LABOR LAW REVIEW FULL TEXT CASES WEEK 1

Contents
I. Fundamental Principles and Policies..................................................................................................... 2
A. Constitutional Provisions ..................................................................................................................... 2
1. Article II, Secs. 9, 10, 11, 13, 14, 18, 20................................................................................................. 2
Espina v. Zamora, G.R. No. 143855, September 21, 2010 .................................................................... 2
Manila Water v. Del Rosario, G.R. No. 188747, January 29, 2014 ........................................................ 9
Philippine Telegraph v. NLRC, G.R. No. 118978, May 23, 1997 .......................................................... 14
Wesleyan University v. Faculty, G.R. No. 181806, March 12, 2014 .................................................... 21
Serrano v. Gallant Maritime, G.R. No. 167614, March 24, 2009 ........................................................ 27
Rosario v. Victory Ricemill, G.R. No. 147572, February 19, 2003 ....................................................... 50
2. Article III, Secs. 1, 4, 7, 8, 10, 16, 18 (2) .............................................................................................. 56
Sameer Overseas v. Cabiles, G.R. No. 170139, August 5, 2014 .......................................................... 56
Tongko v. Manulife, G.R. No. 167622, November 7, 2008 ................................................................. 74
Serrano v. NLRC, G.R. No. 117040, January 27, 2000 ......................................................................... 90
Agabon v. NLRC, G.R. No. 158693, November 17, 2004 ................................................................... 101
De Jesus v. Hon. Aquino, G.R. No. 164662, February 18, 2013 ........................................................ 112
Abbott v. Alcaraz, G.R. No. 192571, July 23, 2013 ............................................................................ 123
Duncan v. Glaxo, G.R. No. 162994, September 17, 2004.................................................................. 136
Yrasuegui v. PAL, G.R. No. 168081, October 17, 2008 ...................................................................... 143
Opinaldo v. Ravina, G.R. No. 196573, October 16, 2013 .................................................................. 157
Phimco Industries v. PILA, G.R. No. 170830, August 11, 2010 .......................................................... 167
BPI v. BPI Employees, G.R. No. 164301, August 10, 2010 ................................................................. 180
Pryce Corp. v. Chinabank, G.R. No. 172302, February 18, 2014 ....................................................... 201
Abella v. NLRC, G.R. No. 71813, July 20, 1987 .................................................................................. 212
Goya v. Goya Employees, G.R. No. 170054, January 21, 2013 ......................................................... 216
Imbong v. Ochoa, G.R. No. 204819, April 8, 2014 ............................................................................ 223
3. Article XIII, Secs. 1, 2, 3, 13, 14 ......................................................................................................... 289
International School v. Quisumbing, G.R. No. 128845, June 1, 2000 ............................................... 289

See:Serrano v. Gallant Maritime, G.R. No. 167614, March 24, 2009 supra ..................................... 295
Canuel v. Magsaysay Maritime, G.R. No. 190161, October 13, 2014 ............................................... 295
Asia Brewery v. TPMA, G.R. Nos. 171594-96, September 18, 2013 ................................................. 305
B. Civil Code.......................................................................................................................................... 315
1. Article 19 ........................................................................................................................................... 315
Dongon v. Rapid Movers, G.R. No. 163431, August 28, 2013........................................................... 315
Cirtex Employees v. Cirtex, G.R. No. 190515, November 15, 2010 .................................................. 322
PNCC Traffic v. PNCC, G.R. No. 171231, February 17, 2010 ............................................................. 325
Magis Center v. Manalo, G.R. No. 178835, February 13, 2009......................................................... 335
2. Article 1700 ....................................................................................................................................... 346
3. Article 1702 ....................................................................................................................................... 346
C. Labor Code ...................................................................................................................................... 346
1. Article 3 ............................................................................................................................................. 346
Moresco v. Cagalawan, G.R. No. 175170, September 5, 2012 ......................................................... 346
PAL v. PALEA, G.R. No. 85985, August 13, 1993 ............................................................................... 354
2. Article 4 ............................................................................................................................................. 359
3. Article 166 ......................................................................................................................................... 359
4. Article 211 ......................................................................................................................................... 359
5. Article 212 ......................................................................................................................................... 359
6. Article 255 ......................................................................................................................................... 359
7. Article 277 ......................................................................................................................................... 359

I. Fundamental Principles and Policies

A. Constitutional Provisions
1. Article II, Secs. 9, 10, 11, 13, 14, 18, 20
Espina v. Zamora, G.R. No. 143855, September 21, 2010

EN BANC
REPRESENTATIVES GERARDO S. G.R. No. 143855
ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG,
ROBERT ACE S. BARBERS, RAUL M. GONZALES,
PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and FRANKLIN
BAUTISTA,
Petitioners, Present:
CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,*
NACHURA,*
*
LEONARDO-DE CASTRO,
- versus - BRION,*
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,* and
SERENO,** JJ.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON.
MAR ROXAS (Secretary of Trade and Industry), HON.
FELIPE MEDALLA (Secretary of National Economic and
Development Authority), GOV. RAFAEL BUENAVENTURA
(Bangko Sentral ng Pilipinas) and HON. LILIA BAUTISTA
(Chairman, Securities and Exchange Commission),
Respondents. Promulgated:
September 21, 2010
x --------------------------------------------------------------------------------------- x
ABAD, J.:

This case calls upon the Court to exercise its power of judicial review and determine the
constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of
the constitutional mandate for the development of a self-reliant and independent national economy
effectively controlled by Filipinos.
The Facts and the Case

On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also
known as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely
prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them to do
so under four categories:
Category A

Category B

Category C

Category D

Less than
US$2,500,000.00

Exclusively for Filipino citizens

and corporations wholly owned
by Filipino citizens.
US$2,500,000.00 up but less For the first two years of R.A.
than US$7,500,000.00
8762s
effectivity,
foreign
ownership is allowed up to
60%. After the two-year period,
100% foreign equity shall be
allowed.
US$7,500,000.00 or more
May be wholly owned by
foreigners. Foreign investments
for establishing a store in
Categories B and C shall not be
less than the equivalent in
Philippine
Pesos
of
US$830,000.00.
US$250,000.00 per store of May be wholly owned by
foreign enterprises specializing foreigners.
in high-end or luxury products

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside
in the Philippines, to engage in the retail trade business with the same rights as Filipino citizens.
On October 11, 2000 petitioners Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S. Espina,
Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers, Enrique
Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma. Elena
Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of
Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on the following
grounds:
First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins
the State to place the national economy under the control of Filipinos to achieve equal distribution of
opportunities, promote industrialization and full employment, and protect Filipino enterprise against
unfair competition and trade policies.
Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which
taken together with alien dominance of other areas of business, would result in the loss of effective
Filipino control of the economy.
Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari store
vendors, destroy self-employment, and bring about more unemployment.

Fourth, the World Bank-International Monetary Fund had improperly imposed the passage of
R.A. 8762 on the government as a condition for the release of certain loans.
Fifth, there is a clear and present danger that the law would promote monopolies or
combinations in restraint of trade.
Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas, National
Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng Pilipinas Gov.
Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista countered that:
First, petitioners have no legal standing to file the petition. They cannot invoke the fact that they
are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor can they invoke
the fact that they are members of Congress since they made no claim that the law infringes on their
right as legislators.
Second, the petition does not involve any justiciable controversy. Petitioners of course claim
that, as members of Congress, they represent the small retail vendors in their respective districts but the
petition does not allege that the subject law violates the rights of those vendors.
Third, petitioners have failed to overcome the presumption of constitutionality of R.A.
8762. Indeed, they could not specify how the new law violates the constitutional provisions they
cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing provisions that are
judicially demandable.
Fourth, the Constitution mandates the regulation but not the prohibition of foreign investments.
It directs Congress to reserve to Filipino citizens certain areas of investments upon the recommendation
of the NEDA and when the national interest so dictates. But the Constitution leaves to the discretion of
the Congress whether or not to make such reservation. It does not prohibit Congress from enacting laws
allowing the entry of foreigners into certain industries not reserved by the Constitution to Filipino
citizens.
The Issues Presented
Simplified, the case presents two issues:
1. Whether or not petitioner lawmakers have the legal standing to challenge the
constitutionality of R.A. 8762; and
2. Whether or not R.A. 8762 is unconstitutional.
The Courts Ruling
One. The long settled rule is that he who challenges the validity of a law must have a standing to
do so.[1] Legal standing or locus standi refers to the right of a party to come to a court of justice and
make such a challenge. More particularly, standing refers to his personal and substantial interest in that
he has suffered or will suffer direct injury as a result of the passage of that law.[2] To put it another way,
he must show that he has been or is about to be denied some right or privilege to which he is lawfully

entitled or that he is about to be subjected to some burdens or penalties by reason of the law he
complains of.[3]
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act prejudices
petitioners or inflicts damages on them, either as taxpayers[4] or as legislators.[5] Stillthe Court will
resolve the question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like
ordinary citizens, taxpayers, and legislators when as in this case the public interest so requires or the
matter is of transcendental importance, of overarching significance to society, or of paramount public
interest.[6]
Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the State
to develop a self-reliant and independent national economy effectively controlled by Filipinos. They
invoke the provisions of the Declaration of Principles and State Policies under Article II of the 1987
Constitution, which read as follows:
Section 9. The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for all.
xxxx
Section 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.
Section 20. The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investments.

Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII
of the 1987 Constitution, which reads:
Section 10. The Congress shall, upon recommendation of the economic and
planning agency, when the national interest dictates, reserve to citizens of the
Philippines or to corporations or associations at least sixty per centum of whose
capital is owned by such citizens, or such higher percentage as Congress may
prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned
by Filipinos.
In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments
within its national jurisdiction and in accordance with its national goals and priorities.
xxxx

Section 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures that help make
them competitive.
Section 13. The State shall pursue a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange on the basis of equality
and reciprocity.
But, as the Court explained in Taada v. Angara,[7] the provisions of Article II of the 1987 Constitution, the
declarations of principles and state policies, are not self-executing. Legislative failure to pursue such
policies cannot give rise to a cause of action in the courts.
The Court further explained in Taada that Article XII of the 1987 Constitution lays down the
ideals of economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony and in the use of
Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt
measures that help make them competitive; and (3) by requiring the State to develop a self-reliant and
independent national economy effectively controlled by Filipinos.[8]
In other words, while Section 19, Article II of the 1987 Constitution requires the development of
a self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does
not impose a policy of Filipino monopoly of the economic environment. The objective is simply to
prohibit foreign powers or interests from maneuvering our economic policies and ensure that Filipinos
are given preference in all areas of development.
Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires
the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in both
domestic and foreign markets as well as of the protection of Filipino enterprises against unfair foreign
competition and trade practices. Thus, while the Constitution mandates a bias in favor of Filipino goods,
services, labor and enterprises, it also recognizes the need for business exchange with the rest of the
world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against
foreign competition and trade practices that are unfair.[9]
In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods,
and services. While it does not encourage their unlimited entry into the country, it does not prohibit
them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on
foreign competition that is unfair.[10] The key, as in all economies in the world, is to strike a balance
between protecting local businesses and allowing the entry of foreign investments and services.
More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion
to reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when
the national interest requires. Thus, Congress can determine what policy to pass and when to pass it
depending on the economic exigencies. It can enact laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens. In this case, Congress has decided to
open certain areas of the retail trade business to foreign investments instead of reserving them
exclusively to Filipino citizens. The NEDA has not opposed such policy.

The control and regulation of trade in the interest of the public welfare is of course an exercise
of the police power of the State. A persons right to property, whether he is a Filipino citizen or foreign
national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail
Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying the
petition assailing the validity of such Act for violation of the foreigners right to substantive due process
of law, the Supreme Court held that the law constituted a valid exercise of police power.[11] The State
had an interest in preventing alien control of the retail trade and R.A. 1180 was reasonably related to
that purpose. That law is not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on
the foreigners right to property or to engage in an ordinarily lawful business, it cannot be said that the
law amounts to a denial of the Filipinos right to property and to due process of law. Filipinos continue to
have the right to engage in the kinds of retail business to which the law in question has permitted the
entry of foreign investors.
Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save
when it blatantly violates the Constitution. But as the Court has said, there is no showing that the law
has contravened any constitutional mandate. The Court is not convinced that the implementation of
R.A. 8762 would eventually lead to alien control of the retail trade business. Petitioners have not
mustered any concrete and strong argument to support its thesis. The law itself has provided strict
safeguards on foreign participation in that business. Thus
First, aliens can only engage in retail trade business subject to the categories aboveenumerated; Second, only nationals from, or juridical entities formed or incorporated in countries which
allow the entry of Filipino retailers shall be allowed to engage in retail trade business; and Third,
qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their
accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives,
door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities.
In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can
prejudice the local small and medium enterprises since its implementation about a decade ago.
WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.
SO ORDERED.

ROBERTO A. ABAD
Associate Justice

Manila Water v. Del Rosario, G.R. No. 188747, January 29, 2014
G.R. No. 188747

January 29, 2014

MANILA WATER COMPANY, Petitioner,

vs.
CARLITO DEL ROSARIO, Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari1 filed pursuant to Rule 45 of the Revised Rules of Court,
assailing the 31 March 2009 Decision2 rendered by the Fifth Division of the Court of Appeals in CA-G.R.
SP No. 925 83. In its assailed decision, the appellate court: ( 1) reversed as grave abuse of discretion the
Resolution of the National Labor Relations Commission (NLRC) which dismissed the petition of Manila
Water Company (Manila Water) on technical grounds; and (2) proceeded to affirm with modification the
ruling of the Labor Arbiter. Manila Water was ordered to pay respondent Carlito Del Rosario (Del
Rosario) separation pay to be computed from 1 August 1997 up to June 2000.
In a Resolution3 dated 7 July 2009, the appellate court refused to reconsider its earlier decision.
The Facts
On 22 October 1979, Del Rosario was employed as Instrument Technician by Metropolitan Waterworks
and Sewerage System (MWSS). Sometime in 1996, MWSS was reorganized pursuant to Republic Act No.
8041 or the National Water Crisis Act of 1995, and its implementing guidelines Executive Order No.
286. Because of the reorganization, Manila Water absorbed some employees of MWSS including Del
Rosario. On 1 August 1997, Del Rosario officially became an employee of Manila Water.
Sometime in May 2000, Manila Water discovered that 24 water meters were missing in its stockroom.
Upon initial investigation, it appeared that Del Rosario and his co-employee, a certain Danilo Manguera,
were involved in the pilferage and the sale of water meters to the companys contractor. Consequently,
Manila Water issued a Memorandum dated 23 June 2000, directing Del Rosario to explain in writing
within 72 hours why he should not be dealt with administratively for the loss of the said water
meters.4 In his letter-explanation,5 Del Rosario confessed his involvement in the act charged and
pleaded for forgiveness, promising not to commit similar acts in the future.
On 29 June 2000, Manila Water conducted a hearing to afford Del Rosario the opportunity to personally
defend himself and to explain and clarify his defenses to the charge against him. During the formal
investigation Del Rosario was found responsible for the loss of the water meters and therefore liable for
violating Section 11.1 of the Companys Code of Conduct.6 Manila Water proceeded to dismiss Del
Rosario from employment on 3 July 2000.7
This prompted Del Rosario to file an action for illegal dismissal claiming that his severance from
employment is without just cause. In his Position Paper submitted before the labor officer, Del Rosario
averred that his admission to the misconduct charged was not voluntary but was coerced by the

