENT and THE EXECUTIVE SECRETARY,
respondents.
Ma.Luisa Y. Cortes for petitioner-intervenor Sales in G.R. No. 87211.
Jose C. Espinas for petitioners in G.R. Nos. 90044 & 91730.
Magtanggol C. Gunigundo for petitioners in G.R. No. 91547.
NARVASA, J.:
Five (5) special civil actions are hereby jointly decided because they involve one common,
fundamental issue, the constitutionality of Republic Act No. 6715, effective March 21, 1989, in
so far as it declares vacant "all positions of the Commissioners, Executive Labor Arbiters and
Labor Arbiters of the National Labor Relations Commission," and operates to remove the
incumbents upon the appointment and qualification of their successors. The law is entitled,
"AN ACT TO EXTEND PROTECTION TO LABOR, STRENGTHEN THE CONSTITUTIONAL
RIGHTS OF WORKERS TO SELF-ORGANIZATION, COLLECTIVE BARGAINING AND
PEACEFUL CONCERTED ACTIVITIES, FOSTER INDUSTRIAL PEACE AND HARMONY,
PROMOTE THE PREFERENTIAL USE OF VOLUNTARY MODES OF SETTLING LABOR
DISPUTES AND RE-ORGANIZE THE NATIONAL LABOR RELATIONS COMMISSION,
AMENDING PRESIDENTIAL DECREE NO. 441, AS AMENDED, OTHERWISE KNOWN AS
THE LABOR CODE OF THE PHILIPPINES, APPROPRIATING FUNDS THEREFOR AND
FOR OTHER PURPOSES." 1The provision directly dealing with the reorganization of the
National Labor Relations Commission is Section 35. It reads as follows: 2
Sec. 35.Equity of the Incumbent. Incumbent career officials and rank-and-file
employees of the National labor Relations Commission not otherwise affected by
the Act shall continue to hold office without need of reappointment. However,
consistent with the need to professionalize the higher levels of officialdom invested
with adjudicatory powers and functions, and to upgrade their qualifications, ranks,
and salaries or emoluments, all positions of the Commissioners, Executive Labor
Arbiters and Labor Arbiters of the present National Labor Relations Commission
are hereby declared vacant. However, subject officials shall continue to temporarily
discharge their duties and functions until their successors shall have been duly
appointed and qualified.
The first of these five consolidated cases was filed by Labor Arbiter Jovencio Ll. Mayor on
March 8, 1989. In the year that followed, eight other officers of the Commission, as initiators
of their own separate actions or as intervenors, joined Mayor in the attempt to invalidate the
reorganization and to be reinstated to their positions in the Government service.
G.R. No. 87211: Jovencio Mayor; and Intervenors Lourdes A. Sales and Ricardo
Olairez
Jovencio Ll. Mayor, a member of the Philippine Bar for fifteen (15) years, was appointed
Labor Arbiter in 1986 after he had, according to him, met the prescribed qualifications and
passed "a rigid screening process." Fearing that he would be removed from office on account
of the expected reorganization, he filed in this Court the action now docketed as G.R. No.
87211. His fears proved groundless, however. He was in fact reappointed a Labor Arbiter on
March 8, 1990. Hence, as he himself says, the case became moot as to him.
Like Mayor, both intervenors Lourdes A. Sales and Ricardo N. Olairez were appointed Labor
Arbiters in 1986, but unlike Mayor, were not among the one hundred fifty-one (151) Labor
Arbiters reappointed by the President on March 8, 1990.
G.R. No. 90044; Pascual Y Reyes; and Intervenor Eugenio L Sagmit, Jr.
At the time of the effectivity of R.A. No. 6715, Pascual Y. Reyes was holding the office of
Executive Director of the National Labor Relations Commission in virtue of an appointment
extended to him on May 30, 1975. As specified by Administrative Order No. 10 of the
Secretary of Labor, dated July 14, 1975, the functions of his office were "to take charge of all
administrative matters of the Commission and to have direct supervision overall units and
personnel assigned to perform administrative tasks;" and Article 213 of the Labor Code, as
amended, declared that the "Executive Director, assisted by a Deputy Executive Director,
shall exercise the administrative functions of the Commission." Reyes states that he has
been "a public servant for 42 years," and "is about to retire at sixty-five (65)," in 1991.
The petitioner-in-intervention, Eugenio I. Sagmit, Jr., was Reyes' Deputy Executive Director,
appointed as such on October 27, 1987 after twenty-five (25) years of government service.
Both Reyes and Sagmit were informed that they had been separated from employment upon
the effectivity of R.A. No. 6715, pursuant to a Memorandum-Order issued by then Secretary
of Labor Franklin Drilon on August 17, 1989 to the effect that the offices of Executive Director
and Deputy Executive Director had been abolished by Section 35, in relation to Section 5 of
said Act, and "their functions transferred to the Chairman, aided by the Executive Clerk.
Reyes moved for reconsideration on August 29, 1989, but when no action was allegedly
taken thereon, he instituted the action at bar, G.R. No. 90044. Sagmit was afterwards granted
leave to intervene in the action.
G.R. No. 91547: CeferinoDulay, Rosario G. Encarnacion, and Daniel M. Lucas
Petitioners Rosario G. Encarnacion and Daniel M. Lucas, Jr. were appointed National Labor
Relations Commissioners on October 20, 1986, after the Commission was reorganized
pursuant to Executive Order No. 47 of President Aquino. Later, or more precisely on
November 19, 1986, Lucas was designated Presiding Commissioner of the Commission's
Second Division; and Commissioner Ceferino E. Dulay was appointed Presiding
Commissioner of the Third Division.
Executive Order No. 252, issued by the President on July 25, 1987, amended Article 215 of
the Labor Code by providing that "the Commissioners appointed under Executive Order No.
47 dated September 10, 1986 shall hold office for a term of six (6) years . . . (but of those
thus appointed) three shall hold office for four (4) years, and three for two (2) years . . .
without prejudice to reappointment." Under Executive Order No. 252, the terms of
Encarnacion and Lucas would expire on October 23, 1992, and that of Dulay, on December
18, 1992.
On November 18, 1989, R.A. No. 6715 being then already in effect, the President extended
to Encarnacion, Lucas and Dulay new appointments as Commissioners of the NLRC despite
the fact that, according to them, they had not been served with notice of the termination of
their services as incumbent commissioners, and no vacancy existed in their positions. Their
new appointments were submitted to Congress, but since Congress adjourned on December
22, 1989 without approving their appointments, said appointments becamefunctus officio.
No other appointments were thereafter extended to Encarnacion and Dulay. Lucas was
however offered the position of Assistant Regional Director by Secretary Drilon and then by
Acting Secretary Dionisio de la Serna (by letter dated January 9, 1990 which referred to his
appointment as such Assistant Regional Director supposedly "issued by the President on
November 8, 1989"). Lucas declined the offer, believing it imported a demotion.
Of the incumbent Commissioners as of the effectivity of R.A. 6715, six (6) were reappointed,
namely: (1) Hon. Edna Bonto Perez (as Presiding Commissioner, Second Division NCR]), (2)
Domingo H. Zapanta (Associate Commissioner, Second Division), (3) Lourdes C. Javier
(Presiding Commissioner, Third Division [Luzon except NCR]), (4) Ernesto G. Ladrido III
(Presiding Commissioner, Fourth Division [Visayas]), (5) Musib M. Buat (Presiding
Commissioner, Fifth Division [Mindanao]), and (6) Oscar N. Abella (Associate Commissioner,
Fifth Division). Other members appointed to the reorganized Commission were Vicente S.E.
Veloso III, Romeo B. Putong, Rustico L. Diokno, Ireneo B. Bernardo, Rogelio I. Rayala,
Irenea E. Ceniza, Bernabe S. Batuhan, and Leon G. Gonzaga, Jr. Appointed Chairman was
Hon. Bartolome Carale, quondam Dean of the College of Law of the University of the
Philippines.
G.R. No. 91730:ConradoMaglaya
Petitioner ConradoMaglaya alleges that he has been "a member of the Philippine Bar for
thirty-six (36) years of which 31 years . . . (had been) devoted to public service, the last 24
years in the field of labor relations law;" that he was appointed Labor Arbiter on May 30, 1975
and "was retained in such position despite the reorganization under the Freedom Constitution
of 1986 . . . (and) later promoted to and appointed by the President as Commissioner of
the . . . (NLRC) First Division on October 23, 1986." He complains that he was effectively
removed from his position as a result of the designation of the full complement of
Commissioners in and to all Five Divisions of the NLRC by Administrative Order No. 161
dated November 18, 1989, issued by Labor Secretary Drilon.
G.R. No. 94518: Rolando D. Gambito
Rolando Gambito passed the bar examinations in 1971, joined the Government service in
1974, serving for sixteen years in the Department of Health, and as Labor Arbiter in the
Department of Labor and Employment from October, 1986. He was not included in the list of
newly appointed Labor Arbiters released on March 8, 1990; and his attempt to obtain a
recosideration of his exclusion therefrom and bring about his reinstatement as Labor Arbiter
was unavailing.
The Basic Issue
They all pray that their removal be pronounced unconstitutional and void and they be
declared Commissioners lawfully in office, or, alternatively, that they be paid all salaries,
benefits and emoluments accruing to them for the unexpired portions of their six-year terms
and allowed to enjoy retirement benefits under applicable laws (pursuant to R.A. 910 and the
Resolution re Judge Mario Ortiz, G. R. No. 78951, June 28, 1988).
A number of issues have been raised and ventilated by the petitioners in their separate
pleadings. They may all be reduced to one basic question, relating to the constitutionality of
the provisions of Republic Act No. 6715 DECLARING VACANT "all positions of the
Commissioners, Executive Labor Arbiters and Labor Arbiters of the present National Labor
Relations Commission," 3 according to which the public respondents
1) considered as effectively separated from the service inter alia, all holders of said positions
at the time of the effectivity of said Republic Act No. 6715, including the positions of
Executive Director and Deputy Executive Director of the Commission, and
2) consequently, thereafter caused the appointment of other persons to the new positions
specified in said statute: of Chairman Commissioners, Executive Clerk, Deputy Executive
Clerk, and Labor Arbiters of the reorganized National Labor Relations Commission. The old
positions were declared vacant because, as the statute states, of "the need to professionalize
the higher levels of officialdom invested with adjudicatory powers and functions, and to
upgrade their qualifications, ranks, and salaries or emoluments."
As everyone knows, security of tenure is a protected right under the Constitution.1wphi1The
right is secured to all employees in privates as well as in public employment. "No officer or
employee in the civil service," the Constitution declares, "shall be removed or suspended
except for cause provided by law." 4
There can scarcely be any doubt that each of the petitioners commissioner, administrative
officer, or labor arbiter falls within the concept of an "officer or employee in the civil
service" since the civil service "embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including governmentowned or controlled corporations with
original charters." 5 The Commissioners thus had the right to remain of office until the
expiration of the terms for which they had been appointed, unless sooner removed "for cause
provided by law." So, too, the Executive Director and Deputy Executive Director, and the
Labor Arbiters had the right to retain their positions until the age of compulsory retirement,
unless sooner removed "for cause provided by law." None of them could be deemed to be
serving at the pleasure of the President.
Now, a recognized cause for several or termination of employment of a Government officer or
employee is the abolition by law of his office as a result of reorganization carried out by
reason of economy or to remove redundancy of functions, or clear and explicit constitutional
mandate for such termination of employment. 6 Abolition of an office is obviously not the
same as the declaration that that office is vacant. While it is undoubtedly a prerogative of the
legislature to abolish certain offices, it can not be conceded the power to simply pronounce
those offices vacant and thereby effectively remove the occupants or holders thereof from the
civil service. Such an act would constitute, on its face, an infringement of the constitutional
guarantee of security of tenure, and will have to be struck down on that account. It can not be
justified by the professed "need to professionalize the higher levels of officialdom invested
with adjudicatory powers and functions, and to upgrade their qualifications, ranks, and
salaries or emoluments."
The Constitution does not, of course, ordain the abolition of the petitioners' positions of their
removal from their offices; and there is no claim that the petitioners' separation from the
service is due to a cause other than RA 6715. The inquiry therefore should be whether or not
RA 6715 has worked such an abolition of the petitioners' offices, expressly or impliedly. This
is the only mode by which, under the circumstances, the petitioners' removal from their
positions may be defended and sustained.
It is immediately apparent that there is no express abolition in RA 6715 of the petitioners'
positions. So, justification must be sought, if at all, in an implied abolition thereof; i.e., that
resulting from an irreconcilable inconsistency between the nature, duties and functions of the
petitioners' offices under the old rules and those corresponding thereof under the new law. An
examination of the relevant provisions of RA 6715, with a view to discovering the changes
thereby effected on the nature, composition, powers, duties and functions of the Commission
and the Commissioners, the Executive Director, the Deputy Executive Director, and the labor
Arbiters under the prior legislation, fails to disclose such essential inconsistencies.
1. Amendments as Regards the NLRC and the Commissioners
First, as regards the National Labor Relations Commissioners.
A. Nature and Composition of the Commission, Generally
1. Prior to its amendment by RA 6715, Article 213 of the Labor Code envisaged the NLRC as
being an integral part of the Department of labor and Employment. "There shall," it said, "be a
National Labor Relations Commission in the Department of Labor and Employment . . . ." RA
6715 would appear to have made the Commission somewhat more autonomous. Article 213
now declares that, "There shall be a National labor Relations Commission which shall be
attached to the Department of labor and Employment for program coordination only . . . ."
2. Tripartite representation was to a certain extent restored in the Commission. The same
Section 213, as amended, now provides that the Chairman and fourteen (14) members
composing the NLRC shall be chosen from the workers', employers' and the public sectors,
as follows:
Five (5) members each shall be chosen from among the nominees of the workers
and employers organization, respectively. The Chairman and the four (4) remaining
members shall come from the public sector, with the latter to be chosen from
among the recommendees of the Secretary of Labor and Employment.
However, once they assume office," the members nominated by the workers and employers
organizations shall divest themselves of any affiliations with or interest in the federation or
association to which they belong."
and the appellate authority of the divisions is exclusive "within their respective
territorial jurisdiction."
D. Qualifications and Tenure of Commissioners
B. Allocation of Powers Between NLRC En Banc and its Divisions