company. Such admission therefore, made without the assistance of a counsel, could not be made basis
in terminating his employment.
Refuting the allegations of Del Rosario, Manila Water pointed out that he was indeed involved in the
taking of the water meters from the companys stock room and of selling these to a private contractor
for personal gain. Invoking Section 11.1 of the Companys Code of Conduct, Manila Water averred that
such act of stealing the companys property is punishable by dismissal. The company invited the
attention of this Court to the fact that Del Rosario himself confessed his involvement to the loss of the
water meters not only in his letter-explanation, but also during the formal investigation, and in both
instances, pleaded for his employers forgiveness.8
After weighing the positions taken by the opposing parties, including the evidence adduced in support of
their respective cases, the Labor Arbiter issued a Decision9 dated 30 May 2002 dismissing for lack of
merit the complaint filed by Del Rosario who was, however, awarded separation pay. According to the
Labor Arbiter, Del Rosarios length of service for 21 years, without previous derogatory record, warrants
the award of separation pay. The decretal portion of the decision reads:
WHEREFORE, viewed from the foregoing, judgment is hereby rendered DISMISSING the complaint for
illegal dismissal for lack of merit.
[Manila Water] is hereby ordered to pay complainant separation pay equivalent to one-half (1/2)
months salary for every year of service based on his basic salary (Php 11,244.00) at the time of his
dismissal. This shall be computed from [1 August 1997] up to June 2000, the total amount of which is
ONE HUNDRED EIGHTEEN THOUSAND SIXTY-TWO (Php 118,062.00) PESOS.10
In a Resolution11 dated 30 September 2003, the NLRC dismissed the appeal interposed by Manila Water
for its failure to append a certification against forum shopping in its Memorandum of Appeal.
Similarly ill-fated was Manila Waters Motion for Reconsideration which was denied by the NLRC in a
Resolution12dated 28 April 2005.
On Certiorari, the Court of Appeals in its Decision dated 31 March 2009, reversed the NLRC Resolution
and held that it committed a grave abuse of discretion when it dismissed Manila Waters appeal on
mere technicality. The appellate court, however, proceeded to affirm the decision of the Labor Arbiter
awarding separation pay to Del Rosario. Considering that Del Rosario rendered 21 years of service to the
company without previous derogatory record, the appellate court considered the granting of separation
pay by the labor officer justified. The fallo of the assailed Court of Appeals Decision reads:
WHEREFORE, the petition is partly granted. The assailed Resolutions dated September 30, 2003 and
[April 28, 2005] of public respondent NLRC are set aside. The Decision dated May 30, 2002 of the [L]abor
[A]rbiter is reinstated, subject to the modification that the computation of the award of separation pay
[to] private respondent shall be counted from August 1, 1997 x x x up to June 2000.13
In a Resolution14 dated 7 July 2009, the Court of Appeals refused to reconsider its earlier decision.
Unrelenting, Manila Water filed the instant Petition for Review on Certiorari assailing the foregoing
Court of Appeals Decision and Resolution on the sole ground that:

THE [COURT OF APPEALS] SERIOUSLY ERRED IN ISSUING THE QUESTIONED DECISION AND RESOLUTION
WHICH DIRECTLY CONTRAVENE BOOK VI, RULE 1, AND SECTION 7 OF THE OMNIBUS RULES
IMPLEMENTING THE LABOR CODE AND PREVAILING JURISPRUDENCE WHICH CATEGORICALLY PROVIDE
THAT AN EMPLOYEE SEPARATED FROM SERIOUS MISCONDUCT IS NOT ENTITLED TO TERMINATION
(SEPARATION) PAY.15
The Courts Ruling
In the instant petition, Manila Water essentially questions the award of separation pay to respondent
who was dismissed for stealing the companys property which amounted to gross misconduct. It argues
that separation pay or financial assistance is not awarded to employees guilty of gross misconduct or for
cause reflecting on his moral character.16
Del Rosario for his part maintains that there is no legal ground to justify his termination from
employment. He insists that his admission pertaining to his involvement in the loss of the water meters
was merely coerced by the company. Since his dismissal was without valid or just cause, Del Rosario
avers that Manila Water is guilty of illegal dismissal rendering it liable for the payment of backwages and
separation pay.17
It must be stressed at the outset that the correctness of the Labor Arbiters pronouncement on the
legality of Del Rosarios dismissal is no longer an issue and is beyond modification. While Manila Water
timely appealed the ruling of the Labor Arbiter awarding separation pay to Del Rosario, the latter did not
question the dismissal of his illegal termination case.18 It is settled in our jurisprudence that a party who
has not appealed cannot obtain from the appellate court any affirmative relief other than the ones
granted in the appealed decision.19 Due process prevents the grant of additional awards to parties who
did not appeal.20 Having said that, this Court will no longer dwell on the issue of whether or not Del
Rosario was illegally dismissed from employment. Included in the closed aspect of the case is
respondents argument that the absence of his counsel when he admitted the charge against him
diminished the evidentiary value of such admission. Nonetheless, it may be mentioned that the
constitutional right to counsel is available only during custodial investigation. If the investigation is
merely administrative conducted by the employer and not a criminal investigation, the admission made
during such investigation may be used as evidence to justify dismissal.21
Our focus will be on the propriety of the award for separation pay.
As a general rule, an employee who has been dismissed for any of the just causes enumerated under
Article 28222of the Labor Code is not entitled to a separation pay.23 Section 7, Rule I, Book VI of the
Omnibus Rules implementing the Labor Code provides:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of an
employee shall be those provided in Article 282 of the Code. The separation from work of an employee
for a just cause does not entitle him to the termination pay provided in the Code, without prejudice,
however, to whatever rights, benefits and privileges he may have under the applicable individual or
collective agreement with the employer or voluntary employer policy or practice.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as
an act of "social justice" or on "equitable grounds."24 In both instances, it is required that the dismissal
(1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.25
In the leading case of Philippine Long Distance Telephone Company v. NLRC,26 we laid down the rule that
separation pay shall be allowed as a measure of social justice only in the instances where the employee
is validly dismissed for causes other than serious misconduct reflecting his moral character. We clarified
that:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow
worker, the employer may not be required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal
only and that the separation pay has nothing to do with the wrong he has committed. Of course it has.
Indeed, if the employee who steals from the company is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a similar offense in his next employment because he
thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not
going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not
deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is committed
by the underprivileged. At best[,] it may mitigate the penalty but it certainly will not condone the
offense. Compassion for the poor is an imperative of every humane society but only when the recipient
is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of
scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who
invoke social justice may do so only if their hands are clean and their motives blameless and not simply
because they happen to be poor. This great policy of our Constitution is not meant for the protection of
those who have proved they are not worthy of it, like the workers who have tainted the cause of labor
with the blemishes of their own character.27
In the subsequent case of Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor
Relations Commission,28 we expanded the exclusions and elucidated that separation pay shall be
allowed as a measure of social justice only in instances where the employee is validly dismissed for
causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud or
willful breach of trust, commission of a crime against the employer or his family, or those reflecting on
his moral character. In the same case, we instructed the labor officials that they must be most judicious
and circumspect in awarding separation pay or financial assistance as the constitutional policy to
provide full protection to labor is not meant to be an instrument to oppress the employers.29 The
commitment of the court to the cause of the labor should not embarrass us from sustaining the
employers when they are right, as here. In fine, we should be more cautious in awarding financial
assistance to the undeserving and those who are unworthy of liberality of the law.30

Guided by the foregoing rules, we have carefully treaded the path of compassionate justice in the
subsequent cases so as not to slip and favor labor at the expense of management.
In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.),31 we denied the award of separation pay to
an employee who was dismissed from employment due to loss of trust and confidence.
While [this] Court commiserates with the plight of Tirazona, who has recently manifested that she has
since been suffering from her poor health condition, the Court cannot grant her plea for the award of
financial benefits based solely on this unfortunate circumstance. For all its conceded merit, equity is
available only in the absence of law and not as its replacement. Equity as an exceptional extenuating
circumstance does not favor, nor may it be used to reward, the indolent or the wrongdoer for that
matter. This Court will not allow a party, in guise of equity, to benefit from its own fault. 32 (Emphasis
supplied).
The attendant circumstances in the present case considered, we are constrained to deny Del Rosario
separation pay since the admitted cause of his dismissal amounts to serious misconduct. He is not only
responsible for the loss of the water meters in flagrant violation of the companys policy but his act is in
utter disregard of his partnership with his employer in the pursuit of mutual benefits.
In the recent case of Daabay v. Coca-Cola Bottlers,33 this Court reiterated our ruling in Toyota and
disallowed the payment of separation pay to an employee who was found guilty of stealing the
companys property. We repeated that an award of separation pay in such an instance is misplaced
compassion for the undeserving who may find their way back and weaken the fiber of labor.
That Del Rosario rendered 21 years of service to the company will not save the day for him.1wphi1 To
this case, Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission is on all
fours, thus:
Although long years of service might generally be considered for the award of separation benefits or
some form of financial assistance to mitigate the effects of termination, this case is not the appropriate
instance for generosity under the Labor Code nor under our prior decisions. The fact that private
respondent served petitioner for more than twenty years with no negative record prior to his dismissal,
in our view of this case, does not call for such award of benefits, since his violation reflects a regrettable
lack of loyalty and worse, betrayal of the company. If an employee's length of service is to be regarded
as a justification for moderating the penalty of dismissal, such gesture will actually become a prize for
disloyalty, distorting the meaning of social justice and undermining the efforts of labor to cleanse its
ranks of undesirables.34 (Emphasis supplied).
Indubitably, the appellate court erred in awarding separation pay to Del Rosario without taking into
consideration that the transgression he committed constitutes a serious offense. The grant of separation
pay to a dismissed employee is determined by the cause of the dismissal. The years of service may
determine how much separation pay may be awarded. It is, however, not the reason why such pay
should be granted at all.
In sum, we hold that the award of separation pay or any other kind of financial assistance to Del Rosario,
under the nomenclature of compassionate justice, is not warranted in the instant case. A contrary rule

would have the effect of rewarding rather than punishing an erring employee, disturbing the noble
concept of social justice.
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution of the
Court of Appeals are hereby REVERSED and SET ASIDE.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice

Philippine Telegraph v. NLRC, G.R. No. 118978, May 23, 1997

SECOND DIVISION

[G.R. No. 118978. May 23, 1997]

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY,* petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and GRACE DE GUZMAN,respondents.
DECISION
REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT&T) invokes the alleged concealment of civil status and defalcation of
company funds as grounds to terminate the services of an employee. That employee, herein private
respondent Grace de Guzman, contrarily argues that what really motivated PT&T to terminate her
services was her having contracted marriage during her employment, which is prohibited by petitioner
in its company policies. She thus claims that she was discriminated against in gross violation of law, such
a proscription by an employer being outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a Supernumerary
Project Worker, for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio
who went on maternity leave.[1] Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration of the agreed
period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondents services as reliever were again engaged by petitioner, this time in replacement of one
Erlinda F. Dizon who went on leave during both periods.[2] After August 8, 1991, and pursuant to their
Reliever Agreement, her services were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that was
furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she
was single although she had contracted marriage a few months earlier, that is, on May 26, 1991.[3]
It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly
learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private
respondent a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that
memorandum, she was reminded about the companys policy of not accepting married women for
employment.[4]
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&Ts policy regarding married women at the time, and that all along she had not deliberately hidden
her true civil status.[5] Petitioner nonetheless remained unconvinced by her explanations. Private
respondent was dismissed from the company effective January 29, 1992,[6] which she readily contested
by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living
allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission
in Baguio City.
At the preliminary conference conducted in connection therewith, private respondent volunteered
the information, and this was incorporated in the stipulation of facts between the parties, that she had
failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for that
amount in favor of petitioner.[7] All of these took place in a formal proceeding and with the agreement
of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that
private respondent, who had already gained the status of a regular employee, was illegally dismissed by
petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was
correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied
upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent
that she had been discriminated against on account of her having contracted marriage in violation of
company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the
labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been
the subject of an unjust and unlawful discrimination by her employer, PT&T. However, the decision of
the labor arbiter was modified with the qualification that Grace de Guzman deserved to be suspended
for three months in view of the dishonest nature of her acts which should not be condoned. In all other
respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement
of private respondent in her employment with PT&T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in
its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of
the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the hubristic
conceit that women constitute the inferior sex. Nowhere has that prejudice against womankind been so
pervasive as in the field of labor, especially on the matter of equal employment opportunities and
standards. In the Philippine setting, women have traditionally been considered as falling within the

vulnerable groups or types of workers who must be safeguarded with preventive and remedial social
legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and
retention.
The Constitution, cognizant of the disparity in rights between men and women in almost all phases
of social and political life, provides a gamut of protective provisions. To cite a few of the primordial ones,
Section 14, Article II[8] on the Declaration of Principles and State Policies, expressly recognizes the role of
women in nation-building and commands the State to ensure, at all times, the fundamental equality
before the law of women and men. Corollary thereto, Section 3 of Article XIII[9] (the progenitor whereof
dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection
to labor and to promote full employment and equality of employment opportunities for all, including an
assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article
XIII[10] mandates that the State shall protect working women through provisions for opportunities that
would enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to
our countrys commitment as a signatory to the United Nations Convention on the Elimination of All
Forms of Discrimination Against Women (CEDAW).[11]
Principal among these laws are Republic Act No. 6727[12] which explicitly prohibits discrimination
against women with respect to terms and conditions of employment, promotion, and training
opportunities; Republic Act No. 6955[13] which bans the mail-order-bride practice for a fee and the
export of female labor to countries that cannot guarantee protection to the rights of women workers;
Republic Act No. 7192,[14] also known as the Women in Development and Nation Building Act, which
affords women equal opportunities with men to act and to enter into contracts, and for appointment,
admission, training, graduation, and commissioning in all military or similar schools of the Armed Forces
of the Philippines and the Philippine National Police; Republic Act No. 7322[15] increasing the maternity
benefits granted to women in the private sector; Republic Act No. 7877[16] which outlaws and punishes
sexual harassment in the workplace and in the education and training environment; and Republic Act
No. 8042,[17] or the Migrant Workers and Overseas Filipinos Act of 1995, which prescribes as a matter of
policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where
their rights are secure. Likewise, it would not be amiss to point out that in the Family Code,[18] womens
rights in the field of civil law have been greatly enhanced and expanded.
In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to
138 thereof. Article 130 involves the right against particular kinds of night work while Article 132
ensures the right of women to be provided with facilities and standards which the Secretary of Labor
may establish to ensure their health and safety. For purposes of labor and social legislation, a woman
working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be
considered as an employee under Article 138. Article 135, on the other hand, recognizes a womans right
against discrimination with respect to terms and conditions of employment on account simply of
sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely
by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of
protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with the
services of such employee, ones labor being regarded as constitutionally protected property.

On the other hand, it is recognized that regulation of manpower by the company falls within the socalled management prerogatives, which prescriptions encompass the matter of hiring, supervision of
workers, work assignments, working methods and assignments, as well as regulations on the transfer of
employees, lay-off of workers, and the discipline, dismissal, and recall of employees.[19] As put in a case,
an employer is free to regulate, according to his discretion and best business judgment, all aspects of
employment, from hiring to firing, except in cases of unlawful discrimination or those which may be
provided by law.[20]
In the case at bar, petitioners policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution. Contrary to
petitioners assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the companys policy that married women are not qualified for employment in PT&T, and not
merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that youre
fully aware that the company is not accepting married women employee (sic), as it was verbally
instructed to you.[21] Again, in the termination notice sent to her by the same branch supervisor, private
respondent was made to understand that her severance from the service was not only by reason of her
concealment of her married status but, over and on top of that, was her violation of the companys
policy against marriage (and even told you that married women employees are not applicable [sic] or
accepted in our company.)[22] Parenthetically, this seems to be the curious reason why it was made to
appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor
and not by its highest ranking officers who would otherwise be solidarily liable with the corporation.[23]
Verily, private respondents act of concealing the true nature of her status from PT&T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly because
she wanted to retain a permanent job in a stable company. In other words, she was practically forced by
that very same illegal company policy into misrepresenting her civil status for fear of being disqualified
from work. While loss of confidence is a just cause for termination of employment, it should not be
simulated.[24] It must rest on an actual breach of duty committed by the employee and not on the
employers caprices.[25] Furthermore, it should never be used as a subterfuge for causes which are
improper, illegal, or unjustified.[26]
In the present controversy, petitioners expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal. Petitioner would asseverate, therefore, that while it has nothing against
marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable reasoning,
with interstitial distinctions, perturbs the Court since private respondent may well be minded to claim
that the imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against
its female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the same
time, declaring that marriage as a trivial matter to which it supposedly has no objection. In other words,
PT&T says it gives its blessings to its female employees contracting marriage, despite the maternity
leaves and other benefits it would consequently respond for and which obviously it would have wanted

to avoid. If that employee confesses such fact of marriage, there will be no sanction; but if such
employee conceals the same instead of proceeding to the confessional, she will be dismissed. This line
of reasoning does not impress us as reflecting its true management policy or that we are being regaled
with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions which
confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its
unlawful policy against married women, both on the aspects of qualification and retention, which
compelled private respondent to conceal her supervenient marriage. It was, however, that very policy
alone which was the cause of private respondents secretive conduct now complained of. It is
then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil
caused.
Finally, petitioners collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat
insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings
that she failed to remit some of her collections, but that is an altogether different story. The fact is that
she was dismissed solely because of her concealment of her marital status, and not on the basis of that
supposed defalcation of company funds. That the labor arbiter would thus consider petitioners
submissions on this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is
a perceptive conclusion born of experience in labor cases. For, there was no showing that private
respondent deliberately misappropriated the amount or whether her failure to remit the same was
through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was
merely agreed that private respondent execute a promissory note to refund the same, which she did,
and the matter was deemed settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her
dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee on September 2,
1991. That her dismissal would be effected just when her probationary period was winding down clearly
raises the plausible conclusion that it was done in order to prevent her from earning security of
tenure.[27] On the other hand, her earlier stints with the company as reliever were undoubtedly those of
a regular employee, even if the same were for fixed periods, as she performed activities which were
essential or necessary in the usual trade and business of PT&T.[28] The primary standard of determining
regular employment is the reasonable connection between the activity performed by the employee in
relation to the business or trade of the employer.[29]
As an employee who had therefore gained regular status, and as she had been dismissed without
just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full
back wages, inclusive of allowances and other benefits or their monetary equivalent.[30] However, as she
had undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of
an unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be
upheld to obviate the impression or inference that such act should be condoned. It would be unfair to
the employer if she were to return to its fold without any sanction whatsoever for her act which was not
totally justified. Thus, her entitlement to back wages, which shall be computed from the time her
compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting
therefrom the amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT&T. The Labor Code states, in no uncertain terms, as follows:

ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate
expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee
merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree
No. 148,[31] better known as the Women and Child Labor Law, which amended paragraph (c), Section 12
of Republic Act No. 679,[32] entitled An Act to Regulate the Employment of Women and Children, to
Provide Penalties for Violations Thereof, and for Other Purposes. The forerunner to Republic Act No.
679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated
the employment of women and children in shops, factories, industrial, agricultural, and mercantile
establishments and other places of labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs.
Philippine Air Lines,[33] a decision that emanated from the Office of the President. There, a policy of
Philippine Air Lines requiring that prospective flight attendants must be single and that they will be
automatically separated from the service once they marry was declared void, it being violative of the
clear mandate in Article 136 of the Labor Code with regard to discrimination against married
women. Thus:
Of first impression is the incompatibility of the respondents policy or regulation with the codal provision
of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to
women employed in ordinary occupations and that the prohibition against marriage of women engaged
in extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of
their chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the
controverted policy has already met its doom as early as March 13, 1973 when Presidential Decree No.
148, otherwise known as the Women and Child Labor Law, was promulgated. But for the timidity of
those affected or their labor unions in challenging the validity of the policy, the same was able to obtain
a momentary reprieve. A close look at Section 8 of said decree, which amended paragraph (c) of Section
12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in Article
136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on
November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies
and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of
Labor to establish standards that will ensure the safety and health of women employees and in
appropriate cases shall by regulation require employers to determine appropriate minimum standards
for termination in special occupations, such as those of flight attendants, but that is precisely the factor
that militates against the policy of respondent. The standards have not yet been established as set forth
in the first paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which are as yet to be
established, the policy of respondent against marriage is patently illegal. This finds support in Section 9
of the New Constitution, which provides:

Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between
workers and employees. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work x x x.
Moreover, we cannot agree to the respondents proposition that termination from employment of flight
attendants on account of marriage is a fair and reasonable standard designed for their own health,
safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its
concern is not so much against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of marriagepregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy
on flight attendants in the course of their employment. We feel that this needs no further discussion as
it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of
Articles 52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social
institution and the family as a basic social institution, respectively, as bases for its policy of nonmarriage. In both instances, respondent predicates absence of a flight attendant from her home for long
periods of time as contributory to an unhappy married life. This is pure conjecture not based on actual
conditions, considering that, in this modern world, sophisticated technology has narrowed the distance
from one place to another. Moreover, respondent overlooked the fact that married flight attendants can
program their lives to adapt to prevailing circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary
occupations, is reflected in the whole text and supported by Article 135 that speaks of nondiscrimination on the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation[34] considered as void a policy of the same nature. In said case, respondent, in dismissing
from the service the complainant, invoked a policy of the firm to consider female employees in the
project it was undertaking as separated the moment they get married due to lack of facilities for married
women. Respondent further claimed that complainant was employed in the project with an oral
understanding that her services would be terminated when she gets married. Branding the policy of the
employer as an example of discriminatory chauvinism tantamount to denying equal employment
opportunities to women simply on account of their sex, the appellate court struck down said employer
policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the
Constitution.
Under American jurisprudence, job requirements which establish employer preference or
conditions relating to the marital status of an employee are categorized as a sex-plus discrimination
where it is imposed on one sex and not on the other. Further, the same should be evenly applied and
must not inflict adverse effects on a racial or sexual group which is protected by federal job
discrimination laws.Employment rules that forbid or restrict the employment of married women, but do
not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of
1964, the main federal statute prohibiting job discrimination against employees and applicants on the
basis of, among other things, sex.[35]

Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married men,
the variable is sex and the discrimination is unlawful.[36] Upon the other hand, a requirement that a
woman employee must remain unmarried could be justified as a bona fide occupational qualification, or
BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a
general principle, such as the desirability of spreading work in the workplace. A requirement of that
nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance. Thus, in one case, a no-marriage rule applicable to both male and female flight
attendants, was regarded as unlawful since the restriction was not related to the job performance of the
flight attendants.[37]
5. Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual as
an intangible and inalienable right.[38] Hence, while it is true that the parties to a contract may establish
any agreements, terms, and conditions that they may deem convenient, the same should not be
contrary to law, morals, good customs, public order, or public policy.[39] Carried to its logical
consequences, it may even be said that petitioners policy against legitimate marital bonds would
encourage illicit or common-law relations and subvert the sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations between
the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much
public interest that the same should yield to the common good.[40] It goes on to intone that neither
capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience
of the public.[41] In the final reckoning, the danger of just such a policy against marriage followed by
petitioner PT&T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable
social institution and, ultimately, of the family as the foundation of the nation.[42] That it must be
effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct
derogatory of the laws of the land is not only in order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.
SO ORDERED.
Romero, Puno, Mendoza, and Torres, Jr., JJ., concur.
Wesleyan University v. Faculty, G.R. No. 181806, March 12, 2014
G.R. No. 181806

March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:

A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment.1 Like any other contract, it has
the force of law between the parties and, thus, should be complied with in good faith.2 Unilateral
changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be
allowed without the consent of both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No.
97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly
organized and existing under the laws of the Philippines.6 Respondent Wesleyan University-Philippines
Faculty and Staff Association, on the other hand, is a duly registered labor organization7 acting as the
sole and exclusive bargaining agent of all rank-and-file faculty and staff employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued
a Memorandum11 providing guidelines on the implementation of vacation and sick leave credits as well
as vacation leave commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified
employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick
Leave credits of 15 days become complete at the cut off date of May 31 of each year. (Example,
only a total of 5 days credit will be given to an employee for each of sick leave [or] vacation
leave, as of month end September, that is, 4 months from June to September multiplied by 1.25
days). An employee, therefore, who takes VL or SL beyond his leave credits as of date will have
to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected
after the second year of continuous service of an employee. Hence, an employee who started
working June 1, 2005 will get his commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondents President, Cynthia L. De Lara (De Lara) wrote a letter 13 to Atty.
Maglaya informing him that respondent is not amenable to the unilateral changes made by
petitioner.14 De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE

SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to
the entitled employee at the end of each school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen
(15) days sick leave with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner
advised respondent to file a grievance complaint on the implementation of the vacation and sick leave
policy.17 In the same meeting, petitioner announced its plan of implementing a one-retirement
policy,18 which was unacceptable to respondent.
Ruling of the Voluntary Arbitrator
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article XVI
of the CBA provide:
ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-time,
regular staff and tenured faculty of the University, except the University President. Membership in the
Plan shall commence on the first day of the month coincident with or next following his statement of
Regular/Tenured Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall
be as follows:
a. Faculty The last day of the School Year, coincident with his attainment of age sixty (60) with
at least five (years) of unbroken, credited service.
b. Staff Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited
service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his
compulsory retirement. His number of years of service in the University shall be the basis of computing x
x x his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the
members final monthly salary for compulsory retirement.
For optional retirement, the vesting schedule shall be:

x x x x19
On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement
policy and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the
Decision reads:
WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and
vacation leave commutation are contrary to law. The University is consequently ordered to
reinstate the earlier scheme, practice or policy in effect before the issuance of the said
guidelines on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The
University is ordered x x x to resume and proceed with the established practice of extending to
qualified employees retirement benefits under both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of
Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and the
Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA without
the consent of respondent.23Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by the
rules and jurisprudence that would substantiate that Petitioner WU-P has long been in the practice of
granting its employees two (2) sets of Retirement Benefits.

b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that a university practice of granting its employees two (2) sets of Retirement Benefits had
already been established as defined by the law and jurisprudence especially in light of the illegality and
lack of authority of such alleged grant.
c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators
ruling that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued
granting two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy.26
Petitioners Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan
are one and the same.27 It maintains that there is no established company practice or policy of giving
two retirement benefits to its employees.28 Assuming, without admitting, that two retirement benefits
were released,29 petitioner insists that these were done by mere oversight or mistake as there is no
Board Resolution authorizing their release.30 And since these benefits are unauthorized and irregular,
these cannot ripen into a company practice or policy.31 As to the affidavits submitted by respondent,
petitioner claims that these are self-serving declarations,32and thus, should not be given weight and
credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy.34
Respondents Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA
Retirement Plan, which has been implemented for more than 30 years, is different from the CBA
Retirement Plan.35Respondent further avers that it has always been a practice of petitioner to give two
retirement benefits36 and that this practice was established by substantial evidence as found by both the
Voluntary Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to
the CBA and existing practices as it added qualifications or limitations which were not agreed upon by
the parties.38
Our Ruling

The Petition is bereft of merit.

The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if the
benefit is based on an express policy, a written contract, or has ripened into a practice.40 To be
considered a practice, it must be consistently and deliberately made by the employer over a long period
of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.
The practice of giving two retirement
benefits to petitioners employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support its
claim that there are two retirement plans. Based on the affidavits, petitioner has been giving two
retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence to
refute the veracity of these affidavits. Petitioners contention that these affidavits are self-serving holds
no water. The retired employees of petitioner have nothing to lose or gain in this case as they have
already received their retirement benefits. Thus, they have no reason to perjure themselves. Obviously,
the only reason they executed those affidavits is to bring out the truth. As we see it then, their affidavits,
corroborated by the affidavits of incumbent employees, are more than sufficient to show that the
granting of two retirement benefits to retiring employees had already ripened into a consistent and
deliberate practice.
Moreover, petitioners assertion that there is only one retirement plan as the CBA Retirement Plan and
the PERAA Plan are one and the same is not supported by any evidence. There is nothing in Article XVI of
the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA Plan. Besides,
any doubt in the interpretation of the provisions of the CBA should be resolved in favor of respondent.
In fact, petitioners assertion is negated by the announcement it made during the LMC Meeting on
February 8, 2006 regarding its plan of implementing a "one-retirement plan." For if it were true that
petitioner was already implementing a one-retirement policy, there would have been no need for such
announcement. Equally damaging is the letter-memorandum45 dated May 11, 2006, entitled
"Suggestions on the defenses we can introduce to justify the abolition of double retirement policy,"
prepared by the petitioners legal counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a
practice.1wphi1 Thus, petitioner cannot, without the consent of respondent, eliminate the tworetirement policy and implement a one-retirement policy as this would violate the rule on nondiminution of benefits.
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal
or unauthorized and that the benefits were erroneously given by the previous administration. No
evidence, however, was presented by petitioner to substantiate its allegations.

Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as
affirmed by the CA, that there is substantial evidence to prove that there is an existing practice of giving
two retirement benefits, one under the PERAA Plan and another under the CBA Retirement Plan.
The Memorandum dated August 16,
2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16,
2005 is contrary to the existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick
leave and 15 days vacation leave with pay every year and that after the second year of service, all
unused vacation leave shall be converted to cash and paid to the employee at the end of each school
year, not later than August 30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not
automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits the
available leave credits of an employee at the start of the school year. For example, for the first four
months of the school year or from June to September, an employee is only entitled to five days vacation
leave and five days sick leave.46 Considering that the Memorandum dated August 16, 2005 imposes a
limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that it must be
struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt
on the intention of the parties, the literal meaning of the stipulation shall govem.47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is
mandated by no less than the Constitution.49
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the February
5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

Serrano v. Gallant Maritime, G.R. No. 167614, March 24, 2009

G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty.
Their earnings have built houses, provided health care, equipped schools and planted the seeds of
businesses. They have woven together the world by transmitting ideas and knowledge from country to
country. They have provided the dynamic human link between cultures, societies and economies. Yet,
only recently have we begun to understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10,
Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement
of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term,
whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but
exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal
to their lump-sum salary either for the unexpired portion of their employment contract "or for three
months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that
the last clause violates the OFWs' constitutional rights in that it impairs the terms of their contract,
deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8,
2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject
clause, entreating this Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents)
under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with
the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the
assurance and representation of respondents that he would be made Chief Officer by the end of April
1998.6
Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner
refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March
19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and
seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23)
days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal
and for payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May
US$ 413.90
27/31,
1998 (5
days)
incl.
Leave
pay
June
01/30,
1998

2,590.00

July
01/31,
1998

2,590.00

August
01/31,
1998

2,590.00

Sept.
01/30,
1998

2,590.00

Oct.
01/31,
1998

2,590.00

Nov.
01/30,
1998

2,590.00

Dec.
01/31,
1998

2,590.00

Jan.
01/31,
1999

2,590.00

Feb.
01/28,
1999

2,590.00

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

1,640.00

-------------------------------------------------------------------------------25,382.23
Amount
adjusted
to chief
mate's
salary
(March 1,060.5010
19/31,
1998 to
April
1/30,
1998) +
---------------------------------------------------------------------------------------------TOTAL
CLAIM

US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and
awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
the complainant (petitioner) by the respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the
amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainants salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally,
in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the
amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a
salary differential. In addition, the respondents are hereby ordered to pay the complainant,
jointly and severally, in Philippine Currency, at the exchange rate prevailing at the time of
payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent
(10%) of the total amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack
of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the
salary period of three months only -- rather than the entire unexpired portion of nine months
and 23 days of petitioner's employment contract - applying the subject clause. However, the LA
applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary,
US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation
leave pay = US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the
finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to
pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange
at the time of payment the following:

1. Three (3) months salary

$1,400 x 3

US$4,200.00

2. Salary differential

45.00

US$4,245.00
3. 10% Attorneys fees 424.50
TOTAL

US$4,669.50

The other findings are affirmed.

SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the
applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the
award of overtime pay, which should be proven to have been actually performed, and for vacation leave
pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of
the subject clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the
subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due
course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition
for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this
Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker
back wages equal to the unexpired portion of his contract of employment instead of limiting it to three
(3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely
erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the

petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits
payment of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court
of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly,
and he intends to make use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow
partial execution of the undisputed monetary award and, at the same time, praying that the
constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes up the full
merit of the petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed.
Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What
remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason
of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the
monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine
months and 23 days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the
US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of
US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his employment
contract, computed at the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of
OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment
period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs
differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum salary
to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary
award for local workers when their dismissal is declared illegal; that the disparate treatment is not
reasonable as there is no substantial distinction between the two groups;33 and that it defeats Section
18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with
existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are
conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected
OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other
purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General
in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their
obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to
promote their continued helpful contribution in deploying Filipino migrant workers, liability for money
claims was reduced under Section 10 of R.A. No. 8042. 37(Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause
sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than
local employers because in cases involving the illegal dismissal of employees, foreign employers are
liable for salaries covering a maximum of only three months of the unexpired employment contract
while local employers are liable for the full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they
have to give their employees they have illegally dismissed, following well-entrenched and unequivocal
jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding
the unexpired term of the contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the
salaries and other emoluments he is entitled to under his fixed-period employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be
entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the
earliest opportunity, which was when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions
could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded
petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's
employment, especially on the matter of money claims, as this was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The
OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local

workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers,
over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to
enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and Millares
v. National Labor Relations Commission,44 OFWs are contractual employees who can never acquire
regular employment status, unlike local workers who are or can become regular employees. Hence, the
OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs; that
these peculiarities make for a reasonable and valid basis for the differentiated treatment under the
subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not
violate the equal protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to
mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant
workers whose welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly deployed and are employed
under decent and humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as
the Congress, it does so only when these conditions obtain: (1) that there is an actual case or
controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the
constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the
constitutional question is the very lis mota of the case,50otherwise the Court will dismiss the case or
decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is
personally aggrieved that the labor tribunals and the CA computed his monetary award based on the
salary period of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before acompetent court, such that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be
considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause was
first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with
said labor tribunal,53 and reiterated in his Petition forCertiorari before the CA.54 Nonetheless, the issue is
deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve
the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its
function in the present case is limited to determining questions of fact to which the legislative policy of
R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid
down by the law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not
to inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of
judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject
clause.56Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable.
The CA was therefore remiss in failing to take up the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of the case likewise obtains
because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his
12-month employment contract, and not just for a period of three months, strikes at the very core of
the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does
Article
of contracts?

the
III

subject
of

the

clause
violate
Constitution

on

Section
10,
non-impairment

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the
term of his employment and the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,58and cannot affect acts or contracts already perfected;59 however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof.60 Thus, the nonimpairment clause under Section 10, Article II is limited in application to laws about to be enacted that
would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the
employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A.
No. 8042, particularly the subject clause, impaired the employment contract of the parties. Rather,
when the parties executed their 1998 employment contract, they were deemed to have incorporated
into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in
the exercise of the police power of the State to regulate a business, profession or calling, particularly the
recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and
well-being of OFWs wherever they may be employed.61 Police power legislations adopted by the State to
promote the health, morals, peace, education, good order, safety, and general welfare of the people are
generally applicable not only to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the State to promote public
welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person
be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without
distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to
economic security and parity: all monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal degree; none should be
denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like
circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees
fit, a system of classification into its legislation; however, to be valid, the classification must comply with
these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law;
3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification
embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification
needs only be shown to be rationally related to serving a legitimate state interest; 67 b) the middle-tier or
intermediate scrutiny in which the government must show that the challenged classification serves an
important state interest and that the classification is at least substantially related to serving that
interest;68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly
interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a
suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest and that it is the least restrictive
means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on
race74 or gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of
the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rankand-file employees of other GFIs had been exempted from the SSL by their respective charters. Finding
that the disputed provision contained a suspect classification based on salary grade, the Court
deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial
philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the

Constitution. The deference stops where the classification violates a fundamental right, or prejudices
persons accorded special protection by the Constitution. When these violations arise, this Court must
discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires
a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these
foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are
persuasive and have been used to support many of our decisions. We should not place undue and
fawning reliance upon them and regard them as indispensable mental crutches without which we
cannot come to our own decisions through the employment of our own endowments. We live in a
different ambience and must decide our own problems in the light of our own interests and needs, and
of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice.
Our laws must be construed in accordance with the intention of our own lawmakers and such intent
may be deduced from the language of each law and the context of other local legislation related
thereto. More importantly, they must be construed to serve our own public interest which is the be-all
and the end-all of all our laws. And it need not be stressed that our public interest is distinct and
different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of
effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble
proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The
command to promote social justice in Article II, Section 10, in "all phases of national development,"
further explicitated in Article XIII, are clear commands to the State to take affirmative action in the
direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal
support for a more vigorous state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that those
with less privilege in life should have more in law. And the obligation to afford protection to labor is
incumbent not only on the legislative and executive branches but also on the judiciary to translate this
pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social
and economic forces by the State so that justice in its rational and objectively secular conception may at
least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power.
Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be
given deferential treatment.

But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation
of prejudice against persons favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for the abdication of this Courts
solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true
whether the actor committing the unconstitutional act is a private person or the government itself or
one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of
the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee
status. It is akin to a distinction based on economic class and status, with the higher grades as recipients
of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher
compensation packages that are competitive with the industry, while the poorer, low-salaried
employees are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP
rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank
- possessing higher and better education and opportunities for career advancement - are given higher
compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file
employees consist of people whose status and rank in life are less and limited, especially in terms of job
marketability, it is they - and not the officers - who have the real economic and financial need for the
adjustment . This is in accord with the policy of the Constitution "to free the people from poverty,
provide adequate social services, extend to them a decent standard of living, and improve the quality of
life for all." Any act of Congress that runs counter to this constitutional desideratum deserves strict
scrutiny by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case
also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect
classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a
closer examination reveals that the subject clause has a discriminatory intent against, and an invidious
impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment
contracts ofone year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of
one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of
the periods prescribed under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract concerned has a term of at least one (1) year
or more. This is evident from the words "for every year of the unexpired term" which follows the
words "salaries x x x for three months."To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard
and overlook some words used in the statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken that every part
or word thereof be given effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res magis valeat quam
pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was
awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on
Section 10(5). One was Asian Center for Career and Employment System and Services v. National Labor
Relations Commission(Second Division, October 1998),81 which involved an OFW who was awarded
a two-year employment contract,but was dismissed after working for one year and two months. The LA
declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months,
the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent
to his three months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or
authorized cause is entitled to his salary for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3) months
or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally
granted a 12-month contract, which was deemed renewed for another 12 months. After serving for one
year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded
her salaries for the entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title

Contract
Period

Skippers
Maguad84

v. 6 months

Period
Service

2 months

of Unexpired Period Period Applied in

the Computation of
the
Monetary
Award
4 months

4 months

Bahia Shipping 9 months

v.
Reynaldo
Chua 85

8 months

4 months

4 months

Centennial
9 months
Transmarine v.
dela Cruz l86

4 months

5 months

5 months

Talidano
Falcon87

v. 12 months

3 months

9 months

3 months

Univan v. CA88

12 months

3 months

9 months

3 months

Oriental v. CA89

12 months

more than 2 10 months

months

PCL v. NLRC90

12 months

more than 2 more or less 9 3 months

months
months

Olarte
Nayona91

v. 12 months

21 days

11 months and 9 3 months

days

12 months

16 days

11 months and 24 3 months

days

JSS v.Ferrer92
Pentagon
Adelantar93

3 months

v. 12 months

9 months and 2 months and 23 2 months and 23

7 days
days
days

Phil. Employ v. 12 months

Paramio, et al.94

10 months

2 months

Flourish
Maritime
Almanzor 95

26 days

v.

23 months and 4 6 months or 3

days
months for each
year of contract

Athenna
Manpower
Villanos 96

1 year, 10 1 month
v. months and
28 days

1 year, 9 months 6 months or 3

and 28 days
months for each
year of contract

2 years

Unexpired portion

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

for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were
awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B
with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both
commenced work on the same day and under the same employer, and were illegally dismissed after one
month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his
salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only US$3,000.00,
equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00
for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to
the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the
period of their employment contracts, were entitled to their salaries for the entire unexpired portions of
their contracts. The matrix below speaks for itself:
Case Title

Contract
Period

Period
Service

of Unexpired
Period

Period Applied in the

Computation of the
Monetary Award

ATCI v. CA, et 2 years

al.98

2 months

22 months

22 months

Phil. Integrated 2 years

v. NLRC99

7 days

23
months 23 months and 23 days
and 23 days

JGB v. NLC100

2 years

9 months

15 months

15 months

Agoy v. NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC, et 2 years

al.102

5 months

19 months

19 months

Barros v. NLRC, 12 months

et al.103

4 months

8 months

8 months

Philippine
12 months
Transmarine v.
Carilla104

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

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions
thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal
dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by
the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of
the money claims of illegally dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an unexpired portion of one year or more and

subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries
for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing the other
category from such prejudice, simply because the latter's unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has
misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every
year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at
least one year, for if it were any shorter, there would be no occasion for such unexpired term to be
measured by every year; and second, the original term must be more than one year, for otherwise,
whatever would be the unexpired term thereof will not reach even a year. Consequently, the more
decisive factor in the determination of when the subject clause "for three (3) months forevery year of
the unexpired term, whichever is less" shall apply is not the length of the original contract period as held
in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause
applies in cases when the unexpired portion of the contract period is at least one year, which
arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one year
left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more remaining in their contracts shall be covered by
the subject clause, and their monetary benefits limited to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court
assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of
US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the
subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be
entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the
contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the
subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be
entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired
portion.
OFWs vis--vis Local
With Fixed-Period Employment

Workers

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of
illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with
fixed-term employment.107

The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of
Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have
been made of a fixed period, none of the contracting parties, without the consent of the other, may
withdraw from the fulfillment of said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the
liability of a shipping company for the illegal discharge of its managers prior to the expiration of their
fixed-term employment. The Court therein held the shipping company liable for the salaries of its
managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce
which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a
definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for
reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused
to the vessel or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was
replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a
certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time certain
although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v.
Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general principle
that in actions for wrongful discharge founded on Article 1586, local workers are entitled to recover
damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On
the computation of the amount of such damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged
it is his duty to seek other employment of the same kind in the same community, for the purpose of
reducing the damages resulting from such wrongful discharge. However, while this is the general rule,

the burden of showing that he failed to make an effort to secure other employment of a like nature, and
that other employment of a like nature was obtainable, is upon the defendant. When an employee is
wrongfully discharged under a contract of employment his prima facie damage is the amount which he
would be entitled to had he continued in such employment until the termination of the period. (Howard
vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment:
Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3
(Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of
1889, the new provisions of the Civil Code do not expressly provide for the remedies available to a fixedterm worker who is illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc.
v. Rich,117 the Court carried over the principles on the payment of damages underlying Article 1586 of
the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local worker
whose fixed-period employment contract was entered into in 1952, when the new Civil Code was
already in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose
fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping
Agency, Inc. v. Ople,119involving seafarers who were illegally discharged. In Teknika Skills and Trade
Services, Inc. v. National Labor Relations Commission,120 an OFW who was illegally dismissed prior to the
expiration of her fixed-period employment contract as a baby sitter, was awarded salaries
corresponding to the unexpired portion of her contract. The Court arrived at the same ruling in
Anderson v. National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi
Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -the Court awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In
Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security
officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract
after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was illegally cut short in the second month was
declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally
discharged were treated alike in terms of the computation of their money claims: they were uniformly
entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of
R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract have since been differently treated in that
their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the Constitution, the
Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the
Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for which
some individual liberties must give way, such as the public interest in safeguarding health or maintaining
medical standards,126 or in maintaining access to information on matters of public concern.127
In the present case, the Court dug deep into the records but found no compelling state interest that the
subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the employment of
Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have
better chance of getting hired by foreign employers." The limitation also protects the interest of local
placement agencies, which otherwise may be made to shoulder millions of pesos in "termination
pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their
obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to
promote their continued helpful contribution in deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government seeks to
promote. The survival of legitimate placement agencies helps [assure] the government that migrant
workers are properly deployed and are employed under decent and humane conditions.129 (Emphasis
supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of
the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of
House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference
to the underlying reason for the adoption of the subject clause. That is only natural for none of the 29
provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the claim arising out of an employer-