Another amendment was made in respect of the allocation of powers and functions between
the Commission en banc, on the one hand, and its divisions, on the other. Both under the old
and the amended law, the Commission was vested with rule-making and administrative
authority, as well as adjudicatory and other powers, functions and duties, and could sit en
banc or in divisions of three (3) members each. But whereas under the old law, the cases to
be decided en banc and those by a division were determined by rules laid down by the
Commission with the approval of the ex officio, Chairman (the Secretary of labor) said
Commission, in other words, then exercise both administrative and adjudicatory powers
the law now, as amended by RA 6715, provides that
1) the Commission "shall sit en banc only for purposes of promulgating rules and
regulations governing the hearing and disposition of cases before any of its
divisions and regional branches and formulating policies affecting its administration
and operations;" but
2) it "shall exercise its adjudicatory and all other powers, functions and duties
through its divisions."
C. Official Stations, and Appellate Jurisdiction over Fixed Territory
Other changes related to the official station of the Commission and its divisions, and the
territory over which the divisions could exercise exclusive appellate jurisdiction.
1. Under the old law, the Commission en banc and its divisions had their main
office in Metropolitan Manila; and appeals could be taken to them from decisions of
Labor Arbiters regardless of the regional office whence the case originated.
2. Under the law now, the First and Second Divisions have their official station in
Metropolitan Manila and "handle cases coming from the National Capital Region;"
the Third Division has its main office also in Metropolitan Manila but would have
appellate jurisdiction over "cases from other parts of Luzon;" and the Fourth and
Fifth Divisions have their main offices in Cebu and Cagayan de Oro City, and
exercise jurisdiction over cases "from the Visayas and Mindanao," respectively;
Revisions were also made by RA 6715 with respect to the qualifications and tenure of the
National Labor Relations Commissioners.
Prescribed by the old law as qualifications for commissioners appointed for a term of six
(6) years were that they (a) by members of the Philippine bar, and (b) have at least five
years' experience in handling labor-management relations. 7
RA 6715, on the other hand, requires (a) membership in the bar, (b) engagement in the
practice of law for at least 15 years, (c) at least five years' experience or exposure in the field
of labor-management relations, and (d) preferably, residence in the region where the
commissioner is to hold office. The commissioners appointed shall hold office during good
behavior until they reach the age of sixty-five (65) years, unless they are sooner removed for
cause as provided by law or become incapacited to discharge the duties of their office.
2. Amendments Regarding Executive Labor Arbiters and Labor Arbiters
A. Qualifications
The old provided for one hundred fifty (150) labor arbiters assigned to the different regional
offices or branches of the Department of Labor and Employment (including sub-regional
branches or provincial extension units), each regional branch being headed by an Executive
Labor Arbiter. RA 6715 does not specify any fixed number of labor arbiters, but simply
provides that there shall be as many labor arbiters as may be necessary for the effective and
efficient operation of the Commission.
The old law declared that Executive Labor Arbiters and Labor Arbiters should be members of
the Bar, with at least two (2) years experience in the field of labor management relations.
They were appointed by the President upon recommendation of the Chairman, and were
"subject to the Civil Service Law, rules and regulations."
On the other hand, RA 6715 requires that the "Executive Labor Arbiters and Labor Arbiters
shall likewise be members of the Philippine Bar," but in addition "must have been in the
practice of law in the Philippines for at least seven (7) years, with at least three (3) years
experience or exposure in the field of labor-management relations." For "purposes of
reappointment," however, "incumbent Executive Labor Arbiters and Labor Arbiters who have
been engaged in the practice of law for at least five (5) years may be considered as already
qualified." They are appointed by the President, on recommendation of the Secretary of
Labor and Employment, and are subject to the Civil Service Law, rules and regulations.
(4) Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations;8
(5) Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts;
B. Exclusive Original Jurisdiction

Before the effectivity of RA 6715, the exclusive original jurisdiction of labor arbiters
comprehended the following cases involving all workers, whether agricultural or nonagricultural:
(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), whether or not accompanies with a
claim for reinstatement.
(1) Unfair labor practice cases;

(2) Those that workers may file involving wages, hours of work and other terms and
conditions of employment;
(3) All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;
(4) Cases involving household services; and
(5) Cases arising from any violation of Article 265 of this Code, including questions
involving the legality of strikes and lockouts.
Some changes were introduced by RA 6715, indicated by italics in the enumeration which
shortly follows. The exclusive, original jurisdiction of Labor Arbiters now embraces the
following involving all workers, whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanies 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;
Now, as before, the Labor Arbiters are given thirty (30) calendar days after the submission of
the case by the parties to decide the case, without extension, except that the present statute
stresses that "even in the absence of stenographic notes," the period to decide is still thirty
days, without extension.
Furthermore, RA 6715 provides that "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."
3. Amendments as Regards the Executive Director and Deputy Executive Director
Prior to RA 6715, there was, as earlier stated, an Executive Director, assisted by a Deputy
Executive Director, who was charged with the "exercise (of) the administrative functions of
the Commission." 9 More particularly, his chief functions were "to take charge of all
administrative matters of the Commission and to have direct supervision over all units and
personnel assigned to perform administrative tasks." 10 Although not so stated in the law, in
the performance of their functions, the Executive Director and the Deputy Executive Director
were obviously themselves subject to the supervision and control of the head of office, the ex
officio Chairman of the National Labor Relations Commission (the Secretary of Labor), or the
Commission itself.
Under RA 6715, the Secretary of Labor is no longer ex officio Chairman of the Commission.
There has been created the office of Chairman, who "shall have the administrative
supervision over the Commission and its regional branches and all its personnel, including
the Executive Labor Arbiters and Labor Arbiters." In this function, the law says, he shall be
"aided by the Executive Clerk of the Commission."
The Executive Clerk appears to be the officer who used to be known under the old law as the
Executive Director. The office of Executive Director is nowhere mentioned in RA 6715. Said
Executive Clerk is given the additional responsibility of assisting the Commission en banc
and the First Division, in performing "such similar or equivalent functions and duties as are
discharged by the Clerk of Court . . . of the Court of Appeals." The position of Deputy
Executive Clerks have also been created whose main role is to assist the other divisions of
the Commission (the second, third, fourth and fifth) "in the performance of such similar or
equivalent functions and duties as are discharged by the . . . Deputy Clerk(s) of the Court of
Appeals."
Summing up
1. Republic Act No. 6715 did not abolish the NLRC, or change its essential
character as a supervisory and adjudicatory body. Under said Act, as under the
former law, the NLRC continues to act collegially, whether it performs
administrative or rule-making functions or exercises appellate jurisdiction to review
decisions and final orders of the Labor Arbiters. The provisions conferring a
somewhat greater measure of autonomy; requiring that its membership be drawn
from tripartite sectors (workers, employees and the public sector); changing the
official stations of the Commission's divisions, and even those prescribing higher or
other qualifications for the positions of Commissioner which, if at all, should
operate only prospectively, not to mention the fact that the petitioners (in G.R. No.
91547) have asserted without dispute that they possess the new qualifications
none of these can be said to work so essential or radical a revision of the nature,
powers and duties of the NLRC as to justify a conclusion that the Act in truth did
not merely declare vacant but actually abolished the offices of commissioners and
created others in their place.
2. Similar considerations yield the same conclusion as far as the positions of Labor
Arbiters are concerned, there being no essential inconsistency on that score
between Republic Act No. 6715 and the old law. The Labor Arbiters continue to
exercise the same basic power and function: the adjudication, in the first instance,
of certain classes of labor disputes. Their original and exclusive jurisdiction remains
substantially the same under both the old law and the new. Again, their incumbents'
constitutionally guaranteed security of tenure cannot be defeated by the provision
for higher or other qualifications than were prescribed under the old law; said
provision can only operate prospectively and as to new appointees to positions
regularly vacated; and there is, besides, also no showing that the petitioning
Arbiters do not qualify under the new law.
3. The position titles of "Executive Clerk" and "Deputy Executive Clerk(s)" provided
for in RA 6715 are obviously not those of newly-created offices, but new
appellations or designations given to the existing positions of Executive Director
and Deputy Executive Director. There is no essential change from the prescribed
and basically administrative duties of these positions and, at the same time, no
mention in the Act of the former titles, from which the logical conclusion is that what
was intended was merely a change in nomenclature, not an express or implied
abolition. Neither does the Act specify the qualifications for Executive Clerk and
Deputy Executive Clerks. There is no reason to suppose that these could be higher
than those for Executive Director and Deputy Executive Director, or that anything
inheres in these positions that would preclude their incumbents from being named
Executive Clerk and Deputy Executive Clerks.
WHEREFORE, the petitions are, as they must be, GRANTED , and the following specific
dispositions are hereby RENDERED:
1. In G.R. No. 91547, and G.R. No. 91730, the removal of petitioners Rosario G.
Encarnacion, Daniel M. Lucas, Jr., Ceferino E. Dulay, and ConradoMaglaya as
Commissioners of the NLRC is ruled unconstitutional and void; however, to avoid
displacement of any of the incumbent Commissioners now serving, it not appearing
that any of them is unfit or has given cause for removal, and conformably to the
alternative prayer of the petitioners themselves, it is ORDERED that said
petitioners be paid all salaries, benefits and emoluments accruing to them for the
unexpired portions of their six-year terms and allowed to enjoy retirement benefits
under applicable laws, pursuant to RA No. 910 and this Court's Resolution in Ortiz
vs. Commission on Elections, G.R. No. 79857, 161 SCRA 812;
This disposition does not involve or apply to respondent Hon. Bartolome Carale,
who replaced the Secretary of Labor as ex officio Chairman of the NLRC pursuant
to RA 6715, none of the petitioners having been affected or in any manner
prejudiced by his appointment and incumbency as such;
2. In G.R. No. 90044, the removal of petitioner Pascual Y. Reyes and petitioner-inintervention Eugenio L. Sagmit, Jr. as NLRC Executive Director and Deputy
Executive Director, respectively, is likewise declared unconstitutional and void, and
they are ordered reinstated as Executive Clerk and Deputy Executive Clerk,
respectively, unless they opt for retirement, in either case with full back salaries,
emoluments and benefits from the date of their removal to that of their
reinstatement; and
3. In G.R. Nos. 87211, and 94518, petitioners-intervenors Lourdes A. Sales and

Ricardo Olairez and petitioner Rolando D. Gambito, having also been illegally
removed as Labor Arbiters, are ordered reinstated to said positions with full back
salaries, emoluments and benefits from the dates of their removal up to the time
they are reinstated.
No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Davide, Jr., J., took no part
Constitutional Law; Appointments; The Chairman and Members of the National Labor
Relations Commission are not among the officers mentioned in the first sentence of Section
16, Article VII whose appointments requires confirmation by the Commission on
Appointments.Indubitably, the NLRC Chairman and Commissioners fall within the second
sentence of Section 16, Article VII of the Constitution, more specifically under the third
groups of appointees referred to in Mison, i.e. those whom the President may be authorized
by law to appoint. Undeniably, the Chairman and Members of the NLRC are not among the
officers mentioned in the first sentence of Section 16, Article VII whose appointments requires
confirmation by the Commission on Appointments. [Calderon vs. Carale, 208 SCRA
254(1992)]
SUPREME COURT
Manila
EN BANC
G.R. No. 91636 April 23, 1992

PETER JOHN D. CALDERON, petitioner,
vs.
BARTOLOME CARALE, in his capacity as Chairman of the National Labor Relations
Commission, EDNA BONTO PEREZ, LOURDES C. JAVIER, ERNESTO G. LADRIDO III,
MUSIB M. BUAT, DOMINGO H. ZAPANTA, VICENTE S.E. VELOSO III, IRENEO B.
BERNARDO, IRENEA E. CENIZA, LEON G. GONZAGA, JR., ROMEO B. PUTONG,
ROGELIO I. RAYALA, RUSTICO L. DIOKNO, BERNABE S. BATUHAN and OSCAR N.
ABELLA, in their capacity as Commissioners of the National Labor Relations
Commission, and GUILLERMO CARAGUE, in his capacity as Secretary of Budget and
Management, respondents.
departments, ambassadors, other public ministers and consuls, or

officers of the armed forces from the rank of colonel or naval captain,
and other officers whose appointments are vested in him in this
Constitution. He shall also appoint all other officers of the Government
whose appointments are not otherwise provided for by law, and those
whom he may be authorized by law to appoint. The Congress may, by
law, vest the appointment of other officers lower in rank in the President
alone, in the courts, or in the heads of departments, agencies,
commissions, or boards.
The President shall have the power to make appointments during the
recess of the Congress, whether voluntary or compulsory, but such
appointments shall be effective only until disapproval by the Commission
on Appointments or until the next adjournment of the Congress. 1
The power of the Commission on Appointments (CA for brevity) to confirm appointments,
contained in the aforequoted paragraph 1 of Sec. 16, Art.VII, was first construed in Sarmiento
III vs.Mison2 as follows:
. . . it is evident that the position of Commissioner of the Bureau of
Customs (a bureau head) is not one of those within the first group of
appointments where the consent of the Commission on Appointments is
required. As a matter of fact, as already pointed out, while the 1935
Constitution includes "heads of bureaus" among those officers whose
appointments need the consent of the Commission on Appointments, the
1987 Constitution, on the other hand, deliberately excluded the position
of "heads of bureaus" from appointments that need the consent
(confirmation) of the Commission on Appointments.
. . . Consequently, we rule that the President of the Philippines acted
within her constitutional authority and power in appointing respondent
Salvador Mison, Commissioner of the Bureau of Customs, without
submitting his nomination to the Commission on Appointments for
confirmation. . . .
PADILLA, J.:
Controversy is focused anew on Sec. 16, Art. VII of the 1987 Constitution which provides:
Sec. 16. The President shall nominate and, with the consent of the
Commission on Appointments, appoint the heads of the executive
. . . In the 1987 Constitution, however, as already pointed out, the clear

and expressed intent of its framers was to exclude presidential
appointments from confirmation by the Commission on Appointments,
except appointments to offices expressly mentioned in the first sentence
of Sec. 16, Art. VII.Consequently, there was no reason to use in the third
sentence of Sec. 16, Article VII the word "alone" after the word
"President" in providing that Congress may by law vest the appointment

of lower-ranked officers in the President alone, or in the courts, or in the
heads of departments, because the power to appoint officers whom he
(the president) may be authorized by law to appoint is already vested in
the President, without need of confirmation by the Commission on
Appointments, in the second sentence of the same Sec. 16, Article VII."
(emphasis supplied)
Next cameMary Concepcion Bautista v.Salonga,3this time involving the appointment of the
Chairman of the Commission on Human Rights. Adhering to the doctrine in Mison, the Court
explained:
. . . Since the position of Chairman of the Commission on Human Rights
is not among the positions mentioned in the first sentence of Sec. 16, Art.
VII of the 1987 Constitution, appointments to which are to be made with
the confirmation of the Commission on Appointments, it follows that the
appointment by the President of the Chairman of the CHR is to be made
without the review or participation of the Commission on Appointments.
To be more precise, the appointment of the Chairman and Members of
the Commission on Human Rights is not specifically provided for in the
Constitution itself, unlike the Chairmen and Members of the Civil Service
Commission, the Commission on Elections and the Commission on
Audit, whose appointments are expressly vested by the Constitution in
the president with the consent of the Commission on Appointments. The
president appoints the Chairman and Members of The Commission on
Human Rights pursuant to the second sentence in Section 16, Art. VII,
that is, without the confirmation of the Commission on Appointments
because they are among the officers of government "whom he (the
President) may be authorized by law to appoint." And Section 2(c),
Executive Order No. 163, 5 May 1987, authorizes the President to
appoint the Chairman and Members of the Commission on Human
Rights.
Consistent with its rulings in Misonand Bautista, in Teresita Quintos Deles, et al. v. The
Commission on Constitutional Commissions, et al., 4the power of confirmation of the
Commission on Appointments over appointments by the President of sectoral representatives
in Congress was upheld because:
. . . Since the seats reserved for sectoral representatives in paragraph 2,
Section 5, Art. VI may be filled by appointment by the President by
express provision of Section 7, Art. XVIII of the Constitution, it is
indubitable that sectoral representatives to the House of Representatives

are among the "other officers whose appointments are vested in the
President in this Constitution," referred to in the first sentence of Section
16, Art. VII whose appointments are subject to confirmation by the
Commission on Appointments.
From the three (3) cases above-mentioned, these doctrines are deducible:
1. Confirmation by the Commission on Appointments is required only for presidential
appointees mentioned in the first sentence of Section 16, Article VII, including, those officers
whose appointments are expressly vested by the Constitution itself in the president (like
sectoral representatives to Congress and members of the constitutional commissions of
Audit, Civil Service and Election).
2. Confirmation is not required when the President appoints other government officers whose
appointments are not otherwise provided for by law or those officers whom he may be
authorized by law to appoint (like the Chairman and Members of the Commission on Human
Rights). Also, as observed inMison, when Congress creates inferior offices but omits to
provide for appointment thereto, or provides in an unconstitutional manner for such
appointments, the officers are considered as among those whose appointments are not
otherwise provided for by law.
Sometime in March 1989, RA 6715 (Herrera-Veloso Law), amending the Labor Code (PD
442) was approved. It provides in Section 13 thereof as follows:
xxxxxxxxx
The Chairman, the Division Presiding Commissioners and other
Commissioners shall all be appointed by the President, subject to
confirmation by the Commission on Appointments. Appointments to any
vacancy shall come from the nominees of the sector which nominated
the predecessor. The Executive Labor Arbiters and Labor Arbiters shall
also be appointed by the President, upon recommendation of the
Secretary of Labor and Employment, and shall be subject to the Civil
Service Law, rules and regulations. 5
Pursuant to said law (RA 6715), President Aquino appointed the Chairman and
Commissioners of the NLRC representing the public, workers and employers sectors. The
appointments stated that the appointees may qualify and enter upon the performance of the
duties of the office. After said appointments, then Labor Secretary Franklin Drilon issued
Administrative Order No. 161, series of 1989, designating the places of assignment of the
newly appointed commissioners.
end of the second sentence. Evidently, our Constitution has significantly

omitted to provide for such additions.
This petition for prohibition questions the constitutionality and legality of the permanent
appointments extended by the President of the Philippines to the respondents Chairman and
Members of the National Labor Relations Commission (NLRC), without submitting the same
to the Commission on Appointments for confirmation pursuant to Art. 215 of the Labor Code
as amended by said RA 6715.
The original text of Section 16 of Article VII of the present Constitution as

embodied in Resolution No. 517 of the Constitutional Commission reads
as follows:
Petitioner insists on a mandatory compliance with RA 6715 which has in its favor the
presumption of validity. RA 6715 is not, according to petitioner, an encroachment on the
appointing power of the executive contained in Section 16, Art. VII, of the Constitution, as
Congress may, by law, require confirmation by the Commission on Appointments of other
officers appointed by the President additional to those mentioned in the first sentence of
Section 16 of Article VII of the Constitution. Petitioner claims that the Mison and Bautista
rulings are not decisive of the issue in this case for in the case at bar, the President issued
permanent appointments to the respondents without submitting them to the CA for
confirmation despite passage of a law (RA 6715) which requires the confirmation by the
Commission on Appointments of such appointments.
The Solicitor General, on the other hand, contends that RA 6715 which amended the Labor
Code transgresses Section 16, Article VII by expanding the confirmation powers of the
Commission on Appointments without constitutional basis. Mison and Bautista laid the issue
to rest, says the Solicitor General, with the following exposition:
As interpreted by this Honorable Court in the Mison case, confirmation
by the Commission on Appointments is required exclusively for the
heads of executive departments, ambassadors, public ministers,
consuls, officers of the armed forces from the rank of colonel or naval
captain, and other officers whose appointments are vested in the
President by the Constitution, such as the members of the various
Constitutional Commissions. With respect to the other officers whose
appointments are not otherwise provided for by the law and to those
whom the President may be authorized by law to appoint, no
confirmation by the Commission on Appointments is required.
Had it been the intention to allow Congress to expand the list of officers
whose appointments must be confirmed by the Commission on
Appointments, the Constitution would have said so by adding the phrase
"and other officers required by law" at the end of the first sentence, or the
phrase, "with the consent of the Commission on Appointments" at the
"The President shall nominate and, with the consent

of the Commission on Appointments, shall appoint
the heads of the executive departments and
bureaus, ambassadors, other public ministers and
consuls, or officers of the armed forces from the
rank of captain or commander, and all other officers
of the Government whose appointments are not
herein otherwise provided for by law, and those
whom he may be authorized by law to appoint. The
Congress may by law vest the appointment of
inferior officers in the President alone, in the courts
or in the heads of the department."
Three points should be noted regarding sub-section 3 of Section 10 of
Article VII of the 1935 Constitution and in the original text of Section 16
of Article VII of the present Constitution as proposed in Resolution No.
517.
First, in both of them, the appointments of heads of bureaus were
required to be confirmed by the Commission on Appointments.
Second, in both of them, the appointments of other officers, "whose
appointments are not otherwise provided for by law to appoint" are
expressly made subject to confirmation by the Commission on
Appointments. However, in the final version of Resolution No. 517, as
embodied in Section 16 of Article VII of the present Constitution, the
appointment of the above mentioned officers (heads of bureaus; other
officers whose appointments are not provided for by law; and those
whom he may be authorized by law to appoint) are excluded from the list
of those officers whose appointments are to be confirmed by the
Commission on Appointments. This amendment, reflected in Section 16
of Article VII of the Constitution, clearly shows the intent of the framers to
exclude such appointments from the requirement of confirmation by the
Commission on Appointments.
Third, under the 1935 Constitution the word "nominate" qualifies the
entire Subsection 3 of Section 10 of Article VII thereof.
Respondent reiterates that if confirmation is required, the three (3) stage
process of nomination, confirmation and appointment operates. This is
only true of the first group enumerated in Section 16, but the word
nominate does not any more appear in the 2nd and 3rd sentences.
Therefore, the president's appointment pursuant to the 2nd and 3rd
sentences needs no confirmation. 6
The only issue to be resolved by the Court in the present case is whether or not Congress
may, by law, require confirmation by the Commission on Appointments of appointments
extended by the president to government officers additional to those expressly mentioned in
the first sentence of Sec. 16, Art. VII of the Constitution whose appointments require
confirmation by the Commission on Appointments.
To resolve the issue, we go back toMison where the Court stated:
. . . there are four (4) groups of officers whom the President shall
appoint. These four (4) groups, to which we will hereafter refer from time
to time, are:
First, the heads of the executive departments,
ambassadors, other public ministers and consuls,
officers of the armed forces from the rank of colonel
or naval captain, and other officers whose
appointments are vested in him in this Constitution;
Second, all other officers of the Government whose
appointments are not otherwise provided for by law;
Third, those whom the president may be authorized
by law to appoint;
Fourth, officers lower in rank whose appointments
the Congress may by law vest in the President
alone. 7
Mison also opined:
In the course of the debates on the text of Section 16, there were two (2)
major changes proposed and approved by the Commission. These were
(1) the exclusion of the appointments of heads of bureaus from the
requirement of confirmation by the Commission on Appointments; and
(2) the exclusion of appointments made under the second sentence of
the section from the same requirement. . . .
The second sentence of Sec. 16, Art. VII refers to all other officers of the government whose
appointments are not otherwise provided for by law and those whom the President may be
authorized by law to appoint.
Indubitably, the NLRC Chairman and Commissioners fall within the second sentence of
Section 16, Article VII of the Constitution, more specifically under the "third groups" of
appointees referred to in Mison, i.e. those whom the President may be authorized by law to
appoint. Undeniably, the Chairman and Members of the NLRC are not among the officers
mentioned in the first sentence of Section 16, Article VII whose appointments requires
confirmation by the Commission on Appointments. To the extent that RA 6715 requires
confirmation by the Commission on Appointments of the appointments of respondents
Chairman and Members of the National Labor Relations Commission, it is unconstitutional
because:
1) it amends by legislation, the first sentence of Sec. 16, Art. VII of the Constitution by adding
thereto appointments requiring confirmation by the Commission on Appointments; and
2) it amends by legislation the second sentence of Sec. 16, Art. VII of the Constitution, by
imposing the confirmation of the Commission on Appointments on appointments which are
otherwise entrusted only with the President.
Deciding on what laws to pass is a legislative prerogative. Determining their constitutionality
is a judicial function. The Court respects the laudable intention of the legislature. Regretfully,
however, the constitutional infirmity of Sec. 13 of RA 6715 amending Art. 215 of the Labor
Code, insofar as it requires confirmation of the Commission on Appointments over
appointments of the Chairman and Member of the National Labor Relations Commission
(NLRC) is, as we see it, beyond redemption if we are to render fealty to the mandate of the
Constitution in Sec. 16, Art. VII thereof.
Supreme Court decisions applying or interpreting the Constitution shall form part of the legal
system of the Philippines. 8No doctrine or principle of law laid down by the Court in a decision
rendered en banc or in division may be modified or reversed except by the Court sitting en
banc. 9
. . . The interpretation upon a law by this Court constitutes, in a way, a

part of the law as of the date that law was originally passed, since this
Court's construction merely establishes the contemporaneous legislative
intent that the law thus construed intends to effectuate. The settled rule
supported by numerous authorities is a restatement of the legal maxim
"legisinterpretadolegis vim obtinent" the interpretation placed upon the
written law by a competent court has the force of law. 10
The rulings in Mison, Bautista and Quintos-Deles have interpreted Art. VII, Sec. 16
consistently in one manner. Can legislation expand a constitutional provision after the
Supreme Court has interpreted it?
In Endencia and Jugo vs. David,11 the Court held:
By legislative fiat as enunciated in Section 13, Republic Act No. 590,
Congress says that taxing the salary of a judicial officer is not a decrease
of compensation. This is a clear example of interpretation or
ascertainment of the meaning of the phrase "which shall not be
diminished during their continuance in office," found in Section 9, Article
VIII of the Constitution, referring to the salaries of judicial officers.
xxxxxxxxx
We have already said that the Legislature under our form of government
is assigned the task and the power to make and enact laws, but not to
interpret them. This is more true with regard to the interpretation of the
basic law, the Constitution, which is not within the sphere of the
Legislative department. If the Legislature may declare what a law
means, or what a specific portion of the Constitution means, especially
after the courts have in actual case ascertained its meaning by
interpretation and applied it in a decision, this would surely cause
confusion and instabilityin judicial processes and court decisions. Under
such a system, a final court determination of a case based on a judicial
interpretation of the law or of the Constitution may be undermined or
even annulled by a subsequent and different interpretation of the law or
of the Constitution by the Legislative department that would be neither
wise nor desirable, being clearly violative of the fundamental principles
of our constitutional system of government, particularly those governing
the separation of powers.14(Emphasis supplied)
Congress, of course, must interpret the Constitution, must estimate the scope of its
constitutional powers when it sets out to enact legislation and it must take into account the
relevant constitutional prohibitions. 15
. . . The Constitution did not change with public opinion.
It is not only the same words, but the same in meaning . . . and as long
as it it speaks not only in the same words, but with the same meaning
and intent with which it spoke when it came from the hands of its
framers, and was voted and adopted by the people . . . 16
The rule is recognized elsewhere that the legislature

cannot pass any declaratory act, or act declaratory
of what the law was before its passage, so as to give
it any binding weight with the courts. A legislative
definition of a word as used in a statute is not
conclusive of its meaning as used elsewhere;
otherwise, the legislature would be usurping a
judicial function in defining a term. (11 Am. Jur., 914,
emphasis supplied).
The function of the Court in passing upon an act of Congress is to "lay the article of the
Constitution which is invoked beside the statute which is challenged and to decide whether
the latter squares with the former" and to "announce its considered judgment upon the
question." 17
The legislature cannot, upon passing law which

violates a constitutional provision, validate it so as to
prevent an attack thereon in the courts, by a
declaration that it shall be so construed as not to
violate the constitutional inhibition. (11 Am., Jur.,
919, emphasis supplied).
It can not be overlooked that Sec. 16, Art. VII of the 1987 Constitution was deliberately, not
unconsciously, intended by the framers of the 1987 Constitution to be a departure from the
system embodied in the 1935 Constitution where the Commission on Appointments exercised
the power of confirmation over almost all presidential appointments, leading to many cases of
abuse of such power of confirmation. Subsection 3, Section 10, Art. VII of the 1935
Constitution provided:
3. The President shall nominate and with the consent of the Commission
on Appointments, shall appoint the heads of the executive departments
and bureaus, officers of the Army from the rank of colonel, of the Navy
and Air Forces from the rank of captain or commander, and all other
officers of the Government whose appointments are not herein otherwise
provided for, and those whom he may be authorized by law to appoint; . .
.
The deliberate limitation on the power of confirmation of the Commission on Appointments
over presidential appointments, embodied in Sec. 16, Art. VII of the 1987 Constitution, has
undoubtedly evoked the displeasure and disapproval of members of Congress. The solution
to the apparent problem, if indeed a problem, is not judicial or legislative but constitutional. A
future constitutional convention or Congress sitting as a constituent (constitutional) assembly
may then consider either a return to the 1935 Constitutional provisions or the adoption of a
hybrid system between the 1935 and 1987 constitutional provisions. Until then, it is the duty
of the Court to apply the 1987 Constitution in accordance with what it says and not in
accordance with how the legislature or the executive would want it interpreted.
When the issues in this petition were first raised in Sarmiento III v.Mison (156 SCRA 549
[1987]), I joined Justice Cruz in a dissent because I felt that the interpretation of Section 16,
Article VII by the majority of the Court results in absurd or irrational consequences. The
framers could not have intended what the majority ruled to be the meaning of the provision.
When the question was again raised in Bautista v.Salonga (172 SCRA 160 [1989]), I
reiterated my dissent and urged a re-examination of the doctrine stated in Sarmiento v.Mison.
The issue is again before us. Even as I continue to believe that the majority was wrong in the
Sarmiento and Bautista cases, I think it is time to finally accept the majority opinion as the
Court's ruling on the matter and one which everybody should respect. There will be no end to
litigation if, everytime a high government official is appointed without confirmation by the
Commission on Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.
CRUZ, J., dissenting:
WHEREFORE, the petition is DISMISSED. Art. 215 of the Labor Code as amended by RA
6715 insofar as it requires the confirmation of the Commission on Appointments of
appointments of the Chairman and Members of the National Labor Relations Commission
(NLRC) is hereby declared unconstitutional and of no legal force and effect.
I dissent on the basis of my dissent in Sarmiento v.Mison, which I believe should be reexamined instead of being automatically re-affirmed simply because of its original adoption. I
do not believe we should persist in error on the ground merely of adherence to judicial
precedent, however unsound.
SO ORDERED.
Separate Opinion
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Bidin, Grio-Aquino, Medialdea,

Regalado, Davide, Jr., Romero and Nocon, JJ., concur.
GUTIERREZ, JR., J., concurring:

When the issues in this petition were first raised in Sarmiento III v.Mison (156 SCRA 549
[1987]), I joined Justice Cruz in a dissent because I felt that the interpretation of Section 16,
Article VII by the majority of the Court results in absurd or irrational consequences. The
framers could not have intended what the majority ruled to be the meaning of the provision.
When the question was again raised in Bautista v.Salonga (172 SCRA 160 [1989]), I
reiterated my dissent and urged a re-examination of the doctrine stated in Sarmiento v.Mison.
Bellosillo, J., took no part.
Separate Opinions
GUTIERREZ, JR., concurring:
The issue is again before us. Even as I continue to believe that the majority was wrong in the
Sarmiento and Bautista cases, I think it is time to finally accept the majority opinion as the
Court's ruling on the matter and one which everybody should respect. There will be no end to
litigation if, everytime a high government official is appointed without confirmation by the
Commission on Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.