employee relationship or by virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of
damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided,
That any installment payments, if applicable, to satisfy any such compromise or voluntary settlement
shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this
paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall
subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which
any such official may have incurred under other existing laws or rules and regulations as a consequence
of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money
claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually
adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the
subject clause in the transcripts of the "Bicameral Conference Committee (Conference Committee)
Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill
No. 14314)." However, the Court finds no discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state
interest that would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment
of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will
have to be rejected. There can never be a justification for any form of government action that alleviates
the burden of one sector, but imposes the same burden on another sector, especially when the favored
sector is composed of private businesses such as placement agencies, while the disadvantaged sector is
composed of OFWs whose protection no less than the Constitution commands. The idea that private
business interest can be elevated to the level of a compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed
to achieve that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas
Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign
employers who default on their contractual obligations to migrant workers and/or their Philippine
agents. These disciplinary measures range from temporary disqualification to preventive suspension.
The POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May
23, 2003, contains similar administrative disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local
placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of
petitioner and other OFWs to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates state
policy on labor under Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which
this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof,
the nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has described to
be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as selfexecuting in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the
full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a
blanket shield in favor of labor against any form of removal regardless of circumstance. This
interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtlessbut still hardly within the contemplation of the framers. Subsequent legislation is still needed to define
the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights
of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial
bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the
Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable
rightto stave off the dismissal of an employee for just cause owing to the failure to serve proper notice
or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice
require legislative enactments for their enforceability.135 (Emphasis added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the
violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk
opening the floodgates of litigation to every worker or union over every conceivable violation of so
broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual
enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges
protection through executive or legislative action and judicial recognition. Its utility is best limited to
being an impetus not just for the executive and legislative departments, but for the judiciary as well, to
protect the welfare of the working class. And it was in fact consistent with that constitutional agenda
that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko
Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the
judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice
against persons favored by the Constitution with special protection -- such as the working class or a
section thereof -- the Court may recognize the existence of a suspect classification and subject the same
to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central
Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article
XIII, by itself, without the application of the equal protection clause, has no life or force of its own as
elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's
right to substantive due process, for it deprives him of property, consisting of monetary benefits,
without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the
entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better
chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is
nothing in the text of the law or the records of the deliberations leading to its enactment or the
pleadings of respondent that would indicate that there is an existing governmental purpose for the
subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise
reason that the clause violates not just petitioner's right to equal protection, but also her right to
substantive due process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired
period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior
to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated into his
contract.

Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner,
DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in
which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses;
whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours,
and holiday pay is compensation for any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday
pay in the computation of petitioner's monetary award, unless there is evidence that he performed
work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed
are conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees
the right to overtime pay but the entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of
the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of
the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire
unexpired portion of his employment contract consisting of nine months and 23 days computed at the
rate of US$1,400.00 per month.
No costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

Rosario v. Victory Ricemill, G.R. No. 147572, February 19, 2003

SECOND DIVISION

[G.R. No. 147572. February 19, 2003]

TEODORICO ROSARIO, petitioner, vs. VICTORY RICEMILL, respondent.
DECISION
CALLEJO, J.:
Petitioner Teodorico Rosario filed the instant petition for review on certiorari seeking to reverse
and set aside the Decision[1] dated September 22, 2000 and Resolution[2] dated March 16, 2001 of the
Court of Appeals in CA-G.R. SP No. 52487. In the assailed decision, the appellate court affirmed the
decision of the National Labor Relations Commission (NLRC) declaring petitioners dismissal from
employment valid. The assailed resolution denied petitioners motion for reconsideration.
The case stemmed from a complaint for illegal dismissal with money claims (separation pay,
overtime pay, 13th month pay and incentive pay) filed by petitioner against respondent Victory Ricemill,
a single proprietorship owned by Emilio Uy. The antecedent facts, as culled from the records of the case
are, as follows:
Emilio Uy was engaged in the business of milling palay under the business name Victory Ricemill. He
employed petitioner as truck driver from January 11, 1982 up to his dismissal on June 22,
1993.Petitioner was paid the wage rate of P110.00 per day. As truck driver, petitioner was tasked to,
among others, haul palay from various points in Isabela and Cagayan and bring them to respondents
ricemill in Cabatuan, Isabela. In addition, petitioner acted as personal driver to the family of Mr. Uy
during their trips to Manila.
On June 22, 1993, respondent terminated petitioners employment for his notorious acts of
insubordination and that he attempted to kill a fellow employee. According to respondent, petitioner
was guilty of insubordination when he refused to serve as driver of Mr. Uys son when the latter needed
a driver. Further, on one occasion, petitioner was instructed to deliver 600 bags of cement to the Felix
Hardware in Tuguegarao. Instead of bringing the merchandise to the said store, petitioner delivered the
same to one Eduardo Interior, who had not since then paid for it to the damage of respondent in the
total sum ofP60,000.00. Because of petitioners tendency to disobey the orders to him, respondent was
constrained to engage the services of another driver in the person of Michael Ng. Petitioner resented
the new driver and became uncooperative, disrespectful and quarrelsome. On June 21, 1993, petitioner,
armed with a dagger, fought with Michael Ng and inflicted an injury on the latter. Petitioner likewise
inflicted injuries on the head of Rody Senias, a co-employee, when he intervened in the fight and tried to
pacify petitioner.
After the proceedings, the regional labor arbiter rendered his decision[3] dismissing for lack of merit
the complaint for illegal dismissal. The regional labor arbiter found that there were valid causes, i.e.,
willful disobedience to the lawful orders of the employer and commission of a crime or offense against
the employers duly authorized representative, for the termination of petitioners employment.
On appeal, the NLRC ordered the remand of the case to the regional labor arbiter for further
proceedings.[4] The NLRC found that petitioner was denied due process during the proceedings with the
regional labor arbiter as he (petitioner) was not given the opportunity to present his additional rebuttal
evidence. On the other hand, respondent was allowed to submit in evidence various exhibits to discredit
the rebuttal testimony of petitioner.
During the subsequent proceedings before the regional labor arbiter, petitioner submitted the
affidavit of Mario Roque. Roque averred that contrary to respondents claim, the 600 bags of cement

delivered to Eduardo Interior had been paid as evidenced by DBP Check No. B-065462, dated May 22,
1993, in the sum of P58,950.00 payable to respondent.
Thereafter, the regional labor arbiter promulgated his decision[5] stating that he found no reason to
deviate from his previous decision. Roques testimony was not given any probative value as the same
was found to be hearsay. The regional labor arbiter concluded that respondent was justified in
terminating the employment of petitioner on ground of loss of confidence. Accordingly, the regional
labor arbiter again dismissed, for lack of merit, petitioners complaint for illegal dismissal.
On appeal, the NLRC affirmed the ruling of the regional labor arbiter and declared that petitioners
dismissal was valid.
Petitioner then elevated the case to the CA which rendered the assailed decision.[6] The appellate
court accorded respect to the findings of the NLRC. It declared that petitioners act of delivering the
merchandise to Edgardo Interior, instead of Felix Hardware, without being authorized to do so by
respondent was not only inimical to the latters business interests, but constitutive of insubordination or
willful disobedience as well. The CA likewise held that petitioners act of fomenting a fight with a coworker constituted serious misconduct. It further noted that petitioners contumacious refusal to obey
the reasonable orders of respondent was not sufficiently explained. The CA thus found that respondent
had justifiable cause to dismiss petitioner.
Anent the procedural aspect, the CA observed that although there was no strict compliance with
the two-notice rule, it could be gleaned from the records that petitioner was given ample opportunity to
explain his side. Moreover, even granting that respondent fell short of the two-notice requirement, such
irregularity, according to the CA, does not militate against the legality of the dismissal.[7]
The dispositive portion of the assailed CA decision reads:
WHEREFORE, premises considered, the decision, dated August 24, 1998, of the National Labor Relations
Commission in NLRC NCR CA 0008213-95 (NLRC RAB-II-CN-07-00262-93) is hereby AFFIRMED. Costs
against the petitioner.[8]
Petitioner filed a motion for reconsideration of the aforesaid decision but the CA denied the same
in the assailed resolution. Aggrieved, petitioner filed with this Court the instant petition on the ground
that:
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED A REVERSIBLE ERROR
WHEN IT AFFIRMED THE QUESTIONED DECISION OF THE PUBLIC RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION NOTWITHSTANDING THE FACT THAT PETITIONER WAS ILLEGALLY
DISMISSED. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN NOT SUSTAINING PETITIONERS
STANCE THAT HIS DISMISSAL FROM HIS EMPLOYMENT WAS NOT IN ACCORDANCE WITH THE DUE
PROCESS REQUIREMENT OF THE LAW. AND AS A CONSEQUENCE OF PETITIONERS ILLEGAL DISMISSAL,
HE IS ENTITLED TO SEPARATION PAY, OVERTIME PAY, INCENTIVE LEAVE PAY, HOLIDAY PAY AND OTHER
BENEFITS GRANTED BY LAW. IN SO DOING, THE HONORABLE COURT OF APPEALS RENDERED A DECISION
WHICH IS CONTRARY TO THE FACTS OF THE CASE, THE EVIDENCE, LAW AND ESTABLISHED
JURISPRUDENCE. THESE MANIFEST AND GLARING ERRORS, IF NOT CORRECTED, WOULD INEVITABLY
WORK INJUSTICE TO HEREIN PETITIONER AND MAKE HIM SUFFER IRREPARABLE DAMAGE.[9]
Petitioner presented the following issues for the Courts resolution:
I

WHETHER OR NOT PETITIONERS TERMINATION WAS FOR A JUST AND LAWFUL CAUSE.
II
WHETHER OR NOT PETITIONERS DISMISSAL FROM HIS EMPLOYMENT WAS IN ACCORDANCE WITH THE
DUE PROCESS REQUIREMENT OF THE LAW.
III
WHETHER OR NOT PETITIONER IS ENTITLED TO SEPARATION PAY, OVERTIME PAY, INCENTIVE LEAVE
PAY, HOLIDAY PAY AND OTHER BENEFITS GRANTED BY LAW.[10]
It is the contention of petitioner that his act of delivering the 600 bags of cement to Edgardo
Interior, instead of the Felix Hardware to which they were intended, does not constitute willful
disobedience nor serious misconduct so as to justify his dismissal. He was allegedly constrained to look
for another buyer for the merchandise because the proprietor of Felix Hardware rejected the aforesaid
materials. It has been allegedly company practice for respondent to allow the delivery of materials to
other business establishments when these are rejected by the intended customers. Contrary to
respondents claim, Mr. Interior allegedly paid for the bags of cement as testified to by Roque.
Petitioner maintains that his refusal to serve as driver to Mr. Uys son does not constitute willful
disobedience to the employers lawful order because it was not work-related. Further, he could not
allegedly be dismissed for committing an offense against his co-worker, Michael Ng, because he was
neither the employer, nor a member of his family nor his duly authorized representative.
Petitioner likewise claims that he was not afforded due process of law because prior to the
termination letter, he was not furnished a written notice detailing the particular acts and/or omissions
which he allegedly committed to warrant his dismissal. Petitioner thus prays that respondent be
directed to reinstate him and pay his money claims.
The regional labor arbiter, the NLRC and the CA are unanimous in finding that there was justifiable
cause for the dismissal of petitioner. They are one in holding that petitioner committed willful
disobedience when he delivered the 600 bags of cement to Mr. Interior, instead of the Felix Hardware,
without respondents knowledge nor permission.
The validity of petitioners dismissal is a factual question. It is not for the reviewing court to weigh
the conflicting evidence, determine the credibility of witnesses, or otherwise substitute its own
judgment for that of the administrative agency. Well-settled is the rule that findings of fact of quasijudicial agencies, like the NLRC, are accorded not only respect but at times even finality if such findings
are supported by substantial evidence.[11] This is especially so in this case, in which the findings of the
NLRC were affirmed by the Court of Appeals. The findings of facts made therein can only be set aside
upon showing of grave abuse of discretion, fraud or error of law.[12] None has been shown in this case.
The unanimous finding of the regional labor arbiter, the NLRC and the CA that petitioner is guilty of
willful disobedience is based on substantial evidence on record. Petitioners cause is not helped by the
fact that he committed a crime against his co-worker. His actuations clearly constituted willful
disobedience and serious misconduct justifying his dismissal under Article 282(a) of the Labor Code
which provides:
Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
xxx
Willful disobedience of the employers lawful orders, as a just cause for the dismissal of an
employee, envisages the concurrence of at least two requisites: (1) the employees assailed conduct
must have been willful or intentional, the willfulness being characterized by a wrongful and perverse
attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee
and must pertain to the duties which he had been engaged to discharge.[13]
In this case, the order to petitioner was simple, i.e., to deliver the merchandise to the Felix
Hardware. It was clearly reasonable, lawful, made known to petitioner and pertained to his duty as
driver of respondent. Petitioner did not even proffer a justifiable explanation for his disobedience
thereto. Every employee is charged with the implicit duty of caring for the employers
property.[14] Petitioners conduct showed that he could not even be trusted with this task. Further, his
hostile attitude towards his co-workers which eventually led him to inflict physical injuries on one of
them cannot be countenanced. As correctly put by the NLRC, petitioners continuance in the service of
respondent company is partly inimical not only to its interests but also to the interest of its other
employees.[15]
To effect the dismissal of an employee, however, the law requires not only that there be just and
valid cause as provided under Article 282 of the Labor Code. It likewise enjoins the employer to afford
the employee the opportunity to be heard and to defend himself. On the latter aspect, the employer is
mandated to furnish the employee with two (2) written notices: (a) a written notice containing a
statement of the cause for the termination to afford the employee ample opportunity to be heard and
defend himself with the assistance of his representative, if he so desires; (b) if the employer decides to
terminate the services of the employee, the employer must notify him in writing of the decision to
dismiss him, stating clearly the reason therefor.[16]
While there was unanimity among the regional labor arbiter, the NLRC and the CA on the existence
of a valid and lawful cause for petitioners dismissal, the same could not be said on their respective
findings on whether or not respondent complied with the procedural requirements in effecting
petitioners dismissal, i.e., affording him the opportunity to be heard. The regional labor arbiter and the
NLRC did not make any finding on whether respondent afforded petitioner the opportunity to be heard
and to defend himself. On the other hand, as mentioned earlier, the CA found that petitioner was given
ample opportunity to explain his side. Even granting that there was no strict compliance with the twonotice requirement, such irregularity, according to the CA, does not militate against the legality of the
dismissal citing Serrano vs. NLRC.[17]
A careful review of the records revealed that, indeed, respondents manner of dismissing petitioner
fell short of the two-notice requirement. While it furnished petitioner the written notice informing him
of his dismissal,[18] respondent failed to furnish petitioner the written notice apprising him of the charge
or charges against him. Consequently, petitioner was deprived of the opportunity to respond thereto.
However, as correctly opined by the CA, respondents omission does not render petitioners
dismissal invalid but merely ineffectual. The prevailing rule is that when the dismissal is effected for a
just and valid cause, as in this case, the failure to observe procedural requirements does not invalidate
nor nullify the dismissal of an employee. The Court had the occasion to expound this rule in the case
ofSerrano[19] in this wise:

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the
Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe
honesty and good faith toward ones fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this precept is to make
him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee should have received were it not for the
termination of his employment without prior notice. If warranted, nominal and moral damages may also
be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a
procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of
the Civil Code in rescinding a contract for the sale of immovable property. Under these provisions, while
the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases
involving the sale of immovable property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand. Consequently, a notice of rescission given in the letter of an
attorney has no legal effect, and the vendee can make payment even after the due date since no valid
notice of rescission has been given.
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. This is clear from Art. 279 which provides:
Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. x x x.[20] (Citations omitted)
In so ruling, the Court recognized that the law, in protecting the rights of labor, authorized neither
the oppression nor self-destruction of the employer, thus:
The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not
giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even
of an attempt against the life of the employer, an employer will be forced to keep in his employ such
guilty employee. This is unjust.
It is true the Constitution regards labor as a primary social economic force. But so does it declare that it
recognizes the indispensable role of the private sector, encourages private enterprise, and provides
incentives to needed investment. The Constitution bids the State to afford full protection to labor. But it
is equally true that the law, in protecting the rights of the laborer, authorizes neither oppression nor

self-destruction of the employer. And it is oppression to compel the employer to continue in

employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so.
xxx
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee
was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that
article, he should not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the termination of his employment
without legal effect.[21] (Citations omitted)
In fine, the lack of notice and hearing is considered as being a mere failure to observe a procedure
for the termination of employment which makes the dismissal ineffectual but not necessarily illegal.The
procedural infirmity is then remedied by ordering the payment to the employee his full backwages from
the time of his dismissal until the court finally rules that the dismissal has been for a valid cause.[22]
Having established that respondent had just and valid cause to terminate petitioners employment
but failed to hear him prior to his dismissal, respondent is obliged to pay petitioner his backwages
computed from the time of his dismissal up to the time the decision in this case becomes final.
WHEREFORE, the Decision dated September 22, 2000 and Resolution dated March 16, 2001 of the
Court of Appeals in CA-G.R. SP No. 52487, are hereby AFFIRMED with MODIFICATION. Emilio Uy, doing
business under the business name Victory Ricemill, is ordered to pay petitioner full backwages from the
time his employment was terminated on June 22, 1993 up to the time the herein decision becomes
final. For this purpose, this case is REMANDED to the regional labor arbiter for the computation of the
backwages due petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Austria-Martinez, JJ., concur.

2. Article III, Secs. 1, 4, 7, 8, 10, 16, 18 (2)

Sameer Overseas v. Cabiles, G.R. No. 170139, August 5, 2014
G.R. No. 170139, August 05, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C. CABILES, Respondent.

DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and
the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals decision2dated
June 27, 2005. This decision partially affirmed the National Labor Relations Commissions resolution
dated March 31, 2004,3 declaring respondents dismissal illegal, directing petitioner to pay respondents
three-month salary equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the
NT$3,000.00 withheld from respondent, and pay her NT$300.00 attorneys fees.4cralawred
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement
agency.5Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a
quality control job in Taiwan.6cralawr
Joys application was accepted.7 Joy was later asked to sign a one-year employment contract for a
monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a
placement fee of P70,000.00 when she signed the employment contract.9cralawred
Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that in
her employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was asked
to work as a cutter.12cral
Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informed Joy, without prior notice, that she was terminated and that she should immediately report to
their office to get her salary and passport.13 She was asked to prepare for immediate
repatriation.14cralawred
Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket to
Manila.16cralawred
On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as well
as moral and exemplary damages.19 She identified Wacoal as Sameer Overseas Placement Agencys
foreign principal.20crala
Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her failure to comply with the work requirements [of] her foreign
[employer].21 The agency also claimed that it did not ask for a placement fee of ?70,000.00.22 As
evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing the amount of
?20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had already been transferred
to the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus, petitioner
asserts that it was already substituted by Pacific Manpower.25cral

Pacific Manpower moved for the dismissal of petitioners claims against it.26 It alleged that there was no
employer-employee relationship between them.27 Therefore, the claims against it were outside the
jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first
be presented so that the employers contractual obligations might be identified.29 It further denied that
it assumed liability for petitioners illegal acts.30cralawred
On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting Executive Labor Arbiter Pedro C.
Ramos ruled that her complaint was based on mere allegations.32 The Labor Arbiter found that there
was no excess payment of placement fees, based on the official receipt presented by petitioner.33 The
Labor Arbiter found unnecessary a discussion on petitioners transfer of obligations to Pacific34 and
considered the matter immaterial in view of the dismissal of respondents complaint.35cralawred
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy was
illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal was
based on a just or valid cause belongs to the employer.39 It found that Sameer Overseas Placement
Agency failed to prove that there were just causes for termination.40 There was no sufficient proof to
show that respondent was inefficient in her work and that she failed to comply with company
requirements.41 Furthermore, procedural due process was not observed in terminating
respondent.42cralawred
The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees
for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to
Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas Placement Agency
failed to appeal the Labor Arbiters decision not to rule on the matter.45cralawred
The National Labor Relations Commission awarded respondent only three (3) months worth of salary in
the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorneys fees
of NT$300.46cralawred
The Commission denied the agencys motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for
certiorari with the Court of Appeals assailing the National Labor Relations Commissions resolutions
dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with respect to
the finding of illegal dismissal, Joys entitlement to the equivalent of three months worth of salary,
reimbursement of withheld repatriation expense, and attorneys fees.51 The Court of Appeals remanded
the case to the National Labor Relations Commission to address the validity of petitioner's allegations
against Pacific.52 The Court of Appeals held, thus:chanRoblesvirtualLawlibrary
Although the public respondent found the dismissal of the complainant-respondent illegal, we should
point out that the NLRC merely awarded her three (3) months backwages or the amount of
NT$46,080.00, which was based upon its finding that she was dismissed without due process, a finding
that we uphold, given petitioners lack of worthwhile discussion upon the same in the proceedings

below or before us. Likewise we sustain NLRCs finding in regard to the reimbursement of her fare,
which is squarely based on the law; as well as the award of attorneys fees.
But we do find it necessary to remand the instant case to the public respondent for further proceedings,
for the purpose of addressing the validity or propriety of petitioners third-party complaint against the
transferee agent or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should
emphasize that as far as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is
hereby affirmed with finality, and we hold petitioner liable thereon, but without prejudice to further
hearings
on
its
third
party
complaint
against
Pacific
for
reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partlyAFFIRMED in accordance
with the foregoing discussion, but subject to the caveat embodied in the last sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition.54cralawred
We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her three
months worth of salary, the reimbursement of the cost of her repatriation, and attorneys fees despite
the alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal
that respondent was inefficient in her work.55 Therefore, it claims that respondents dismissal was
valid.56cralawred
Petitioner also reiterates that since Wacoals accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for Wacoals
contractual obligations to the workers originally recruited by petitioner.57cralawred
Sameer Overseas Placement Agencys petition is without merit. We find for respondent.
I
Sameer Overseas Placement Agency failed to show that there was just cause for causing Joys dismissal.
The employer, Wacoal, also failed to accord her due process of law.
Indeed, employers have the prerogative to impose productivity and quality standards at work.58They
may also impose reasonable rules to ensure that the employees comply with these standards.59 Failure
to comply may be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain
the services of an employee who is guilty of acts that are inimical to the interest of the
employer.61 While the law acknowledges the plight and vulnerability of workers, it does not authorize
the oppression or self-destruction of the employer.62 Management prerogative is recognized in law and
in our jurisprudence.
This prerogative, however, should not be abused. It is tempered with the employees right to security
of tenure.63 Workers are entitled to substantive and procedural due process before termination. They

may not be removed from employment without a valid or just cause as determined by law and without
going through the proper procedure.
Security

of

tenure

for

labor

is

guaranteed

by

our

Constitution.64cralawred

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

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

However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are guaranteed
to all employees, whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the probationary
employees fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires
that the probationary employee be informed of such standards at the time of his or her engagement so
he or she can adjust his or her character or workmanship accordingly. Proper adjustment to fit the
standards upon which the employees qualifications will be evaluated will increase ones chances of
being positively assessed for regularization by his or her employer.
Assessing an employees work performance does not stop after regularization. The employer, on a
regular basis, determines if an employee is still qualified and efficient, based on work standards. Based
on that determination, and after complying with the due process requirements of notice and hearing,
the employer may exercise its management prerogative of terminating the employee found unqualified.
The regular employee must constantly attempt to prove to his or her employer that he or she meets all
the standards for employment. This time, however, the standards to be met are set for the purpose of
retaining employment or promotion. The employee cannot be expected to meet any standard of
character or workmanship if such standards were not communicated to him or her. Courts should
remain vigilant on allegations of the employers failure to communicate work standards that would
govern ones employment if [these are] to discharge in good faith [their] duty to
adjudicate.73cralawred
In this case, petitioner merely alleged that respondent failed to comply with her foreign employers
work requirements and was inefficient in her work.74No evidence was shown to support such allegations.
Petitioner did not even bother to specify what requirements were not met, what efficiency standards
were violated, or what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which her
work efficiency and performance were judged. The parties conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination.
There
is
no
proof
that
respondent
was
legally
terminated.
Petitioner failed to comply with the due process requirements
Respondents dismissal less than one year from hiring and her repatriation on the same day show not
only failure on the part of petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employers did not comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75The
employer is required to give the charged employee at least two written notices before
termination.76 One of the written notices must inform the employee of the particular acts that may
cause his or her dismissal.77 The other notice must [inform] the employee of the employers
decision.78 Aside from the notice requirement, the employee must also be given an opportunity to be
heard.79cralawred

Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working
on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same day and
barely a month from her first workday. She was also repatriated on the same day that she was informed
of her termination. The abruptness of the termination negated any finding that she was properly
notified and given the opportunity to be heard. Her constitutional right to due process of law was
violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired
portion of the employment contract that was violated together with attorneys fees and reimbursement
of amounts withheld from her salary.
Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos
Act of 1995, states that overseas workers who were terminated without just, valid, or authorized cause
shall be entitled to the full reimbursement of his placement fee with interest of twelve (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provisions [sic] shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims
or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall themselves be jointly
and solidarily liable with the corporation or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages
under this section shall be paid within four (4) months from the approval of the settlement by the
appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined by law
or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of
twelve (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
.

(Emphasis supplied)chanrobleslaw
Section 15 of Republic Act No. 8042 states that repatriation of the worker and the transport of his [or
her] personal belongings shall be the primary responsibility of the agency which recruited or deployed
the worker overseas. The exception is when termination of employment is due solely to the fault of
the worker,80 which as we have established, is not the case. It reads:chanRoblesvirtualLawlibrary
SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. The repatriation of the
worker and the transport of his personal belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas. All costs attendant to repatriation shall be borne by or
charged to the agency concerned and/or its principal. Likewise, the repatriation of remains and
transport of the personal belongings of a deceased worker and all costs attendant thereto shall be borne
by the principal and/or local agency. However, in cases where the termination of employment is due
solely to the fault of the worker, the principal/employer or agency shall not in any manner be
responsible
for
the
repatriation
of
the
former
and/or
his
belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorneys fees
when the withholding is unlawful.
The Court of Appeals affirmed the National Labor Relations Commissions decision to award respondent
NT$46,080.00 or the three-month equivalent of her salary, attorneys fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondents salary should, however, be increased to the amount equivalent to the
unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that the
clause or for three (3) months for every year of the unexpired term, whichever is less83 is
unconstitutional for violating the equal protection clause and substantive due process.84cralawred
A statute or provision which was declared unconstitutional is not a law. It confers no rights; it imposes
no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at
all.85cralawred
We are aware that the clause or for three (3) months for every year of the unexpired term, whichever is
less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010.
Section 7 of Republic Act No. 10022 provides:chanRoblesvirtualLawlibrary
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as
follows:chanRoblesvirtualLawlibrary
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an

employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damage.
Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to de
[sic] filed by the recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as the case may be, shall themselves be
jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages
under this section shall be paid within thirty (30) days from approval of the settlement by the
appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined by law
or contract, or any unauthorized deductions from the migrant workers salary, the worker shall be
entitled to the full reimbursement if [sic] his placement fee and the deductions made with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.
In case of a final and executory judgement against a foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from participating in the Philippine Overseas Employment
Program and from recruiting and hiring Filipino workers until and unless it fully satisfies the judgement
award.
Noncompliance with the mandatory periods for resolutions of case provided under this section shall
subject the responsible officials to any or all of the following penalties:cralawlawlibrary
(a) The salary of any such official who fails to render his decision or resolution within the prescribed
period shall be, or caused to be, withheld until the said official complies
therewith;chanroblesvirtuallawlibrary
(b)

Suspension

for

not

more

than

ninety

(90)

days;

or

(c) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which
any such official may have incured [sic] under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the

clause in Republic Act No. 8042 was not yet in effect at the time of respondents termination from work
in 1997.86 Republic Act No. 8042 before it was amended by Republic Act No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their
proper context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause
already declared as unconstitutional, without any perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals. At minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment
in this case, further frustrating remedies to assuage the wrong done to petitioner. Hence, there is a
necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to [p]romulgate rules concerning the
protection and enforcement of constitutional rights.87 When cases become moot and academic, we do
not hesitate to provide for guidance to bench and bar in situations where the same violations are
capable of repetition but will evade review. This is analogous to cases where there are millions of
Filipinos working abroad who are bound to suffer from the lack of protection because of the restoration
of an identical clause in a provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence of any
law that supports such exercise. The Constitution cannot be trumped by any other law. All laws must be
read in light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the nullity
cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A law or
provision of law that was already declared unconstitutional remains as such unless circumstances have
so changed as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so changed so as
to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.
The new law puts our overseas workers in the same vulnerable position as they were prior toSerrano.
Failure to reiterate the very ratio decidendi of that case will result in the same untold economic
hardships that our reading of the Constitution intended to avoid. Obviously, we cannot countenance
added expenses for further litigation that will reduce their hard-earned wages as well as add to the
indignity of having been deprived of the protection of our laws simply because our precedents have not
been followed. There is no constitutional doctrine that causes injustice in the face of empty procedural
niceties. Constitutional interpretation is complex, but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor
General to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a

balance between the employers and the employees rights by not unduly burdening the local
recruitment agency.91 Petitioner is also of the view that the clause was already declared as
constitutional in Serrano.92cralawred
The Office of the Solicitor General also argued that the clause was valid and constitutional.93However,
since the parties never raised the issue of the constitutionality of the clause as reinstated in Republic Act
No. 10022, its contention is that it is beyond judicial review.94cralawred
On the other hand, respondent argued that the clause was unconstitutional because it infringed on
workers right to contract.95cralawre
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General
have failed to show any compelling change in the circumstances that would warrant us to revisit the
precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered
by an illegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and falling within the
same class are treated alike, in terms of privileges conferred and liabilities enforced.97 It is a guarantee
against undue favor and individual or class privilege, as well as hostile discrimination or the oppression
of inequality.98cralawre
In creating laws, the legislature has the power to make distinctions and classifications.99 In exercising
such power, it has a wide discretion.100cralawred
The equal protection clause does not infringe on this legislative power.101 A law is void on this basis, only
if classifications are made arbitrarily.102 There is no violation of the equal protection clause if the law
applies equally to persons within the same class and if there are reasonable grounds for distinguishing
between those falling within the class and those who do not fall within the class.103 A law that does not
violate the equal protection clause prescribes a reasonable classification.104cralawred
A reasonable classification (1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all
members of the same class.105cralawre
The

reinstated

clause

does

not

satisfy

the

requirement

of

reasonable

classification.