CRUZ, J., dissenting:
I dissent on the basis of my dissent in Sarmiento v.Mison, which I believe should be reexamined instead of being automatically re-affirmed simply because of its original adoption. I
do not believe we should persist in error on the ground merely of adherence to judicial
precedent, however unsound.
Civil Law; Labor Law; Jurisdiction; Not every controversy involving workers and their
employers can be resolved only by the labor arbiters; There must be a reasonable causal
connection between the claim asserted and employee-employer relations to put the case
under the provisions of Article 217.It must be stressed that not every controversy involving
workers and their employers can be resolved only by the labor arbiters. This will be so only if
there is a reasonable causal connection between the claim asserted and employeeemployer relations to put the case under the provisions of Article 217. Absent such a link, the
complaint will be cognizable by the regular courts of justice in the exercise of their civil and
criminal jurisdiction.
Same; Same; Same; Same; Although a controversy is between an employer and an
employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved.ln
Molave Motor Sales, Inc. v. Laron, the same Justice held for the Court that the claim of the
plaintiff against its sales manager for payment of certain accounts pertaining to his purchase
of vehicles and automotive parts, repairs of such vehicles, and cash advances from the
corporation was properly cognizable by the Regional Trial Court of Dagupan City and not the
labor arbiter, because although a controversy is between an employer and an employee, the
Labor Arbiters have no jurisdiction if the Labor Code is not involved.
Same; Same; Same; Same; No reasonable causal connection between the complaint and
the relations of the parties as employer and employees in the case at bar.The case now
before the Court involves a complaint for damages for malicious prosecution which was filed
with the Regional Trial Court of Leyte by the employees of the defendant company. It does
not appear that there is a reasonable causal connection between the complaint and the
relations of the
________________
Pepsi Cola Distributors of the Phils., Inc. vs. Gal-lang

parties as employer and employees. The complaint did not arise from such relations and in
fact could have arisen independently of an employment relationship between the parties. No
such relationship or any unfair labor practice is asserted. What the employees are alleging is
that the petitioners acted with bad faith when they filed the criminal complaint which the
Municipal Trial Court said was intended to harass the poor employees and the dismissal of
which was affirmed by the Provincial Prosecutor for lack of evidence to establish even a
slightest probability that all the respondents herein have committed the crime imputed against
them. This is a matter which the labor arbiter has no competence to resolve as the
applicable law is not the Labor Code but the Revised Penal Code. [Pepsi Cola Distributors of
the Phils., Inc. vs. Gal-lang, 201 SCRA 695(1991)]
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 89621 September 24, 1991
PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant
General Manager ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR &
JORGE HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO
CABAAS & FULGENCIO LEGO, respondents.
Aurelio D. Menzon for petitioners.
* FIRST DIVISION.
696
696
Mario P. Nicolasora co-counsel for petitioners.

Papiano L. Santo for private respondents.
CRUZ, J.:p
The question now before us has been categorically resolved in earlier decisions of the Court
that a little more diligent research would have disclosed to the petitioners. On the basis of
those cases and the facts now before us, the petition must be denied.
The private respondents were employees of the petitioner who were suspected of complicity
in the irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed
a criminal complaint for theft against them but this was later withdrawn and substituted with a
criminal complaint for falsification of private documents. On November 26, 1987, after a
preliminary investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the
complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the
Provincial Prosecutor.
Meantime, allegedly after an administrative investigation, the private respondents were
dismissed by the petitioner company on November 23, 1987. As a result, they lodged a
complaint for illegal dismissal with the Regional Arbitration Branch of the NLRC in Tacloban
City on December 1, 1987, and decisions manded reinstatement with damages. In addition,
they instituted in the Regional Trial Court of Leyte, on April 4, 1988, a separate civil complaint
against the petitioners for damages arising from what they claimed to be their malicious
prosecution.
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no
jurisdiction over the case because it involved employee-employer relations that were
exclusively cognizable by the labor arbiter. The motion was granted on February 6, 1989. On
July 6, 1989, however, the respondent judge, acting on the motion for reconsideration,
reinstated the complaint, saying it was "distinct from the labor case for damages now pending
before the labor courts." The petitioners then came to this Court for relief.
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court
to support their position that the private respondents civil complaint for damages falls under
the jurisdiction of the labor arbiter. They particularly cite the case of Getz Corporation v. Court
of Appeals, 1 where it was held that a court of first instance had no jurisdiction over the
complaint filed by a dismissed employee "for unpaid salary and other employment benefits,
termination pay and moral and exemplary damages."
We hold at the outset that the case is not in point because what was involved there was a
claim arising from the alleged illegal dismissal of an employee, who chose to complain to the
regular court and not to the labor arbiter. Obviously, the claim arose from employee-employer
relations and so came under Article 217 of the Labor Code which then provided as follows:
ART. 217. Jurisdiction of Labor Arbiters 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 non-payment or
underpayment of wages, overtime compensation, separation pay and
other benefits provided by law or appropriate agreement, except claims
for employees' compensation, social security, medicare and maternity
benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including
questions involving the legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by labor Arbiters. 2
It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a "reasonable causal
connection" between the claim asserted and employee-employer relations to put the case
under the provisions of Article 217. Absent such a link, the complaint will be cognizable by the
regular courts of justice in the exercise of their civil and criminal jurisdiction.
In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a
civil complaint for damages against their employer for slanderous remarks made against
them by the company president. On the order dismissing the case because it came under the
jurisdiction of the labor arbiters, Justice Vicente Abad Santos said for the Court:
It is obvious from the complaint that the plaintiffs have not alleged any
unfair labor practice. Theirs is a simple action for damages for tortious
acts allegedly committed by the defendants. Such being the case, the
governing statute is the Civil Code and not the Labor Code. It results that
the orders under review are based on a wrong premise.
In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged
violation by the defendant of an "Agreement for a Course of Conversion Training at the
Expense of Singapore Airlines Limited," the jurisdiction of the Court of First Instance of Rizal
over the case was questioned. The Court, citing the earlier case of Quisaba v. Sta. Ines
Melale Veneer and Plywood, Inc., 5 declared through Justice Herrera:
Stated differently, petitioner seeks protection under the civil laws and
claims no benefits under the Labor Code. The primary relief sought is for
liquidated damages for breach of a contractual obligation. The other
items demanded are not labor benefits demanded by workers generally
taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation, intrinsically a
civil dispute.
In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the
plaintiff against its sales manager for payment of certain accounts pertaining to his purchase
of vehicles and automotive parts, repairs of such vehicles, and cash advances from the
corporation was properly cognizable by the Regional Trial Court of Dagupan City and not the
labor arbiter, because "although a controversy is between an employer and an employee, the
Labor Arbiters have nojurisdiction if the Labor Code is not involved."
The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above
cases are cited and the changes in Article 217 are recounted. That case involved a claim of
an employee for a P60,000.00 prize for a proposal made by him which he alleged had been
accepted and implemented by the defendant corporation in the processing of one of its beer
products. The claim was filed with the labor arbiter, who dismissed it for lack of jurisdiction but
was reversed by the NLRC on appeal. In setting aside the appealed decision and dismissing
the complaint, the Court observed through Justice Feliciano:
It is the character of the principal relief sought that appears essential, in
this connection. Where such principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case should fall
within the jurisdiction of the Labor Arbiter and the NLRC, even though a
claim for damages might be asserted as an incident to such claim.
xxxxxxxxx
Where the claim to the principal relief sought is to be resolved not by

reference to the Labor Code or other labor relations statute or a
collective bargaining agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular courts of justice and
not to the Labor Arbiter and the NLRC. In such situations, resolution of
the dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but
rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to Labor
Arbiters and the NLRC and the rationale for granting jurisdiction over
such claims to these agencies disappears.
xxxxxxxxx
While paragraph 3 above refers to "all money claims of workers," it is not
necessary to suppose that the entire universe of money claims that might
be asserted by workers against their employers has been absorbed into
the original and exclusive jurisdiction of Labor Arbiters.
xxxxxxxxx
For it cannot be presumed that money claims of workers which do not
arise out of or in connection with their employer-employee relationship,
and which would therefore fall within the general jurisdiction of the
regular courts of justice, were intended by the legislative authority to be
taken away from the jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis. The Court, therefore, believes and so
holds that the 'money claims of workers" referred to in paragraph 3 of
Article 217 embraces money claims which arise out of or in connection
with the employer- employee relationship, or some aspect or incident of
such relationship. Put a little differently, that money claims of workers
which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship (Ibid.).
The case now before the Court involves a complaint for damages for malicious prosecution
which was filed with the Regional Trial Court of Leyte by the employees of the defendant
company. It does not appear that there is a "reasonable causal connection" between the
complaint and the relations of the parties as employer and employees. The complaint did not
arise from such relations and in fact could have arisen independently of an employment
relationship between the parties. No such relationship or any unfair labor practice is asserted.
What the employees are alleging is that the petitioners acted with bad faith when they filed
the criminal complaint which the Municipal Trial Court said was intended "to harass the poor
employees" and the dismissal of which was affirmed by the Provincial Prosecutor "for lack of
evidence to establish even a slightest probability that all the respondents herein have
committed the crime imputed against them." This is a matter which the labor arbiter has no
competence to resolve as the applicable law is not the Labor Code but the Revised Penal
Code.
"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in
the case we here decide.
WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with
costs against the petitioner.
SO ORDERED.
Narvasa (Chairman), Grio-Aquino and Medialdea, JJ., concur.
Labor Law; Employer-Employee Relationships; Seafarers; Considering that petitioner was not
able to depart from the airport or seaport in the point of hire, the employment contract did not
commence and no employer-employee relationship was created between the parties.There
is no question that the parties entered into an employment contract on 3 February 1998,
whereby petitioner was contracted by respondent to render services on board MSV
Seaspread for the consideration of US$515.00 per month for nine (9) months, plus overtime
pay. However, respondent failed to deploy petitioner from the port of Manila to Canada.
Considering that petitioner was not able to depart from the airport or seaport in the point of
hire, the employment contract did not commence, and no employer-employee relationship
was created between the parties.
Same; Same; Distinction must be made between the perfection of the employment contract
and the commencement of the employeremployee relationship; Even before the start of any
employer-employee relationship, contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations, the breach of which may give rise to a
cause of action against the erring party.A distinction must be made between the perfection
of the employment contract and the commencement of the employer-employee relation_______________
* SECOND DIVISION.
166
employee relationship, contemporaneous with the perfection of the employment contract was
the birth of certain rights and obligations, the breach of which may give rise to a cause of
action against the erring party. Thus, if the reverse had happened, that is the seafarer failed
or refused to be deployed as agreed upon, he would be liable for damages.
Same; Same; Seafarers; Neither the manning agent nor the employer can simply prevent a
seafarer from being deployed without a valid reason; Respondent unilaterally and
unreasonably reneged on its obligation to deploy petitioner and must therefore answer for the
actual damages he suffered.While the POEA Standard Contract must be recognized and
respected, neither the manning agent nor the employer can simply prevent a seafarer from
being deployed without a valid reason. Respondents act of preventing petitioner from
departing the port of Manila and boarding MSV Seaspread constitutes a breach of contract,
giving rise to petitioners cause of action. Respondent unilaterally and unreasonably reneged
on its obligation to deploy petitioner and must therefore answer for the actual damages he
suffered.
Same; Same; Same; The fact that the Philippine Overseas Employment Administration
(POEA) Rules are silent as to the payment of damages to the affected seafarer does not
mean that the seafarer is precluded from claiming the same.We take exception to the Court
of Appeals conclusion that damages are not recoverable by a worker who was not deployed
by his agency. The fact that the POEA Rules are silent as to the payment of damages to the
affected seafarer does not mean that the seafarer is precluded from claiming the same. The
sanctions provided for non-deployment do not end with the suspension or cancellation of
license or fine and the return of all documents at no cost to the worker. They do not forfend a
seafarer from instituting an action for damages against the employer or agency which has
failed to deploy him.
167
166
VOL. 527, JULY 10, 2007
Santiago vs. CF Sharp Crew Management, Inc.
167
ship. The perfection of the contract, which in this case coincided with the date of execution
thereof, occurred when petitioner and respondent agreed on the object and the cause, as
well as the rest of the terms and conditions therein. The commencement of the
employeremployee relationship, as earlier discussed, would have taken place had petitioner
been actually deployed from the point of hire. Thus, even before the start of any employer-

Same; Same; Despite the absence of an employer-employee relationship between petitioner
and respondent, the Court rules that the National Labor Relations Commission (NLRC) has
jurisdiction over petitioners complaint.Despite the absence of an employeremployee
relationship between petitioner and respondent, the Court rules that the NLRC has
jurisdiction over petitioners complaint. The jurisdiction of labor arbiters is not limited to claims
arising from employer-employee relationships. Section 10 of R.A. No. 8042 (Migrant Workers
Act), provides that: Sec.10.Money Claims.Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have
the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days
after the filing of the complaint, the claims arising out of an employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages. x x x [Emphasis
supplied] Since the present petition involves the employment contract entered into by
petitioner for overseas employment, his claims are cognizable by the labor arbiters of the
NLRC.
Same; Same; Seafarers; Respondent liable to pay petitioner actual damages in the form of
the loss of nine (9) months worth of salary as provided in the contract, petitioner is not
entitled to overtime pay.Respondent is thus liable to pay petitioner actual damages in the
form of the loss of nine (9) months worth of salary as provided in the contract. He is not,
however, entitled to overtime pay. While the contract indicated a fixed overtime pay, it is not a
guarantee that he would receive said amount regardless of whether or not he rendered
overtime work. Even though petitioner was prevented without valid reason from rendering
regular much less overtime service, the fact remains that there is no certainty that petitioner
will perform overtime work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and when the employee rendered
overtime work. This has been the tenor of our rulings in the case of Stolt-Nielsen Marine
Services (Phils.), Inc. v. National Labor Relations Commission, 258 SCRA 643 (1996), where
we discussed the matter in this light: The contract provision means that the fixed overtime
pay of 30% would be the basis for computing the overtime pay if and when overtime work
would be rendered. Simply stated, the rendition of overtime
168
168
work and the submission of sufficient proof that said work was actually performed are
conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision
guarantees the right to overtime pay but the entitlement to such benefit must first be
established. Realistically speaking, a seaman, by the very nature of his job, stays on board a
ship or vessel beyond the regular eight-hour work schedule. For the employer to give him
overtime pay for the extra hours when he might be sleeping or attending to his personal
chores or even just lulling away his time would be extremely unfair and unreasonable.
Same; Same; Attorneys Fees; Respondents failure to deploy petitioner is unfounded and
unreasonable, forcing petitioner to institute the suit below; Award of attorneys fees is thus
warranted.The Court also holds that petitioner is entitled to attorneys fees in the concept of
damages and expenses of litigation. Attorneys fees are recoverable when the defendants
act or omission has compelled the plaintiff to incur expenses to protect his interest. We note
that respondents basis for not deploying petitioner is the belief that he will jump ship just like
his brother, a mere suspicion that is based on alleged phone calls of several persons whose
identities were not even confirmed. Time and again, this Court has upheld management
prerogatives so long as they are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements. Respondents failure to deploy
petitioner is unfounded and unreasonable, forcing petitioner to institute the suit below. The
award of attorneys fees is thus warranted.
Same; Same; Seafarers; Nature of Employment; Seafarers are considered contractual
employees and cannot be considered as regular employees under the Labor Code.We
likewise do not see respondents failure to deploy petitioner as an act designed to prevent the
latter from attaining the status of a regular employee. Even if petitioner was able to depart the
port of Manila, he still cannot be considered a regular employee, regardless of his previous
contracts of employment with respondent. In Millares v. National Labor Relations
Commission, 385 SCRA 306 (2002), the Court ruled that seafarers are considered
contractual employees and cannot be considered as regular employees under the Labor
Code. Their employment is governed by the contracts they sign every time they are rehired
169

VOL. 527, JULY 10, 2007

169

and their employment is terminated when the contract expires. The exigencies of their work
necessitates that they be employed on a contractual basis. [Santiago vs. CF Sharp Crew
Management, Inc., 527 SCRA 165(2007)]
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162419
July 10, 2007
PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.
DECISION
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one hand, and the
manning agent and the foreign principal, on the other, is this erstwhile unsettled legal
quandary: whether the seafarer, who was prevented from leaving the port of Manila and
refused deployment without valid reason but whose POEA-approved employment contract
provides that the employer-employee relationship shall commence only upon the seafarers
actual departure from the port in the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the
Decision and Resolution of the Court of Appeals dated 16 October 2003 and 19 February
2004, respectively, in CA-G.R. SP No. 68404.1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for
about five (5) years.2 On 3 February 1998, petitioner signed a new contract of employment
with respondent, with the duration of nine (9) months. He was assured of a monthly salary of
US$515.00, overtime pay and other benefits. The following day or on 4 February 1998, the
contract was approved by the Philippine Overseas Employment Administration (POEA).
Petitioner was to be deployed on board the "MSV Seaspread" which was scheduled to leave
the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondents Vice
President, sent a facsimile message to the captain of "MSV Seaspread," which reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me
not to send her husband to MSV Seaspread anymore. Other callers who did not
reveal their identity gave me some feedbacks that Paul Santiago this time if
allowed to depart will jump ship in Canada like his brother Christopher Santiago,
O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last December,
1997.
We do not want this to happen again and have the vessel penalized like the C.S.
Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he was applying
he behaved like a Saint but in his heart he was a serpent. If you agree with me
then we will send his replacement.
Kindly advise.3
To this message the captain of "MSV Seaspread" replied:
Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for
him to return to Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada
anymore, but he was reassured that he might be considered for deployment at some future
date.
Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against
respondent and its foreign principal, Cable and Wireless (Marine) Ltd.5 The case was raffled
to Labor Arbiter Teresita Castillon-Lora, who ruled that the employment contract remained
valid but had not commenced since petitioner was not deployed. According to her,
respondent violated the rules and regulations governing overseas employment when it did
not deploy petitioner, causing petitioner to suffer actual damages representing lost salary
income for nine (9) months and fixed overtime fee, all amounting to US$7, 209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29
January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay
complainant actual damages in the amount of US$7,209.00 plus 10% attorney's
fees, payable in Philippine peso at the rate of exchange prevailing at the time of
payment.
According to the appellate court, petitioner is not entitled to actual damages because
damages are not recoverable by a worker who was not deployed by his agency within the
period prescribed in
All the other claims are hereby DISMISSED for lack of merit.
the POEA Rules.13 It agreed with the NLRCs finding that petitioners non-deployment was a
valid exercise of respondents management prerogative.14 It added that since petitioner had
not departed from the Port of Manila, no employer-employee relationship between the parties
arose and any claim for damages against the so-called employer could have no leg to stand
on.15
SO ORDERED.6
Petitioners subsequent motion for reconsideration was denied on 19 February 2004.16
On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that there
is no employer-employee relationship between petitioner and respondent because under the
Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board
Ocean Going Vessels (POEA Standard Contract), the employment contract shall commence
upon actual departure of the seafarer from the airport or seaport at the point of hire and with
a POEA-approved contract. In the absence of an employer-employee relationship between
the parties, the claims for illegal dismissal, actual damages, and attorneys fees should be
dismissed.7 On the other hand, the NLRC found respondents decision not to deploy
petitioner to be a valid exercise of its management prerogative.8 The NLRC disposed of the
appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated January
29, 1999 is hereby AFFIRMED in so far as other claims are concerned and with
MODIFICATION by VACATING the award of actual damages and attorneys fees
as well as excluding Pacifico Fernandez as party respondent.
SO ORDERED.9
Petitioner moved for the reconsideration of the NLRCs Decision but his motion was denied
for lack of merit.10 He elevated the case to the Court of Appeals through a petition for
certiorari.
In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an ambiguity
in the NLRCs Decision when it affirmed with modification the labor arbiters Decision,
because by the very modification introduced by the Commission (vacating the award of actual
damages and attorneys fees), there is nothing more left in the labor arbiters Decision to
affirm.12
The present petition is anchored on two grounds, to wit:

A. The Honorable Court of Appeals committed a serious error of law when it
ignored [S]ection 10 of Republic Act [R.A.] No. 8042 otherwise known as the
Migrant Workers Act of 1995 as well as Section 29 of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board OceanGoing Vessels (which is deemed incorporated under the petitioners POEA
approved Employment Contract) that the claims or disputes of the Overseas
Filipino Worker by virtue of a contract fall within the jurisdiction of the Labor Arbiter
of the NLRC.
B. The Honorable Court of Appeals committed a serious error when it disregarded
the required quantum of proof in labor cases, which is substantial evidence, thus a
total departure from established jurisprudence on the matter.17
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules
when it failed to deploy him within thirty (30) calendar days without a valid reason. In doing
so, it had unilaterally and arbitrarily prevented the consummation of the POEA- approved
contract. Since it prevented his deployment without valid basis, said deployment being a
condition to the consummation of the POEA contract, the contract is deemed consummated,
and therefore he should be awarded actual damages, consisting of the stipulated salary and
fixed overtime pay.18 Petitioner adds that since the contract is deemed consummated, he
should be considered an employee for all intents and purposes, and thus the labor arbiter
and/or the NLRC has jurisdiction to take cognizance of his claims.19
Petitioner additionally claims that he should be considered a regular employee, having
worked for five (5) years on board the same vessel owned by the same principal and manned
by the same local agent. He argues that respondents act of not deploying him was a scheme
designed to prevent him from attaining the status of a regular employee.20
Petitioner submits that respondent had no valid and sufficient cause to abandon the
employment contract, as it merely relied upon alleged phone calls from his wife and other
unnamed callers in arriving at the conclusion that he would jump ship like his brother. He
points out that his wife had executed an affidavit21 strongly denying having called respondent,
and that the other alleged callers did not even disclose their identities to respondent. 22 Thus,
it was error for the Court of Appeals to adopt the unfounded conclusion of the NLRC, as the
same was not based on substantial evidence.23
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioners monetary claims. His employment with respondent did not commence because
his deployment was withheld for a valid reason. Consequently, the labor arbiter and/or the
NLRC cannot entertain adjudication of petitioners case much less award damages to him.
The controversy involves a breach of contractual obligations and as such is cognizable by
civil courts.24 On another matter, respondent claims that the second issue posed by petitioner
involves a recalibration of facts which is outside the jurisdiction of this Court. 25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February
1998, whereby petitioner was contracted by respondent to render services on board "MSV
Seaspread" for the consideration of US$515.00 per month for nine (9) months, plus overtime
pay. However, respondent failed to deploy petitioner from the port of Manila to Canada.
Considering that petitioner was not able to depart from the airport or seaport in the point of
hire, the employment contract did not commence, and no employer-employee relationship
was created between the parties.26
However, a distinction must be made between the perfection of the employment contract and
the commencement of the employer-employee relationship. The perfection of the contract,
which in this case coincided with the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as the rest of the terms and
conditions therein. The commencement of the employer-employee relationship, as earlier
discussed, would have taken place had petitioner been actually deployed from the point of
hire. Thus, even before the start of any employer-employee relationship, contemporaneous
with the perfection of the employment contract was the birth of certain rights and obligations,
the breach of which may give rise to a cause of action against the erring party. Thus, if the
reverse had happened, that is the seafarer failed or refused to be deployed as agreed upon,
he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither the
manning agent nor the employer can simply prevent a seafarer from being deployed without
a valid reason.
Respondents act of preventing petitioner from departing the port of Manila and boarding
"MSV Seaspread" constitutes a breach of contract, giving rise to petitioners cause of action.
Respondent unilaterally and unreasonably reneged on its obligation to deploy petitioner and
must therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals conclusion that damages are not recoverable by a
worker who was not deployed by his agency. The fact that the POEA Rules27 are silent as to
the payment of damages to the affected seafarer does not mean that the seafarer is
precluded from claiming the same. The sanctions provided for non-deployment do not end
with the suspension or cancellation of license or fine and the return of all documents at no
cost to the worker. They do not forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It
does not provide for damages and money claims recoverable by aggrieved employees
because it is not the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and
respondent, the Court rules that the NLRC has jurisdiction over petitioners complaint. The
jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10.Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employeremployee 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. x xx [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner for
overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation only
for such pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to
pay petitioner actual damages in the form of the loss of nine (9) months worth of salary as
provided in the contract. He is not, however, entitled to overtime pay. While the contract
indicated a fixed overtime pay, it is not a guarantee that he would receive said amount
regardless of whether or not he rendered overtime work. Even though petitioner was
"prevented without valid reason from rendering regular much less overtime service," 28 the fact
remains that there is no certainty that petitioner will perform overtime work had he been
allowed to board the vessel. The amount of US$286.00 stipulated in the contract will be paid
only if and when the employee rendered overtime work. This has been the tenor of our
rulings in the case of Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations
Commission29 where we discussed the matter in this light:
We likewise do not see respondents failure to deploy petitioner as an act designed to prevent
the latter from attaining the status of a regular employee. Even if petitioner was able to depart
the port of Manila, he still cannot be considered a regular employee, regardless of his
previous contracts of employment with respondent. In Millares v. National Labor Relations
Commission,33 the Court ruled that seafarers are considered contractual employees and
cannot be considered as regular employees under the Labor Code. Their employment is
governed by the contracts they sign every time they are rehired and their employment is
terminated when the contract expires. The exigencies of their work necessitates that they be
employed on a contractual basis.34
The contract provision means that the fixed overtime pay of 30% would be the
basis for computing the overtime pay if and when overtime work would be
rendered. Simply stated, the rendition of overtime work and the submission of
sufficient proof that said work was actually performed are conditions to be satisfied
before a seaman could be entitled to overtime pay which should be computed on
the basis of 30% of the basic monthly salary. In short, the contract provision
guarantees the right to overtime pay but the entitlement to such benefit must first
be established. Realistically speaking, a seaman, by the very nature of his job,
stays on board a ship or vessel beyond the regular eight-hour work schedule. For
the employer to give him overtime pay for the extra hours when he might be
sleeping or attending to his personal chores or even just lulling away his time would
be extremely unfair and unreasonable.30
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the
Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and SET ASIDE.
The Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is
REINSTATED with the MODIFICATION that respondent CF Sharp Crew Management, Inc. is
ordered to pay actual or compensatory damages in the amount of US$4,635.00
The Court also holds that petitioner is entitled to attorneys fees in the concept of damages
and expenses of litigation. Attorney's fees are recoverable when the defendant's act or
omission has compelled the plaintiff to incur expenses to protect his interest. 31 We note that
respondents basis for not deploying petitioner is the belief that he will jump ship just like his
brother, a mere suspicion that is based on alleged phone calls of several persons whose
identities were not even confirmed. Time and again, this Court has upheld management
prerogatives so long as they are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements.32 Respondents failure to deploy
petitioner is unfounded and unreasonable, forcing petitioner to institute the suit below. The
award of attorneys fees is thus warranted.
However, moral damages cannot be awarded in this case. While respondents failure to
deploy petitioner seems baseless and unreasonable, we cannot qualify such action as being
tainted with bad faith, or done deliberately to defeat petitioners rights, as to justify the award
of moral damages. At most, respondent was being overzealous in protecting its interest when
it became too hasty in making its conclusion that petitioner will jump ship like his brother.
representing salary for nine (9) months as stated in the contract, and attorneys fees at the
reasonable rate of 10% of the recoverable amount.
SO ORDERED.
Carpio, Carpio-Morales, Velasco, Jr., JJ., concur.
Quisumbing, J., on official leave.
Labor Law; Dismissals; Appeals; Factual findings of agencies exercising quasi-judicial

functions are accorded not only respect but even finality.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, 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. 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.
reinstatement be no longer possible. [Atlas Farms, Inc. vs. National Labor Relations
Commission, 392 SCRA 128(2002)]
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 142244
November 18, 2002
_______________
* SECOND DIVISION.
ATLAS FARMS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION,
JAIME O. DELA PEA and MARCIAL I. ABION, respondents.
DECISION
129
QUISUMBING, J.:
VOL. 392, NOVEMBER 18, 2002
Petitioner seeks the reversal of the decision1 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 resolution2 dated February 24, 2000, denying its motion for reconsideration.
129
The antecedent facts of the case, as found by the Court of Appeals,3 are as follows:
Atlas Farms, Inc. vs. National Labor Relations Commission
Same; Same; Requisites for 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.
Same; Same; Benefits; 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.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. A terminated employees receipt of his separation pay and
other monetary benefits does not preclude reinstatement or full benefits under the law, should
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.
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. Abion5 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.
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 managementdominated 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.
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.
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:
WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-96 is
AFFIRMED with the following modifications:
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,
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:
I. DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING THE

RULINGS OF THE PUBLIC RESPONDENT NLRC THAT THE PRIVATE RESPONDENTS
WERE ILLEGALLY DISMISSED;
III. RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT.9
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.
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.
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.
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
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 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."
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.
Moreover, per Justice Bellosillo:
II. RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY
AND FULL BACKWAGES;
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.12Moreover, 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
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 and expeditious selection by the parties of a
Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA.
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 that-
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 x xx
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.17However, 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.18It
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 arisingfrom 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 26021 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
_______________
23 Brief for the Appellee, 10; Rollo, 84. See also People vs. Liquen, supra.
* THIRD DIVISION.
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.
Labor Law; Jurisdiction of Labor Arbiter; Case at bar; The jurisdiction over the instant dispute
lies exclusively and originally with the Labor Arbiter, the claims being in excess of P5,000.00
each.Clearly,
607

607
Albay I Electric Cooperative, Inc. vs. Martinez, Sr.
the jurisdiction over the instant dispute lies exclusively and originally with the Labor Arbiter,
the claims being in excess of P5,000.00 each. Thus, respondents reliance in Brokenshire
(supra) is evidently misplaced. For, and in construing the aforequoted provisions, the Court
did not confer unlimited jurisdiction on the Regional Director. Rather, it qualified the Regional
Directors jurisdiction to hear and decide employees claims, to wit: It will be observed that
what in fact conferred upon Regional Directors and other hearing officers of the Department
of Labor (aside from the Labor Arbiters) adjudicative powers. i.e., the power to try and decide,
or hear and determine any claim brought before them for recovery of wages, simple money
claims, and other benefits, is Republic Act 6715, provided that the following requisites concur,
to wit: 1) The claim is presented by an employee or person employed in domestic or
household service or househelper under the code; 2) The claimant, no longer being
employed, does not seek reinstatement; and 3) The aggregate money claim of the employee
or househelper does not exceed five thousand pesos (P5,000.00). In the absence of any of
the three (3) requisites, the Labor Arbiters have exclusive original jurisdiction over all claims
arising from employer-employee relations, other than claims for employees compensation,
social security, medicare and maternity benefits (Brokenshire Memorial Hospital, Inc. vs.
Minister of Labor and Employment supra).
Same; Same; Jurisdiction; Since the amount claimed by each respondent exceeded the
P5,000.00 jurisdictional limit conferred upon public respondent, the latter acted without
jurisdiction in ordering petitioner to pay private respondents claims for salary differentials and
13th month pay.Since the amount claimed by each respondent exceeded the P5,000.00
jurisdictional limit conferred upon public respondent, the latter acted without jurisdiction in
ordering petitioner to pay private respondents claims for salary differentials and 13th month
pay (Midland Insurance Corporation v. Secretary of Labor and Employment, 214 SCRA 578
[1992]). Furthermore, the fact that petitioner raised the propriety of granting the claimed
salary differentials in favor of private respondents should have alerted public respondent to
exercise utmost restraint in assuming jurisdiction over the complaint. When the employer
contests the findings of the Regional Director, the case must be referred to the Labor Arbiter.
This is also a question of fact which cannot be dealt with by the Regional Director in view of
the summary nature of the proceedings attendant to the exercise of his visitorial powers (See
Art. 128 [b]). It may be argued, however, that respondent Regional Director found that
respondent Buban and Bonagua were issued appointment papers on February 9, 1988 and
March 22, 1988, respectively. Nevertheless, the fact that each of the private
608
ALBAY I ELECTRIC COOPERATIVE, INC. (ALECO I), petitioner,