In Serrano, we identified the classifications made by the reinstated clause. It distinguished between
fixed-period overseas workers and fixed-period local workers.106 It also distinguished between overseas
workers with employment contracts of less than one year and overseas workers with employment
contracts of at least one year.107 Within the class of overseas workers with at least one-year
employment contracts, there was a distinction between those with at least a year left in their contracts
and those with less than a year left in their contracts when they were illegally dismissed.108cralawred
The Congress classification may be subjected to judicial review. In Serrano, there is a legislative

classification which impermissibly interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class.109cralawre
Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, [i]mbued
with the same sense of obligation to afford protection to labor, . . . employ[ed] the standard of strict
judicial scrutiny, for it perceive[d] in the subject clause a suspect classification prejudicial to
OFWs.111cralawred
We also noted in Serrano that before the passage of Republic Act No. 8042, the money claims of illegally
terminated overseas and local workers with fixed-term employment were computed in the same
manner.112 Their money claims were computed based on the unexpired portions of their
contracts.113 The adoption of the reinstated clause in Republic Act No. 8042 subjected the money
claims of illegally dismissed overseas workers with an unexpired term of at least a year to a cap of three
months worth of their salary.114 There was no such limitation on the money claims of illegally terminated
local workers with fixed-term employment.115cralawred
We observed that illegally dismissed overseas workers whose employment contracts had a term of less
than one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year
were granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117cralawred
Observing the terminologies used in the clause, we also found that the subject clause creates a sublayer of discrimination among OFWs whose contract periods are for more than one year: those who are
illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the
entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the reinstated clause, and their monetary benefits
limited to their salaries for three months only.118cralawred
We do not need strict scrutiny to conclude that these classifications do not rest on any real or
substantial distinctions that would justify different treatments in terms of the computation of money
claims resulting from illegal termination.
Overseas workers regardless of their classifications are entitled to security of tenure, at least for the
period agreed upon in their contracts. This means that they cannot be dismissed before the end of their
contract terms without due process. If they were illegally dismissed, the workers right to security of
tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than
nor less than the rights violated when a fixed-period overseas worker is illegally terminated. It is state
policy to protect the rights of workers without qualification as to the place of employment.119In both
cases, the workers are deprived of their expected salary, which they could have earned had they not
been illegally dismissed. For both workers, this deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between overseas workers with an employment
contract of less than one year and overseas workers with at least one year of employment contract, and
between overseas workers with at least a year left in their contracts and overseas workers with less than
a year left in their contracts when they were illegally dismissed.

For this reason, we cannot subscribe to the argument that [overseas workers] are contractual
employees who can never acquire regular employment status, unlike local workers121 because it
already justifies differentiated treatment in terms of the computation of money claims.122cralawred
Likewise, the jurisdictional and enforcement issues on overseas workers money claims do not justify a
differentiated treatment in the computation of their money claims.123 If anything, these issues justify an
equal, if not greater protection and assistance to overseas workers who generally are more prone to
exploitation given their physical distance from our government.
We also find that the classifications are not relevant to the purpose of the law, which is to establish a
higher standard of protection and promotion of the welfare of migrant workers, their families and
overseas Filipinos in distress, and for other purposes.124 Further, we find specious the argument that
reducing the liability of placement agencies redounds to the benefit of the [overseas]
workers.125cralawred
Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivized by the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to
violate our overseas workers rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated. Meanwhile, these overseas
workers who are impressed with an expectation of a stable job overseas for the longer contract period
disregard other opportunities only to be terminated earlier. They are left with claims that are less than
what others in the same situation would receive. The reinstated clause, therefore, creates a situation
where the law meant to protect them makes violation of rights easier and simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:chanRoblesvirtualLawlibrary
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden
twist affecting the principal/employers liability. While intended as an incentive accruing to
recruitment/manning agencies, the law, as worded, simply limits the OFWs recovery in wrongful
dismissal situations. Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer the direct employer primarily liable for the wrongful dismissal. In this sense, Section
10 read as a grant of incentives to recruitment/manning agencies oversteps what it aims to do by
effectively limiting what is otherwise the full liability of the foreign principals/employers.Section 10, in
short, really operates to benefit the wrong party and allows that party, without justifiable reason, to
mitigate its liability for wrongful dismissals. Because of this hidden twist, the limitation of liability under
Section 10 cannot be an appropriate incentive, to borrow the term that R.A. No. 8042 itself uses to
describe the incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to
encourage greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply
limits their liability for the wrongful dismissals of already deployed OFWs. This is effectively a legallyimposed partial condonation of their liability to OFWs, justified solely by the laws intent to encourage
greater deployment efforts. Thus, the incentive, from a more practical and realistic view, is really part of
a scheme to sell Filipino overseas labor at a bargain for purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its effect on the OFWs the benefits accruing
to the recruitment/manning agencies and their principals are taken from the pockets of the OFWs to

whom the full salaries for the unexpired portion of the contract rightfully belong. Thus, the
principals/employers and the recruitment/manning agencies even profit from their violation of the
security of tenure that an employment contract embodies. Conversely, lesser protection is afforded the
OFW, not only because of the lessened recovery afforded him or her by operation of law, but also
because this same lessened recovery renders a wrongful dismissal easier and less onerous to undertake;
the lesser cost of dismissing a Filipino will always be a consideration a foreign employer will take into
account in termination of employment decisions. . . .126
Further, [t]here can never be a justification for any form of government action that alleviates the
burden of one sector, but imposes the same burden on another sector, especially when the favored
sector is composed of private businesses such as placement agencies, while the disadvantaged sector is
composed of OFWs whose protection no less than the Constitution commands. The idea that private
business interest can be elevated to the level of a compelling state interest is odious. 127cralawred
Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid purpose.128cralawred
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance
with Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondents
salary must be modified accordingly. Since she started working on June 26, 1997 and was terminated on
July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25, 1998. To rule
otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal
that principals/employers and recruitment/manning agencies may violate an OFWs security of tenure
which an employment contract embodies and actually profit from such violation based on an
unconstitutional provision of law.129cralawred
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the
interest rate for loan or forbearance from 12% to 6% in the absence of stipulation, applies in this case.
The pertinent portions of Circular No. 799, Series of 2013, read:chanRoblesvirtualLawlibrary
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section
2
of
Circular
No.
905,
Series
of
1982:cralawlawlibrary
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six
percent
(6%)
per
annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are
hereby
amended
accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal
interest in Nacar v. Gallery Frames:130cralawred

II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:chanRoblesvirtualLawlibrary
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed
therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only applicable if the
judgment did not become final and executory before July 1, 2013.132cralawred
We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the
Bangko Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not
apply when the law provides that a different interest rate shall be applied. [A] Central Bank Circular
cannot
repeal
a
law.
Only
a
law
can
repeal
another
law.134cralawred
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers
are entitled to the reimbursement of his or her placement fee with an interest of 12% per annum. Since
Bangko Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the issuance of Circular No.
799 does not have the effect of changing the interest on awards for reimbursement of placement fees
from 12% to 6%. This is despite Section 1 of Circular No. 799, which provides that the 6% interest rate
applies
even
to
judgments.
Moreover, laws are deemed incorporated in contracts. The contracting parties need not repeat them.

They do not even have to be referred to. Every contract, thus, contains not only what has been explicitly
stipulated, but the statutory provisions that have any bearing on the matter.135 There is, therefore, an
implied stipulation in contracts between the placement agency and the overseas worker that in case the
overseas worker is adjudged as entitled to reimbursement of his or her placement fees, the amount
shall be subject to a 12% interest per annum. This implied stipulation has the effect of removing awards
for
reimbursement
of
placement
fees
from
Circular
No.
799s
coverage.
The same cannot be said for awards of salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not
provide
for
a
specific
interest
rate
that
should
apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation
in the contract providing for a different interest rate, other money claims under Section 10 of Republic
Act No. 8042 shall be subject to the 6% interest per annum in accordance with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her money claims from
the finality of this judgment.
IV
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the employment agency that
facilitated
respondents
overseas
employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims including
claims arising out of an employer-employee relationship and/or damages. This section also provides that
the performance bond filed by the local agency shall be answerable for such money claims or damages if
they
were
awarded
to
the
employee.
This provision is in line with the states policy of affording protection to labor and alleviating workers
plight.136cralawred
In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications. The distance of the foreign employer alone makes it difficult for an
overseas worker to reach it and make it liable for violations of the Labor Code. There are also possible
conflict of laws, jurisdictional issues, and procedural rules that may be raised to frustrate an overseas
workers
attempt
to
advance
his
or
her
claims.
It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137cralawred
The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
assures overseas workers that their rights will not be frustrated with these complications.
The fundamental effect of joint and several liability is that each of the debtors is liable for the entire
obligation.138 A final determination may, therefore, be achieved even if only one of the joint and
several debtors are impleaded in an action. Hence, in the case of overseas employment, either the local
agency or the foreign employer may be sued for all claims arising from the foreign employers labor law

violations. This way, the overseas workers are assured that someone the foreign employers local
agent may be made to answer for violations that the foreign employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in
law despite the circumstances of their employment. By providing that the liability of the foreign
employer may be enforced to the full extent139 against the local agent, the overseas worker is assured
of
immediate
and
sufficient
payment
of
what
is
due
them.140cralawred
Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the
Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign
employer from the overseas worker to the local employment agency. However, it must be emphasized
that the local agency that is held to answer for the overseas workers money claims is not left without
remedy. The law does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against the foreign
employer.
A further implication of making local agencies jointly and severally liable with the foreign employer is
that an additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local agencies must
already have mechanisms for guarding against unscrupulous foreign employers even at the level prior to
overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent
overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and
most difficult reaches of our planet to provide for their families. In Prieto v. NLRC:141cralawred
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land
where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of
debasement, are only a few of the inhumane acts to which they are subjected by their foreign
employers, who probably feel they can do as they please in their own country. While these workers may
indeed have relatively little defense against exploitation while they are abroad, that disadvantage must
not continue to burden them when they return to their own territory to voice their muted complaint.
There is no reason why, in their very own land, the protection of our own laws cannot be extended to
them in full measure for the redress of their grievances.142chanrobleslaw
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of
their stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of
families left behind daily. They would count the minutes, hours, days, months, and years yearning to see

their sons and daughters. We all know of the joy and sadness when they come home to see them all
grown up and, being so, they remember what their work has cost them. Twitter accounts, Facetime, and
many other gadgets and online applications will never substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political and economic
crises. They are our true diplomats, they who show the world the resilience, patience, and creativity of
our people. Indeed, we are a people who contribute much to the provision of material creations of this
world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by
limiting the contractual wages that should be paid to our workers when their contracts are breached by
the foreign employers. While we sit, this court will ensure that our laws will reward our overseas
workers with what they deserve: their dignity.
Inevitably, their dignity is ours as well.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C.
Cabiles the amount equivalent to her salary for the unexpired portion of her employment contract at an
interest of 6% per annum from the finality of this judgment. Petitioner is also ORDERED to reimburse
respondent the withheld NT$3,000.00 salary and pay respondent attorneys fees of NT$300.00 at an
interest of 6% per annum from the finality of this judgment.
The clause, or for three (3) months for every year of the unexpired term, whichever is less in Section 7
of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional
and, therefore, null and void.
SO ORDERED.
Carpio, Acting C.J., Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez,
Mendoza, Reyes, and Perlas-Bernabe, JJ., concur.
Sereno, C.J., on Leave.
Brion, J., see dissenting opinion.

Tongko v. Manulife, G.R. No. 167622, November 7, 2008

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

GREGORIO V. TONGKO, G.R. No. 167622

Petitioner,
Present:
QUISUMBING, J., Chairperson,
- versus - CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
THE MANUFACTURERS LIFE
INSURANCE CO. (PHILS.), INC. Promulgated:
and RENATO A.
VERGEL DE DIOS,
Respondents. November 7, 2008
x-----------------------------------------------------------------------------------------x

DECISION
VELASCO, JR., J.:
The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life
Insurance Co. (Phils.), Inc. v. National Labor Relations Commission and Gregorio V. Tongko. The assailed
decision set aside the Decision dated September 27, 2004and Resolution dated December 16,
2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 040220-04.

The Facts
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life
insurance business. Renato A. Vergel De Dios was, during the period material, its President and Chief
Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1,
1977 by virtue of a Career Agents Agreement[2] (Agreement) he executed with Manulife.
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an employeremployee relationship between the Company and the Agent.
xxxx

a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due or to become due to the Company
in respect of applications or policies obtained by or through the Agent or from
policyholders allotted by the Company to the Agent for servicing, subject to subsequent
confirmation of receipt of payment by the Company as evidenced by an Official Receipt
issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any
of the provisions hereof by the Agent by giving written notice to the Agent within fifteen
(15) days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by
the Company shall be construed for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time
without cause, by giving to the other party fifteen (15) days notice in writing. x x x

In 1983, Tongko was named as a Unit Manager in Manulifes Sales Agency Organization. In 1990,
he became a Branch Manager. As the CA found, Tongkos gross earnings from his work at Manulife,
consisting of commissions, persistency income, and management overrides, may be summarized as
follows:
January to December 10, 2002 - P 865,096.07
2001 - 6,214,737.11
2000 - 8,003,180.38
1999 - 6,797,814.05
1998 - 4,805,166.34
1997 - 2,822,620.00[3]
The problem started sometime in 2001, when Manulife instituted manpower development
programs in the regional sales management level. Relative thereto, De Dios addressed a letter
dated November 6, 2001[4] to Tongko regarding an October 18, 2001 Metro North Sales Managers
Meeting. In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has been very clear to
increase the number of agents to at least 1,000 strong for a start. This may seem
diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within and
without the company.
xxxx