vs.
RICARDO S. MARTINEZ, Sr., ARNOLD B. BONAGUA and CONRADO S. BUBAN,
respondents.
Juan D. Victoria for petitioner.
Marietta Lea B. Rosana for private respondents.
BIDIN, J.:
This special civil action for certiorari seeks the annulment of the Orders dated September 11,
1989 and September 3, 1990 issued by respondent Ricardo Martinez, Sr., Regional Director,
Department of Labor and Employment, Regional Office No. 5, Legazpi City, for having been
rendered in excess of jurisdiction.
608
Albay I Electric Cooperative, Inc. vs. Martinez, Sr.
respondents claim exceeded P5,000.00 ousted respondent Martinez of jurisdiction, by
operation of law, to hear and decide complainants claim for underpayment of wages. [Albay I
Electric Cooperative, Inc. vs. Martinez, Sr., 227 SCRA 606(1993)]
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 95559 November 9, 1993
Petitioner avers that on August 15, 1988, private respondents ConradoBuban and
ArnaldoBonagua were designated as acting manager (Commercial Services Department)
and supervisor (Service Center), respectively, of Albay I Electric Cooperative, inc. by Israel
Garcia, petitioner's Acting General Manager. Garcia allegedly made the appointments after
his own appointment was recalled by the National Electrification Administration (NEA) by
virtue of Office Order No. 454 issued on August 10, 1988 effective immediately. (Rollo p. 31)
On August 27, 1988, the Board of Director of ALECO I considered the midnight appointments
of respondents Buban and Bonagua as null and void. In a Memorandum dated June 7, 1989,
Romulo Maristaza, Chief of the Legal Service Office of the NEA, considered as defective the
appointments of private respondents there being serious doubts as to their validity. (Rollo p.
14-15)
On August 15, 1989, private respondents filed a complaint with the Office of the Regional
Director for the recovery of salary differentials corresponding to their new positions. They also
claimed that since they held their respective positions for more than one year, their status
should be classified as permanent and they should be paid the corresponding salaries.
Petitioner moved to dismiss the complaint for lack of jurisdiction. Nonetheless, on September
11, 1989, respondent Regional Director issued an Order requiring the petitioner to pay
respondents Bonagua and Buban P11,962.31 and P12,593.36, respectively, corresponding to

the underpayment of wages for their new positions (Rollo, p. 16)
On September 19, 1989, petitioner filed a notice of appeal and Memorandum of Appeal.
Instead of giving due course to the appeal, the Med-Arbiter denied the same and directed the
parties to present evidence (Rollo, p. 23). In its position paper, petitioner assailed the Order
denying its appeal and further argued that since the amount claimed by private respondents
is in excess of P5,000.00, the Regional Director has no jurisdiction to entertain the complaint.
On September 3, 1990, the Regional Director issued another Order, this time requiring
petitioner to pay respondent Bonagua the amount of P9,259.72 and respondent Buban
P38,243.21 corresponding to their salary differentials and 13th month pay (Rollo p. 32).
Public respondent also held that since the complainants (private respondents) were allowed
to discharge their functions for more than one year without objection or adverse action on the
part of the petitioner, this amounted to acquiescence and an implied approval of their
appointments. Thereafter, a writ of execution was issued on September 26, 1990.
Hence this petition.
Petitioner contends that since each of the money claims of private respondent exceeded
P5,000.00, the complaint falls outside the jurisdiction of the respondent Regional Director and
should properly be heard by the Labor Arbiter.
Public respondent argues however that under his visitorial power, the P5,000.00 jurisdictional
limit does not apply, citing for the purpose Brokenshire Memorial Hospital Inc., vs. Minister of
Labor and Employment (182 SCRA 5 [1990]), to wit:
If the amount involved does not exceed P5,000.00, the Regional Director
undeniably has jurisdiction. But even if the amount of the claim exceeds
P5,000.00, the claim is not on that account necessarily removed from the
Regional Director's competence. In respect thereof, he may still exercise
the visitorial powers vested in him by Article 128 of the Labor Code, as
amended, supra; that is to say, he may still direct his labor regulations
officers or industrial safety engineers to inspect the employer's premises
and examine his records; and if the officers should find that there have
been violations of labor standard provisions, the Regional Director may,
after due notice and hearing order compliance by the employer therewith
and issue a writ of execution to the appropriate authority for the
enforcement thereof. However, this power may not, repeat, be exercised
by him where the employer contests the labor regulation officers' findings
and raises issues which cannot be resolved without considering the

evidentiary matters not verifiable in the normal course of inspection. In
such an event, the case will have to be referred to the corresponding
Labor Arbiter for adjudication, since it falls within the latter's exclusive
original jurisdiction (citingBriad Agro Development Corp.).
Public respondent hastens to add that the purpose of the law is to afford to the workers an
expeditious delivery of what legally belongs to them; thus, the jurisdictional P5,000.00 limit
need not apply. On the other hand, private respondents submit that the Regional Director has
the power and authority in complaints for inspection cases to hear and decide labor standard
cases where employer-employee relationships still exists between the parties. The law does
not put a limit as to what should be the minimum claim of the employees in order to seek
relief under Article 128 of the Labor Code.
In his Manifestation in Lieu of Comment, the Solicitor General submits that the claims of
private respondents for unpaid wages properly fall under the exclusive and original
jurisdiction of the Labor Arbiter, mainly because the money claims of private respondents
exceed P5,000.00. In addition, the Regional Director ordered the payment of the salary
differentials not in connection with his visitorial powers but in the adjudication of the claims or
complaints of the private respondents.
Article 129 and Article 217 of the Labor Code, as amended by R.A. 6715, provide:
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 monetary 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
employer-employee relations. Provided, That such complaint does not
include a claim for reinstatement; provided further, That the aggregate
money claims of each employee or househelper do not exceed five
thousand pesos
P5,000.00). . . .
Art. 217. Jurisdiction of Labor Arbiters and the Commission. 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 workers, whether agricultural or nonagricultural:
xxxxxxxxx
(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),
whether or not accompanied with a claim for reinstatement.
Clearly, the jurisdiction over the instant dispute lies exclusively and originally with the Labor
Arbiter, the claims being in excess of P5,000.00 each. Thus, respondents' reliance in
Brokenshire (supra) is evidently misplaced. For, and in construing the aforequoted provisions,
the Court did not confer unlimited jurisdiction on the Regional Director. Rather, it qualified the
Regional Director's jurisdiction to hear and decide employee's claims, to wit:
It will be observed that what in fact conferred upon Regional Directors
and other hearing officers of the Department of Labor (aside from the
Labor Arbiters) adjudicative powers, i.e., the power to try and decide, or
hear and determine any claim brought before them for recovery of
wages, simple money claims, and other benefits, is Republic Act 6715,
provided that the following requisites concur, to wit:
Neither can private respondents successfully invoke the visitorial power of the Regional
Director as provided under Article 128 of the Labor Code. In Servando's Inc. vs. Secretary of
Labor and Employment (198 SCRA 156 [1991]) the Court ruled:
To construe the visitorial power of the Secretary of Labor to order and
enforce compliance with labor laws as including the power to hear and
decide cases involving employees' claims for wages, arising from
employer-employee relations, even if the amount of said claims exceed
P5,000.00 for each employee, would, in our considered opinion,
emasculate and render meaningless, if not useless, the provisions of
Article 217 (a) (6) and Article 129 of the Labor Code which, as above
pointed out, confer exclusive jurisdiction on the Labor Arbiter to hear and
decide such employee's claims (exceeding P5,000.00 for each
employee). To sustain the respondent's position would, in effect, sanction
a situation where all employee's claims, regardless of amount, can be
heard and determined by the Secretary of Labor under this visitorial
power. This does not, however, appear to be the legislative intent.
xxxxxxxxx
. . . the power to hear and decide employee's claim 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.
Nor is this position devoid of sound reason or purpose because
1) The claim is presented by an employee or person employed in

domestic or household service or househelper under the code;
2) The claimant, no longer being employed, does not seek reinstatement;
and
3) The aggregate money claim of the employee or househelper does not
exceed five thousand pesos (P5,000.00).
In the absence of any of the three (3) requisites, the Labor Arbiters have
exclusive original jurisdiction over all claims arising from employeremployee relations, other than claims for employees compensation,
social security, medicare and maternity benefits. (Brokenshire Memorial
Hospital, Inc. vs. Minister of Labor and Employment, supra).
1. The proceedings before the Secretary of Labor (or his agents)

exercising his visitorial powers is summary in nature. On the other hand,
proceedings before the Labor Arbiters are more formal and in accord
with rules of evidence. When the employee's claim in less than
P5,000.00, a summary procedure for its settlement can be justified, but
not when a claim is more or less substantial, from the standpoint of both
employee and management, for which reason, an employee's claim
exceeding P5,000.00 is placed within the exclusive jurisdiction of the
Labor Arbiter to hear and decide.
2. Article 129 of the Labor Code expressly provides that upon complaint
of any interested party, the Regional Director (and, consequently, the
Secretary of Labor to whom appeals from the Regional Directors are
taken) is empowered to hear and decide simple money claims, i.e. those
that do not exceed P5,000.00 for each employee, employing for this
purpose a summary procedure. If Article 128 (b) of the Labor Code were
to be construed as empowering the Secretary of Labor, under his
visitorial power, to hear and decide all types of employee's claims,
including those exceeding P5,000.00 for each employee, employing for
this purpose a summary procedure, then, Article 129 (limiting the
Regional Director's jurisdiction to a claim not exceeding P5,000.00)
becomes a useless surplusage in the Labor Code.
Since the amount claimed by each respondent exceeded the P5,000.00 jurisdictional limit
conferred upon public respondent, the latter acted without jurisdiction in ordering petitioner to
pay private respondents' claim for salary differentials and 13th month pay (Midland Insurance
Corporation v. Secretary of Labor and Employment, 214 SCRA 578 [1992]).
Furthermore, the fact that petitioner raised the propriety of granting the claimed salary
differentials in favor of private respondents should have alerted public respondent to exercise
utmost restraint in assuming jurisdiction over the complaint. When the employer contests the
findings of the Regional Director, the case must be referred to the Labor Arbiter. This is also a
question of fact which cannot be dealt with by the Regional Director in view of the summary
nature of the proceedings attendant to the exercise of his visitorial powers (See Art. 128 [b]).
It may be argued, however, that respondent Regional Director found that respondents Buban
and Bonagua were issued appointment papers on February 9, 1988 and March 22, 1988
respectively. Nevertheless, the fact that each of the private respondents' claim exceeded
P5,000.00 ousted respondent Martinez of jurisdiction, by operation of law, to hear and decide
complainant's claim for underpayment of wages.
It is a rule that when a tribunal acts in excess or lack of jurisdiction, all decisions, orders and
processes emanating thereform are null and void. Thus, on the issue posed by the petitioners
regarding the denial of its appeal, suffice it to say that in taking cognizance of the case at the
first instance, the Regional Director already acted beyond the scope of his jurisdiction.
Necessarily, all orders and processes subsequently issued by him are without force and
effect.
WHEREFORE, the assailed Orders of the Regional Director dated September 11, 1989 and
September 3, 1990 including the writ of execution dated September 26, 1990, are hereby
SET ASIDE and declared null and void. Each claim of private respondents as regards their
salary differentials and 13th month pay is hereby referred to the proper Labor Arbiter for
appropriate determination.
SO ORDERED.
Feliciano, Romero, Melo and Vitug, JJ., concur.
Labor Law; Retirement Benefits; Separation Pay; The receipt of retirement benefits does not
bar the retiree from receiving separation pay; Retirement benefits and separation pay are not
mutually exclusive unless there is no specific prohibition against the payment of both benefits
in the retirement plan and/or in the Collective Bargaining Agreement.We have declared in
Aquino v. National Labor Rela_______________
* THIRD DIVISION.
488
Same; Jurisdiction; Labor Arbiters; National Labor Relations Commission; Illegal Deduction;
The issue of deduction for tax purposes is a money claim arising from the employeremployee relationship, which clearly falls within the jurisdiction of the Labor Arbiter and the
National Labor Relations Commission (NLRC).Contrary to the Labor Arbiter and NLRCs
conclusions, petitioners claim for illegal deduction falls within the tribunals jurisdiction. It is
noteworthy that petitioner demanded the completion of her retirement benefits, including the
amount withheld by respondent for taxation purposes. The issue of deduction for tax
purposes is intertwined with the main issue of whether or not petitioners benefits have been
fully given her. It is, therefore, a money claim arising from the employer-employee
relationship, which clearly falls within the jurisdiction of the Labor Arbiter and the NLRC.
Same; Retirement Benefits; Exemption from Withholding Tax; Requisites for the Retirement
Benefits to be Bxempt from the Withholding Tax.For the retirement benefits to be exempt
from the
489
488
Santos vs. Servier Philippines, Inc.
489
tions Commission, 206 SCRA 118 (1992), that the receipt of retirement benefits does not bar
the retiree from receiving separation pay. Separation pay is a statutory right designed to
provide the employee with the wherewithal during the period that he/she is looking for
another employment. On the other hand, retirement benefits are intended to help the
employee enjoy the remaining years of his life, lessening the burden of worrying about his
financial support, and are a form of reward for his loyalty and service to the employer. Hence,
they are not mutually exclusive. However, this is only true if there is no specific prohibition
against the payment of both benefits in the retirement plan and/or in the Collective Bargaining
Agreement (CBA).
Santos vs. Servier Philippines, Inc.
Same; Same; Same; There being a provision in the Retirement Plan, petitioner is entitled
only to either the separation pay under the law or retirement benefits under the Plan, and not
both.In the instant case, the Retirement Plan bars the petitioner from claiming additional
benefits on top of that provided for in the Plan. x x x There being such a provision, as held in
Cruz v. Philippine Global Communications, Inc., 430 SCRA 184 (2004), petitioner is entitled
only to either the separation pay under the law or retirement benefits under the Plan, and not
both.
withholding tax, the taxpayer is burdened to prove the concurrence of the following elements:
(1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or
employee has been in the service of the same employer for at least ten (10) years; (3) the
retiring official or employee is not less than fifty (50) years of age at the time of his retirement;
and (4) the benefit had been availed of only once. [Santos vs. Servier Philippines, Inc., 572
SCRA 487(2008)]
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166377
November 28, 2008
MA. ISABEL T. SANTOS, represented by ANTONIO P. SANTOS,petitioner,

vs.
SERVIER PHILIPPINES, INC. and NATIONAL LABOR RELATIONS COMMISSION,
respondents.
In a letter dated May 14, 1999, respondent informed the petitioner that the former had
requested the latters physician to conduct a thorough physical and psychological evaluation
of her condition, to determine her fitness to resume her work at the company. Petitioners
physician concluded that the former had not fully recovered mentally and physically. Hence,
respondent was constrained to terminate petitioners services effective August 31, 1999.9
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking to set aside the Court of Appeals (CA) Decision,1 dated August 12, 2004 and its
Resolution2 dated December 17, 2004, in CA-G.R. SP No. 75706.
The facts, as culled from the records, are as follows:
Petitioner Ma. Isabel T. Santos was the Human Resource Manager of respondent Servier
Philippines, Inc. since 1991 until her termination from service in 1999. On March 26 and 27,
1998, petitioner attended a meeting3 of all human resource managers of respondent, held in
Paris, France. Since the last day of the meeting coincided with the graduation of petitioners
only child, she arranged for a European vacation with her family right after the meeting. She,
thus, filed a vacation leave effective March 30, 1998.4
On March 29, 1998, petitioner, together with her husband Antonio P. Santos, her son, and
some friends, had dinner at Leon des Bruxelles, a Paris restaurant known for mussels5 as
their specialty. While having dinner, petitioner complained of stomach pain, then vomited.
Eventually, she was brought to the hospital known as Centre Chirurgical de LQuest where
she fell into coma for 21 days; and later stayed at the Intensive Care Unit (ICU) for 52 days.
The hospital found that the probable cause of her sudden attack was "alimentary allergy," as
she had recently ingested a meal of mussels which resulted in a concomitant uticarial
eruption.6
During the time that petitioner was confined at the hospital, her husband and son stayed with
her in Paris. Petitioners hospitalization expenses, as well as those of her husband and son,
were paid by respondent.7
In June 1998, petitioners attending physicians gave a prognosis of the formers condition;
and, with the consent of her family, allowed her to go back to the Philippines for the
continuation of her medical treatment. She was then confined at the St. Lukes Medical
Center for rehabilitation.8 During the period of petitioners rehabilitation, respondent continued
to pay the formers salaries; and to assist her in paying her hospital bills.
As a consequence of petitioners termination from employment, respondent offered a

retirement package which consists of:
Retirement Plan Benefits:
P 1,063,841.76
Insurance Pension at 20,000.00/month for 60

months from company-sponsored group life policy:
P 1,200,000.00
Educational assistance:
Medical and Health Care:
P 465,000.00
P 200,000.0010
Of the promised retirement benefits amounting to P1,063,841.76, only P701,454.89 was

released to petitioners husband, the balance11 thereof was withheld allegedly for taxation
purposes. Respondent also failed to give the other benefits listed above.12
Petitioner, represented by her husband, instituted the instant case for unpaid salaries; unpaid
separation pay; unpaid balance of retirement package plus interest; insurance pension for
permanent disability; educational assistance for her son; medical assistance; reimbursement
of medical and rehabilitation expenses; moral, exemplary, and actual damages, plus
attorneys fees. The case was docketed as NLRC-NCR (SOUTH) Case No. 30-06-02520-01.
On September 28, 2001, Labor Arbiter Aliman D. Mangandog rendered a Decision13
dismissing petitioners complaint. The Labor Arbiter stressed that respondent had been
generous in giving financial assistance to the petitioner.14 He likewise noted that there was a
retirement plan for the benefit of the employees. In denying petitioners claim for separation
pay, the Labor Arbiter ratiocinated that the same had already been integrated in the
retirement plan established by respondent. Thus, petitioner could no longer collect separation
pay over and above her retirement benefits.15 The arbiter refused to rule on the legality of the
deductions made by respondent from petitioners total retirement benefits for taxation
purposes, as the issue was beyond the jurisdiction of the NLRC. 16 On the matter of
educational assistance, the Labor Arbiter found that the same may be granted only upon the
submission of a certificate of enrollment.17 Lastly, as to petitioners claim for damages and
attorneys fees, the Labor Arbiter denied the same as the formers dismissal was not tainted
with bad faith.18
On appeal to the National Labor Relations Commission (NLRC), the tribunal set aside the
Labor Arbiters decision, ruling that:
WHEREFORE, premises considered, Complainants appeal is partly GRANTED.
The Labor Arbiters decision in the above-entitled case is hereby SET ASIDE.
Respondent is ordered to pay Complainants portion of her separation pay covering
the following: 1) P200,000.00 for medical and health care from September 1999 to
April 2001; and 2) P35,000.00 per year for her sons high school (second year to
fourth year) education and P45,000.00 per semester for the latters four-year
college education, upon presentation of any applicable certificate of enrollment.
SO ORDERED.19
The NLRC emphasized that petitioner was not retired from the service pursuant to law,
collective bargaining agreement (CBA) or other employment contract; rather, she was
dismissed from employment due to a disease/disability under Article 284 20 of the Labor
Code.21 In view of her non-entitlement to retirement benefits, the amounts received by
petitioner should then be treated as her separation pay.22 Though not legally obliged to give
the other benefits, i.e., educational assistance, respondent volunteered to grant them, for
humanitarian consideration. The NLRC therefore ordered the payment of the other benefits
promised by the respondent.23 Lastly, it sustained the denial of petitioners claim for damages
for the latters failure to substantiate the same.24
Unsatisfied, petitioner elevated the matter to the Court of Appeals which affirmed the NLRC
decision.25
Hence, the instant petition.
At the outset, the Court notes that initially, petitioner raised the issue of whether she was
entitled to separation pay, retirement benefits, and damages. In support of her claim for
separation pay, she cited Article 284 of the Labor Code, as amended. However, in coming to
this Court via a petition for review on certiorari, she abandoned her original position and
alleged that she was, in fact, not dismissed from employment based on the above provision.
She argued that her situation could not be characterized as a disease; rather, she became
disabled. In short, in her petition before us, she now changes her theory by saying that she is
not entitled to separation pay but to retirement pay pursuant to Section 4,26 Article V of the
Retirement Plan, on disability retirement. She, thus, prayed for the full payment of her
retirement benefits by giving back to her the amount deducted for taxation purposes.
In our Resolution27 dated November 23, 2005 requiring the parties to submit their respective
memoranda, we specifically stated:
No new issues may be raised by a party in the Memorandum and the issues raised
in the pleadings but not included in the Memorandum shall be deemed waived or
abandoned.
Being summations of the parties previous pleadings, the Court may consider the
Memoranda alone in deciding or resolving this petition.
Pursuant to the above resolution, any argument raised in her petition, but not raised in her
Memorandum,28 is deemed abandoned.29 Hence, the only issue proper for determination is
the propriety of deducting P362,386.87 from her total benefits, for taxation purposes.
Nevertheless, in order to resolve the legality of the deduction, it is imperative that we settle,
once and for all, the ground relied upon by respondent in terminating the services of the
petitioner, as well as the nature of the benefits given to her after such termination. Only then
can we decide whether the amount deducted by the respondent should be paid to the
petitioner.
Respondent dismissed the petitioner from her employment based on Article 284 of the Labor
Code, as amended, which reads:
Art. 284. DISEASE AS GROUND FOR TERMINATION
An employer may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is prohibited by law
or is prejudicial to his health as well as to the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to onehalf (1/2) month salary for every year of service, whichever is greater, a fraction of
at least six (6) months being considered as one (1) whole year.
As she was dismissed on the abovementioned ground, the law gives the petitioner the right to
demand separation pay. However, respondent established a retirement plan in favor of all its
employees which specifically provides for "disability retirement," to wit:
Sec. 4. DISABILITY RETIREMENT

In the event that a Member is retired by the Company due to permanent total
incapacity or disability, as determined by a competent physician appointed by the
Company, his disability retirement benefit shall be the Full Members Account
Balance determined as of the last valuation date. x x x.30
On the basis of the above-mentioned retirement plan, respondent offered the petitioner a
retirement package which consists of retirement plan benefits, insurance pension, and
educational assistance.31 The amount of P1,063,841.76 represented the disability retirement
benefit provided for in the plan; while the insurance pension was to be paid by their insurer;
and the educational assistance was voluntarily undertaken by the respondent as a gesture of
compassion to the petitioner.32
We have declared in Aquino v. National Labor Relations Commission33 that the receipt of
retirement benefits does not bar the retiree from receiving separation pay. Separation pay is a
statutory right designed to provide the employee with the wherewithal during the period that
he/she is looking for another employment. On the other hand, retirement benefits are
intended to help the employee enjoy the remaining years of his life, lessening the burden of
worrying about his financial support, and are a form of reward for his loyalty and service to
the employer.34 Hence, they are not mutually exclusive. However, this is only true if there is
no specific prohibition against the payment of both benefits in the retirement plan and/or in
the Collective Bargaining Agreement (CBA).35
In the instant case, the Retirement Plan bars the petitioner from claiming additional benefits
on top of that provided for in the Plan. Section 2, Article XII of the Retirement Plan provides:
Clearly, the benefits received by petitioner from the respondent represent her retirement
benefits under the Plan. The question that now confronts us is whether these benefits are
taxable. If so, respondent correctly made the deduction for tax purposes. Otherwise, the
deduction was illegal and respondent is still liable for the completion of petitioners retirement
benefits.
Respondent argues that the legality of the deduction from petitioners total benefits cannot be
taken cognizance of by this Court since the issue was not raised during the early stage of the
proceedings.38
We do not agree.
Records reveal that as early as in petitioners position paper filed with the Labor Arbiter, she
already raised the legality of said deduction, albeit designated as "unpaid balance of the
retirement package." Petitioner specifically averred that P362,386.87 was not given to her by
respondent as it was allegedly a part of the formers taxable income. 39 This is likewise evident
in the Labor Arbiter and the NLRCs decisions although they ruled that the issue was beyond
the tribunals jurisdiction. They even suggested that petitioners claim for illegal deduction
could be addressed by filing a tax refund with the Bureau of Internal Revenue.40
Contrary to the Labor Arbiter and NLRCs conclusions, petitioners claim for illegal deduction
falls within the tribunals jurisdiction. It is noteworthy that petitioner demanded the completion
of her retirement benefits, including the amount withheld by respondent for taxation
purposes. The issue of deduction for tax purposes is intertwined with the main issue of
whether or not petitioners benefits have been fully given her. It is, therefore, a money claim
arising from the employer-employee relationship, which clearly falls within the jurisdiction 41 of
the Labor Arbiter and the NLRC.
Section 2. NO DUPLICATION OF BENEFITS

No other benefits other than those provided under this Plan shall be payable from
the Fund. Further, in the event the Member receives benefits under the Plan, he
shall be precluded from receiving any other benefits under the Labor Code or
under any present or future legislation under any other contract or Collective
Bargaining Agreement with the Company.36
There being such a provision, as held in Cruz v. Philippine Global Communications, Inc.,37
petitioner is entitled only to either the separation pay under the law or retirement benefits
under the Plan, and not both.
This is not the first time that the labor tribunal is faced with the issue of illegal deduction. In
Intercontinental Broadcasting Corporation (IBC) v. Amarilla,42 IBC withheld the salary
differentials due its retired employees to offset the tax due on their retirement benefits. The
retirees thus lodged a complaint with the NLRC questioning said withholding. They averred
that their retirement benefits were exempt from income tax; and IBC had no authority to
withhold their salary differentials. The Labor Arbiter took cognizance of the case, and this
Court made a definitive ruling that retirement benefits are exempt from income tax, provided
that certain requirements are met.
Nothing, therefore, prevents us from deciding this main issue of whether the retirement
benefits are taxable.
We answer in the affirmative.
No. L-55774. February 20, 1984.*
Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for the
exclusion of retirement benefits from gross income, thus:
SENTINEL INSURANCE COMPANY, INC., petitioner, vs. PORFIRIO M. BAUTISTA and THE
NATIONAL LABOR RELATIONS COMMISSION, respondents.
(6) Retirement Benefits, Pensions, Gratuities, etc.

a) Retirement benefits received under Republic Act 7641 and those received by
officials and employees of private firms, whether individual or corporate, in
accordance with a reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the service of the same
employer for at least ten (10) years and is not less than fifty (50) years of age at the
time of his retirement: Providedfurther, That the benefits granted under this
subparagraph shall be availed of by an official or employee only once. x xx.
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is
burdened to prove the concurrence of the following elements: (1) a reasonable private benefit
plan is maintained by the employer; (2) the retiring official or employee has been in the
service of the same employer for at least ten (10) years; (3) the retiring official or employee is
not less than fifty (50) years of age at the time of his retirement; and (4) the benefit had been
availed of only once.43
As discussed above, petitioner was qualified for disability retirement. At the time of such
retirement, petitioner was only 41 years of age; and had been in the service for more or less
eight (8) years. As such, the above provision is not applicable for failure to comply with the
age and length of service requirements. Therefore, respondent cannot be faulted for
deducting from petitioners total retirement benefits the amount of P362,386.87, for taxation
purposes.
WHEREFORE, the petition is DENIED for lack of merit. The Court of Appeals Decision dated
August 12, 2004 and its Resolution dated December 17, 2004, in CA-G.R. SP No. 75706 are
AFFIRMED.
Labor Law; NLRC; Employer-employee relationship, no cessation of, by his timely opposition
to application for authority to terminate his employment.It is alleged that at the time
Bautista instituted his money claim by way of opposition, the employer-employee relationship
has ceased. The allegation is without basis. Bautista filed a timely opposition to the
application for authority to terminate his employment. The employer-employee tie certainly
existed at that point of time. Although Bautista did not seek reinstatement, he demanded
compliance with one of the express terms of his employment, thus the dispute is one arising
from employer-employee relationship.
Same; Same; Money Claims; Jurisdiction; Calderon vs. Court of Appeals case, no longer
controlling, as PD 1367 superseded by PD 1691 which restored to Labor Arbiters original and
exclusive jurisdiction over monetary and other claims.The Calderon case, however, is no
longer controlling because the law upon which said decision was based, Article 217 of the
Labor Code as amended by PD No. 1367, has been superseded by PD No. 1691 which took
effect May 1, 1980 and which restored to the Labor Arbiters original and exclusive jurisdiction
over claims, monetary or otherwise, provided by law or by appropriate agreement, arising
from employer-employee relations, except those expressly excluded therefrom.
Same; Same; Same; Same; PD 1691; Cause of action which arose when PD 1367 was the
prevailing law and upon which the Calderon case was premised, cannot prevail over the law
in force when the case was resolved by the NLRC which was PD 1691.Although the cause
of action arose when PD No. 1367 was then the prevailing law and upon which the Calderon
case was premised, said Decree was no longer applicable when the case was resolved by
the National Labor Relations Commission on August 29, 1980. The law then in force was PD
No. 1691.
_______________

623
* SECOND DIVISION.
Sentinel Insurance Company, Inc, vs. Bautista
624
opposition for termination of employment but also raised as an issue at the conciliation
hearing.
624
625
Sentinel Insurance Company, Inc. vs. Bautista
Same; Same; Same; Same; Same; BP 227 amending PD 1367, and PD 1691 as amended
by BP 130, vests on Labor Arbiters jurisdiction over money claims involving employeremployee relationship.Article 217 as amended by PD No. 1367 and PD No. 1691 was
again amended by Batas Pambansa Bilang 130 which took effect August 21, 1981. On June
1, 1982, said Article 217 was amended anew by Batas Pambansa Bilang 227 vesting on
Labor Arbiters jurisdiction over cases that workers may file involving wages, hours of work
and other terms and conditions of employment and all money claims of workers, except
claims for employees compensation, social security, medicare and maternity benefits.
Same; Same; Same; Same; Same; Same; Legal fees of attorney-employee which arose out
of employer-employee relationship clearly falls under Art. 217 of the Labor Code, as
amended by PD 1691 and BP 227.Undoubtedly, the claim of 15% legal fees arose out of
employer-employee relationship and clearly falls within the coverage of Article 217 as
amended by PD No. 1691 and Batas Pambansa Bilang. 227.
Same; Same; Same; Same; Same; Same; PD 1691 and BP 227, considered curative
statutes and are given retroactive effect; Reason.In Garcia vs. Martinez, promulgated May
28, 1979, PD No. 1367 was held to be an amendatory decree in the nature of a curative
statute with retrospective application to a pending proceeding which cured the lack of
jurisdiction of the Court of First Instance of Davao City over a complaint for damages
allegedly arising from the dismissal of a radio station manager which was filed on August 2,
1976. PD No. 1691 and BP No. 227 are likewise curative statutes which cured the lack of
jurisdiction of the Labor Arbiter at the start of the proceeding and should be given
retrospective application to this pending proceedings, as the precise purpose of the
amendments was to settle once and for all the conflict of jurisdiction between regular courts
and labor agencies.
Same; Same; Same; Estoppel; Employer estopped from questioning jurisdiction of Labor
Arbiter to award money claim for its failure to object to the employees money claim.
Moreover, petitioner is estopped from questioning the jurisdiction of the Labor Arbiter to
award the money claim considering that in the position paper it submitted to the Labor Arbiter,
it never objected but in fact remained silent as to the claim which was asserted not only in the
625
Same; Same; Same; Same; Categorizing a money claim for legal fees as involving both a
labor controversy and a civil dispute would result in split jurisdiction; Intent of law making
authority not to deprive Labor Arbiters and the NLRC of jurisdiction to award damages in
labor cases; Reason.Furthermore, to state that this case involves both a labor controversy
and a civil dispute would be to sanction split jurisdiction which is obnoxious to the orderly
administration of justice. In a number of cases this Court expounded on this holding that
evidently, the lawmaking authority had second thoughts about depriving Labor Arbiters and
the National Labor Relations Commission of the jurisdiction to award damages in labor cases
because that setup means duplicity of suits, splitting the cause of action and possible
conflicting findings and conclusions by two tribunals of one and the same claim.
PETITION for certiorari with preliminary injunction to review the resolution of the National
Labor Relations Commission.
The facts are stated in the opinion of the Court.

Jesus I. Santos Law Office for petitioner.
The Solicitor General for respondents.
DE CASTRO, J.:
Petition for certiorari with writ of preliminary injunction seeking review of the resolution of the
National Labor Relations Commission which affirmed the decision of the Labor Arbiter
awarding to private respondent the sum of P84,587.58 representing unpaid legal fees. The
pertinent portion of the decision was as follows:
Coming now to the money claim raised by complainant, we noted that the position paper, as
well as the documentary evidence submitted by respondent never did touch on this issue.
Respondents silence on this point has led us to the inevitable conclusion that complainant is
indeed entitled to these monetary claims. More so, in the light of the fact that the contract of
employment entered into by the parties provides among others that Should your duties
permit, you may handle recovery cases for the company for which you will be entitled to
fifteen (15%) per cent legal fees for amount actually recovered. (par. 4).
626
Sentinel Insurance vs.

Carmel Corporation
(P240,000.00 x 15%) ...............................
P36,000.00
3.
Maritime Company of the
Phil. vs. Sea Gems Fishing
Corporation (P183,000.00
626
x 15%) = P27,450.00
P10,000.00) ..............................................
P17,450.00
As computed, complainants legal fees for the recovery cases he handled for the company
are as follows:
4.
1.
Sentinel Insurance vs.
Mt. Arnpiro Timber, et als.
Rose Industries vs. Nemesio

Ascuetas (P60,000.00 x 15%) ..................
P 9,000.00
(P147,583.87 x 15%) ...............................

P22,137.58
2.
Total ..........................................
P84,587.58
WHEREFORE, in the light of the foregoing considerations, the complaint for illegal dismissal
should be, as it is hereby DISMISSED for lack of merit.
However, respondent is hereby ordered to pay complainant the amount indicated above.1
Petitioner, Sentinel Insurance Company, was in accord with the portion of the decision
dismissing the complaint of respondent, Porfirio Bautista; however, it disagreed with the
portion which awarded P84,587.58 to Bautista because contending that the Labor Arbiter was
without jurisdiction to make such award, the same being within the exclusive jurisdiction of
the civil courts.
The factual background of the case is as follows:
Porfirio M. Bautista was hired as Legal Officer by Sentinel and his letter of appointment
provided, among others, the following:
4. Should your duties permit, you may handle recovery cases for the company for which you
will be entitled fifteen (15%) per cent
In the course of his employment, Bautista handled a number of cases for which he was paid
fifteen (15) per cent on amounts recovered except for the four cases in question which,
according to Bautista, he deferred the billing and collection of his percentage on said cases
because of his awareness of the tight financial condition of the company.
Bautista also handled thirteen other cases which, according to petitioner, were defaulted
and/or dismissed for reasons attributable to him. Believing that the defaults/dismissals of the
thirteen cases were the results of the wanton connivance of Bautista with the adverse parties
and/or gross negligence sufficient to warrant his dismissal for loss of trust and confidence,
petitioner served private respondent notice of termination of his services on April 2, 1979 to
take effect March 31, 1979. On March 29, 1979, petitioner applied for clearance to terminate
employment with the Ministry of Labor and Employment but which was opposed by Bautista
on May 31, 1979. In his opposition, Bautista questioned the legality of his dismissal and at
the same time asserted his claim for unpaid legal fees in the sum of P87,800.00 pursuant to
the terms and conditions of his employment, particularly the provision on legal fees.
No settlement having been arrived at in the conciliatory hearing, the case was referred to the
National Capital Region of the Ministry of Labor and Employment. In the position-paper
submitted, petitioner presented its reasons for the application for clearance but remained
silent on the matter of the money claim.
_______________
1 pp. 26-27, Rollo.
On September 28, 1979, the Labor Arbiter rendered the questioned decision. Dissatisfied
with the portion awarding the money claim, petitioner appealed to the National Labor
Relations Commission and argued that the Labor Arbiter erred in assuming that Bautista was
entitled to the legal fees irrespective of the means by which he effected recoveries for the
company.
627
_______________
2 Annex A, Petition, p. 16, Rollo.
627
628

legal fees for amount actually recovered.2
628
629

Considering that there was no dispute that the appointment of Bautista provided for the 15%
legal fees on top of his basic salary and finding that there appeared to be no qualification for
entitlement of the disputed fees and there being no denial that Bautista handled the four
cases subjects of the controversy and succeeded in recovering for the company, the National
Labor Relations Commission on August 29, 1980 affirmed the decision of the Labor Arbiter
and dismissed the appeal.
Sentinel Insurance sought reconsideration of the dismissal which was however denied on
December 10, 1980. Hence this petition for certiorari. On January 12, 1981, We issued a
temporary restraining order enjoining the National Labor Relations Commission from
enforcing and/or carrying out any writ of execution issued or might be issued pursuant to its
resolution and to continue until otherwise ordered.
relations, the jurisdiction of said Labor Arbiters over said cases being expressly limited to
those which are duly endorsed by the Regional Directors in accordance with the provisions of
the Labor Code and which in no case shall include claims for moral or other forms of
damages.4
It is alleged that at the time Bautista instituted his money claim by way of opposition, the
employer-employee relationship has ceased. The allegation is without basis. Bautista filed a
timely opposition to the application for authority to terminate his employment. The employeremployee tie certainly existed at that point of time. Although Bautista did not seek
reinstatement, he demanded compliance with one of the express terms of his employment,
thus the dispute is one arising from employer-employee relationship.
The main argument of petitioner is that the money claim is civil in character cognizable only
by regular courts and therefore beyond the jurisdiction and competence of the Labor Arbiter.
Petitioner invoked the ruling in Jose D. Calderon, Sr. vs. Court of Appeals3 promulgated on
October 28, 1980 where this Court held that an alleged oppressive act of non-payment of
salaries, allowances and other reimbursable expenses is intrinsically a civil dispute within the
jurisdiction of regular courts to resolve and beyond that of Labor Arbiters. The Calderon case
was based on PD No. 1367 enacted May 1, 1978 and which removed from the exclusive
jurisdiction of Labor Arbiters money claims arising from employer-employee
_______________
3 100 SCRA 459.
629
The Calderon case, however, is no longer controlling because the law upon which said
decision was based, Article 217 of the Labor Code as amended by PD No. 1367, has been
superseded by PD No. 1691 which took effect May 1, 1980 and which restored to the Labor
Arbiters original and exclusive jurisdiction over claims, monetary or otherwise, provided by
law or by appropriate agreement, arising from employer-employee relations, except those
expressly excluded therefrom.5
Although the cause of action arose when PD No. 1367 was then the prevailing law and upon
which the Calderon case was premised, said Decree was no longer applicable when the case
was resolved by the National Labor Relations Commission on August 29, 1980. The law then
in force was PD No. 1691.
Article 217 as amended by PD No. 1367 and PD No. 1691 was again amended by Batas
Pambansa Bilang 130 which took effect August 21, 1981. On June 1, 1982, said Article 217
was amended anew by Batas Pambansa Bilang 227 vesting on Labor Arbiters jurisdiction
over cases that workers may file involving wages, hours of work and other terms and
conditions of employment and all money claims of workers, except claims for employees
compensation, social security, medicare and maternity benefits.
Undoubtedly, the claim of 15% legal fees arose out of employer-employee relationship and
clearly falls within the coverage of Article 217 as amended by PD No. 1691 and Batas
Pambansa Bilang. 227.
_______________
Arbiter did not have the authority to adjudicate the claim for legal fees although part of the
express terms of the contract of employment because it is to its disadvantage.7
4 Abad vs. Phil. American General Insurance Company, G.R. No. 50563, October 30, 1981.
5 Pepsi-Cola Bottling Co. vs. Martinez, G.R. No. 58877, March 15, 1982; Ebon vs. de
Guzman, G.R. No. 58265, March 25, 1982; Aguda vs. Vallejos; G.R. No. 58133, March 26,
1982; Cardinal Industries Inc. vs. Vallejos, G.R. No. 57032, June 19, 1982.
Furthermore, to state that this case involves both a labor controversy and a civil dispute
would be to sanction split jurisdiction which is obnoxious to the orderly administration of
justice.8 In a number of cases this Court expounded on this
_______________
630
6 G.R. No. L-47629, 90 SCRA 331.

630
7 p. 10, Rollo, Brief for Private Respondent.
8 Calderon, Sr. vs. Court of Appeals, 100 SCRA 466.
631
In Garcia vs. Martinez,6 promulgated May 28, 1979, PD No. 1367 was held to be an
amendatory decree in the nature of a curative statute with retrospective application to a
pending proceeding which cured the lack of jurisdiction of the Court of First Instance of
Davao City over a complaint for damages allegedly arising from the dismissal of a radio
station manager which was filed on August 2, 1976. PD No. 1691 and BP No. 227 are
likewise curative statutes which cured the lack of jurisdiction of the Labor Arbiter at the start
of the proceeding and should be given retrospective application to this pending proceedings,
as the precise purpose of the amendments was to settle once and for all the conflict of
jurisdiction between regular courts and labor agencies.
Moreover, petitioner is estopped from questioning the jurisdiction of the Labor Arbiter to
award the money claim considering that in the position paper it submitted to the Labor Arbiter,
it never objected but in fact remained silent as to the claim which was asserted not only in the
opposition for termination of employment but also raised as an issue at the conciliation
hearing.
Also, as correctly argued by respondent Bautista, it was petitioner who commenced the
action for dismissal, and he merely asserted a claim expressly provided by the terms of his
employment so much so that petitioner cannot pretend that the Labor Arbiter possessed
jurisdiction over issues of illegal dismissal as in fact, it did not question the portion of the
decision which sustained the dismissal because it was in its favor, but alleged that the Labor

631
holding that evidently, the lawmaking authority had second thoughts about depriving Labor
Arbiters and the National Labor Relations Commission of the jurisdiction to award damages
in labor cases because that setup means duplicity of suits, splitting the cause of action and
possible conflicting findings and conclusions by two tribunals of one and the same claim.9
In view of the foregoing, We hold that the National Labor Relations Commission did not
commit grave abuse of discretion in sustaining the money claim granted by the Labor Arbiter
which arose out of an employer-employee relationship and which, as we hereby hold, was
within the exclusive jurisdiction of the Labor Arbiter.
WHEREFORE, the instant petition is hereby dismissed. The temporary restraining order
heretofore issued is hereby lifted. No costs.
Notes.The National Labor Relations Commission, not the regular courts, has jurisdiction
over actions for recovery of unpaid salaries, separation benefits, and damages. (Pepsi-Cola
Bottling Company vs. Martinez, 112 SCRA 578.)
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Guerrero and Escolin, JJ., concur.
Aquino and Abad Santos, JJ., in the result.
Petition dismissed.
Regular courts have no jurisdiction over claims for moral and exemplary damages arising
from illegal dismissal of employees. (Ebon vs. De Guzman, 113 SCRA 52; Aguda vs. Vallejo,
113 SCRA 69.) [Sentinel Insurance Company, Inc, vs. Bautista, 127 SCRA 623(1984)]

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Labor Law; Managerial and Supervisory Employees; The test of supervisory or managerial

Republic of the Philippines

PHILIPPINE APPLIANCE CORPORATION, (PHILACOR), petitioner,

VOL. 226, SEPTEMBER 27, 1993

On November 21, 1990, respondent the Genuine Organization of Workers in Hotel,

WHEREFORE, premises considered, an Order is hereby issued,

Respondent GLOWHRAIN filed a motion for reconsideration, to which petitioner filed an

The test of "supervisory" or "managerial status" depends on whether a person possesses

Grio-Aquino, J., is on leave.

VOL. 326, FEBRUARY 28, 2000

VOL. 326, FEBRUARY 28, 2000

sa M. Greenfield vs. Ramos

SUPREME COURT REPORTS ANNOTATED

Malayang Samahan ng mga Manggagawa

VOL. 326, FEBRUARY 28, 2000

Malayang Samahan ng mga Manggagawa

SUPREME COURT REPORTS ANNOTATED

Republic of the Philippines

February 28, 2000

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP) et

HON. CRESENCIO J. RAMOS, NATIONAL LABOR RELATIONS COMMISSION, M.

In connection with Section 4 Article II of our existing Collective Bargaining

. . . any and all future representations by MSMG affecting a number of members be

WHEREFORE, finding no sufficient jurisdiction to warrant the exercise of our

(d) Threats, coercion and intimidation

M. Greenfield Inc., (B)

(e) Union busting

Km. 14, Merville Rd., Paraaque, M.M.

May 17, 1989

which it belongs when circumstances warrant, in accordance with the constitutional

Republic of the Philippines

JOVENCIO L. MAYOR petitioner,

PASCUAL V. REYES, petitioner,

CEFERINO E. DULAY, ROSARIO G. ENCARNACION and DANIEL LUCAS, JR.,

CONRADO B. MAGLAYA, petitioner,

G.R. No. 94518

ROLANDO D. GAMBITO, petitioner,

B. Allocation of Powers Between NLRC En Banc and its Divisions

B. Exclusive Original Jurisdiction

(1) Unfair labor practice cases;

3. In G.R. Nos. 87211, and 94518, petitioners-intervenors Lourdes A. Sales and

G.R. No. 91636 April 23, 1992

departments, ambassadors, other public ministers and consuls, or

. . . In the 1987 Constitution, however, as already pointed out, the clear

"President" in providing that Congress may by law vest the appointment

indubitable that sectoral representatives to the House of Representatives

end of the second sentence. Evidently, our Constitution has significantly

The original text of Section 16 of Article VII of the present Constitution as

"The President shall nominate and, with the consent

. . . The interpretation upon a law by this Court constitutes, in a way, a

The rule is recognized elsewhere that the legislature

The legislature cannot, upon passing law which

Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Bidin, Grio-Aquino, Medialdea,

GUTIERREZ, JR., J., concurring:

Bellosillo, J., took no part.

GUTIERREZ, JR., concurring:

I, therefore, VOTE with the majority to DISMISS the PETITION.

Pepsi Cola Distributors of the Phils., Inc. vs. Gal-lang

Mario P. Nicolasora co-counsel for petitioners.

Where the claim to the principal relief sought is to be resolved not by

VOL. 527, JULY 10, 2007

Santiago vs. CF Sharp Crew Management, Inc.

Santiago vs. CF Sharp Crew Management, Inc.

SUPREME COURT REPORTS ANNOTATED