The issues around agent recruiting are central to the intended objectives hence the
need for a Senior Managers meeting earlier last month when Kevin OConnor, SVP
Agency, took to the floor to determine from our senior agency leaders what more could
be done to bolster manpower development. At earlier meetings, Kevin had presented
information where evidently, your Region was the lowest performer (on a per Manager
basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the
laggards in this area.
While discussions, in general, were positive other than for certain comments from your
end which were perceived to be uncalled for, it became clear that a one-on-one meeting
with you was necessary to ensure that you and management, were on the same plane.
As gleaned from some of your previous comments in prior meetings (both in group and
one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of which
we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro
North Managers may be a bit confused as to the directions the company was taking. For
this reason, I sought a meeting with everyone in your management team, including you,
to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North
Regions Sales Managers meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: Some Managers are unhappy with their earnings and would want to revert to
the position of agents.
This is an often repeated issue you have raised with me and with Kevin. For this reason, I
placed the issue on the table before the rest of your Regions Sales Managers to verify its
validity. As you must have noted, no Sales Manager came forward on their own to
confirm your statement and it took you to name Malou Samson as a source of the same,
an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to
muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: Sales Managers are doing what the company asks them to do but, in the
process, they earn less.
xxxx
All the above notwithstanding, we had your own records checked and we found that
you made a lot more money in the Year 2000 versus 1999. In addition, you also

volunteered the information to Kevin when you said that you probably will make more
money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making less money did not refer to you but the way you argued this point had us almost
believing that you were spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this
group towards the new direction that we have been discussing these past few weeks,
i.e., Manulifes goal to become a major agency-led distribution company in
the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been
proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year
and so, we are making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of
much of the routine tasks which can be easily delegated. This assistant should
be so chosen as to complement your skills and help you in the areas where you
feel may not be your cup of tea.
You have stated, if not implied, that your work as Regional Manager may be too
taxing for you and for your health. The above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will
deal with the North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and
allow you to concentrate more fully on overseeing the remaining groups under
Metro North, your Central Unit and the rest of the Sales Managers in Metro
North. I will hold you solely responsible for meeting the objectives of these
remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that meeting
corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001,[5] terminating
Tongkos services, thus:

It would appear, however, that despite the series of meetings and

communications, both one-on-one meetings between yourself and SVP Kevin OConnor,
some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Managements avowed
agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14
of your Agents Contract as we are now issuing this notice of termination of your Agency
Agreement with us effective fifteen days from the date of this letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife
for illegal dismissal. The case, docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter
Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that
De Dios gave him specific directives on how to manage his area of responsibility in the latters letter
dated November 6, 2001. He further claimed that Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was
Manulife who hired, promoted and gave various assignments to him. It was the
company who set objectives as regards productions, recruitment, training programs and
all activities pertaining to its business. Manulife prescribed a Code of Conduct which
would govern in minute detail all aspects of the work to be undertaken by employees,
including the sales process, the underwriting process, signatures, handling of money,
policyholder service, confidentiality, legal and regulatory requirements and grounds for
termination of employment. The letter of Mr. De Dios dated 06 November 2001 left no
doubt as to who was in control. The subsequent termination letter dated 18 December
2001 again established in no uncertain terms the authority of the herein respondents to
control the employees of Manulife. Plainly, the respondents wielded control not only as
to the ends to be achieved but the ways and means of attaining such ends.[6]
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC
(4th Division)[7] and Great Pacific Life Assurance Corporation v. NLRC,[8] which Tongko claimed to be
similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due
process. He also cited the Manulife Code of Conduct by which his actions were controlled by the
company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003,[9] in which
it alleged that Tongko is not its employee, and that it did not exercise control over him. Thus, Manulife
claimed that the NLRC has no jurisdiction over the case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for
lack of an employer-employee relationship. Padolina found that applying the four-fold test in
determining the existence of an employer-employee relationship, none was found in the instant
case. The dispositive portion thereof states:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING

the instant complaint for lack of jurisdiction, there being no employer-employee
relationship between the parties.
SO ORDERED.
Tongko appealed the arbiters Decision to the NLRC which reversed the same and rendered a
Decision dated September 27, 2004 finding Tongko to have been illegally dismissed.
The NLRCs First Division, while finding an employer-employee relationship between Manulife
and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that
Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios
and wrote:
The above-mentioned letter shows the extent to which respondents controlled
complainants manner and means of doing his work and achieving the goals set by
respondents. The letter shows how respondents concerned themselves with the
manner complainant managed the Metro North Region as Regional Sales Manager, to
the point that respondents even had a say on how complainant interacted with other
individuals in the Metro North Region. The letter is in fact replete with comments and
criticisms on how complainant carried out his functions as Regional Sales Manager.
More importantly, the letter contains an abundance of directives or orders that
are intended to directly affect complainants authority and manner of carrying out his
functions as Regional Sales Manager.[10] x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents] control over complainant can be found in the
records of the case. [These] are the different codes of conduct such as the Agent Code
of Conduct, the Manulife Financial Code of Conduct, and the Manulife Financial Code of
Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative
and other tasks that he is required to perform. These codes of conduct corroborate and
reinforce the display of respondents power of control in their 06 November 2001 Letter
to complainant.[11]
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed
and set aside. We find complainant to be a regular employee of respondent Manulife
and that he was illegally dismissed from employment by respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay
complainant separation pay as above set forth. Respondent Manulife is further ordered
to pay complainant backwages from the time he was dismissed on 02 January 2002 up
to the finality of this decision also as indicated above.

xxxx
All other claims are hereby dismissed for utter lack of merit.

From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC
First Division in a Resolution dated December 16, 2004.[12]
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA
issued the assailed Decision dated March 29, 2005, finding the absence of an employer-employee
relationship between the parties and deeming the NLRC with no jurisdiction over the case. The CA
arrived at this conclusion while again applying the four-fold test. The CA found that Manulife did not
exercise control over Tongko that would render the latter an employee of Manulife. The dispositive
portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and
the writ prayed for accordingly GRANTED. The assailed Decision dated September 27,
2004 and Resolution dated December 16, 2004 of the National Labor Relations
Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04) are
hereby ANNULLED and SET ASIDE. The Decision datedApril 15, 2004 of Labor Arbiter
Marita V. Padolina is hereby REINSTATED.

Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in granting
respondents petition for certiorari.
B
The Court of Appeals committed grave abuse of discretion in annulling and
setting aside the Decision dated September 27, 2004 and Resolution dated December
16, 2004 in finding that there is no employer-employee relationship between petitioner
and respondent.
C
The Court of Appeals committed grave abuse of discretion in annulling and
setting aside the Decision dated September 27, 2004 and Resolution dated December
16, 2004 which found petitioner to have been illegally dismissed and ordered his
reinstatement with payment of backwages.[13]

Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and
Tongko? and (2) If yes, was Manulife guilty of illegal dismissal?
The Courts Ruling
This petition is meritorious.

Tongko Was An Employee of Manulife

The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the
question of whether an employer-employee relationship existed between Manulife and Tongko. If no
employer-employee relationship existed between the two parties, then jurisdiction over the case
properly lies with the Regional Trial Court.
In the determination of whether an employer-employee relationship exists between two
parties, this Court applies the four-fold test to determine the existence of the elements of such
relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of
an employer-employee relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment

relationship is in dispute, four elements constitute the reliable yardstick: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. It is the socalled control test which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or has reserved
the right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end to be achieved but
also the means to be used in reaching such end.[14]

The NLRC, for its part, applied the four-fold test and found the existence of all the elements and
declared Tongko an employee of Manulife. The CA, on the other hand, found that the element of control
as an indicator of the existence of an employer-employee relationship was lacking in this case. The NLRC
and the CA based their rulings on the same findings of fact but differed in their interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6,
2001 addressed by De Dios to Tongko. According to the NLRC, the letter contained an abundance of
directives or orders that are intended to directly affect complainants authority and manner of carrying
out his functions as Regional Sales Manager. It enumerated these directives or orders as follows:
1.
You will hire at your expense a competent assistant who can unload
you of much of the routine tasks which can be easily delegated. x x x
xxxx
This assistant should be hired immediately.
2.
Effective immediately, Kevin and the rest of the Agency Operations
will deal with the North Star Branch (NSB) in autonomous fashion x x x.
xxxx

I have decided to make this change so as to reduce your span of control and
allow you to concentrate more fully on overseeing the remaining groups under Metro
North, your Central Unit and the rest of the Sales Managers in Metro North. x x x
3.
accordingly.

Any resistance or holding back by anyone will be dealt with

4.
I have been straightforward in this my letter and I know that we can
continue to work together but it will have to be on my terms. Anything else is
unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko
served as the foundations of the power of control wielded by Manulife over Tongko that is further
manifested in the different administrative and other tasks that he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further
bolstering the existence of an employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which
Manulife exercised control, including the actions of its officers. The NLRC held that such integration
added to the fact that Tongko did not have his own agency belied Manulifes claim that Tongko was an
independent contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship
by the NLRC as far too sweeping having as its only basis the letter dated November 6, 2001 of De Dios.
The CA did not concur with the NLRCs ruling that the elements of control as pointed out by the NLRC are
sufficient indicia of control that negates independent contractorship and conclusively establish an
employer-employee relationship between[15] Tongko and Manulife. The CA ruled that there is no
employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of
control over an employees conduct. It bears clarifying that such control not only applies to the work or
goal to be done but also to the means and methods to accomplish it.[16] In Sonza v. ABS-CBN
Broadcasting Corporation, we explained that not all forms of control would establish an employeremployee relationship, to wit:
Further, not every form of control that a party reserves to himself over the
conduct of the other party in relation to the services being rendered may be accorded
the effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held
that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no

employer-employee relationship unlike the second, which address both the

result and the means used to achieve it.[17] (Emphasis supplied.)
We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to promulgate a
set of rules to guide its commission agents in selling its policies that they may not run
afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid and the schedules of payment.
None of these really invades the agents contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot justifiably
be said to establish an employer-employee relationship between him and the
company.[18]

Hence, we ruled in Insular that no employer-employee relationship existed therein. However,

such ruling was tempered with the qualification that had there been evidence that the company
promulgated rules or regulations that effectively controlled or restricted an insurance agents choice of
methods or the methods themselves in selling insurance, an employer-employee relationship would
have existed. In other words, the Court in Insular in no way definitively held that insurance agents are
not employees of insurance companies, but rather made the same a case-to-case basis. We held:
The respondents limit themselves to pointing out that Basiaos contract with the
Company bound him to observe and conform to such rules and regulations as the latter
might from time to time prescribe. No showing has been made that any such rules or
regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods or the methods
themselves of selling insurance. Absent such showing, the Court will not speculate
that any exceptions or qualifications were imposed on the express provision of the
contract leaving Basiao ... free to exercise his own judgment as to the time, place and
means of soliciting insurance.[19] (Emphasis supplied.)

There is no conflict between our rulings in Insular and in Great Pacific Life Assurance
Corporation. We said in the latter case:
[I]t cannot be gainsaid that Grepalife had control over private respondents
performance as well as the result of their efforts. A cursory reading of their respective
functions as enumerated in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried out. For instance, the District
Manager must properly account, record and document the companys funds spot-check
and audit the work of the zone supervisors, conserve the companys business in the
district through reinstatements, follow up the submission of weekly remittance reports
of the debit agents and zone supervisors, preserve company property in good condition,
train understudies for the position of district manager, and maintain his quota of sales
(the failure of which is a ground for termination). On the other hand, a zone supervisor
must direct and supervise the sales activities of the debit agents under him, conserve

company property through reinstatements, undertake and discharge the functions of

absentee debit agents, spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit agents.[20] (Emphasis supplied.)

Based on the foregoing cases, if the specific rules and regulations that are enforced against
insurance agents or managers are such that would directly affect the means and methods by which such
agents or managers would achieve the objectives set by the insurance company, they are employees of
the insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its
employee. Several factors contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the
Company as herein provided as well as maintain a standard of knowledge and
competency in the sale of the Companys products which satisfies those set by the
Company and sufficiently meets the volume of new business required of Production
Club membership.[21]
Under this provision, an agent of Manulife must comply with three (3) requirements: (1)
compliance with the regulations and requirements of the company; (2) maintenance of a level of
knowledge of the companys products that is satisfactory to the company; and (3) compliance with a
quota of new businesses.
Among the company regulations of Manulife are the different codes of conduct such as the
Agent Code of Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of Conduct
Agreement, which demonstrate the power of control exercised by the company over Tongko. The fact
that Tongko was obliged to obey and comply with the codes of conduct was not disowned by
respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an
employee of Manulife may already be established. Certainly, these requirements controlled the means
and methods by which Tongko was to achieve the companys goals.
More importantly, Manulifes evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife
attached affidavits of its agents purportedly to support its claim that Tongko, as a Regional Sales
Manager, did not perform any administrative functions. An examination of these affidavits would,
however, prove the opposite.
In an Affidavit dated April 28, 2003,[22] John D. Chua, a Regional Sales Manager of Manulife,
stated:

4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional

Sales Manager (RSM) for Metro South Region pursuant to an Agency Contract.
As such RSM, I have the following functions:
1.
2.
3.

2003

[23]

Refer and recommend prospective agents to Manulife

Coach agents to become productive
Regularly meet with, and coordinate activities of agents
affiliated to my region.

While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29,
that:

3. In January 1997, I was assigned as a Branch Manager (BM) of Manulife for the
Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate
activites of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized
Commissions and Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.

2003

[24]

While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28,
that:
3. In 1977, I was assigned as a Unit Manager (UM) of North Peaks Unit, North
Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained
and contracted to sell Manulife products and who will be part of my
Unit;
b. To coordinate activities of the agents under my Unit in their daily,
weekly and monthly selling activities, making sure that their respective
sales targets are met;
c. To conduct periodic training sessions for my agents to further
enhance their sales skills.
d. To assist my agents with their sales activities by way of joint
fieldwork, consultations and one-on- one evaluation and analysis of
particular accounts.
e. To provide opportunities to motivate my agents to succeed like
conducting promos to increase sales activities and encouraging them to
be involved in company and industry activities.

f. To provide opportunities for professional growth to my agents by

encouraging them to be a member of the LUCAP (Life Underwriters
Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those cited
in Great Pacific Life Assurance Corporation[25] reveals a striking similarity that would more than support a
similar finding as in that case. Thus, there was an employer-employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a
certain number of agents, in addition to his other administrative functions, leads to no other conclusion
that he was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming
a major agency-led distribution company whereby greater agency recruitment is required of the
managers, including Tongko. De Dios made it clear that agent recruitment has become the primary
means by which Manulife intends to sell more policies. More importantly, it is Tongkos alleged failure to
follow this principle of recruitment that led to the termination of his employment with Manulife. With
this, it is inescapable that Tongko was an employee of Manulife.

Tongko Was Illegally Dismissed

In its Petition for Certiorari dated January 7, 2005[26] filed before the CA, Manulife argued that
even if Tongko is considered as its employee, his employment was validly terminated on the ground of
gross and habitual neglect of duties, inefficiency, as well as willful disobedience of the lawful orders of
Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr.
De Dios refused to shape up and altogether disregarded the latters advice resulting in
his laggard performance clearly indicative of his willful disobedience of the lawful orders
of his superior. x x x
xxxx
As private respondent has patently failed to perform a very fundamental duty,
and that is to yield obedience to all reasonable rules, orders and instructions of the
Company, as well as gross failure to reach at least minimum quota, the termination of
his engagement from Manulife is highly warranted and therefore, there is no illegal
dismissal to speak of.

It is readily evident from the above-quoted portions of Manulifes petition that it failed to cite a
single iota of evidence to support its claims. Manulife did not even point out which order or rule that
Tongko disobeyed. More importantly, Manulife did not point out the specific acts that Tongko was guilty
of that would constitute gross and habitual neglect of duty or disobedience. Manulife merely cited
Tongkos alleged laggard performance, without substantiating such claim, and equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept Manulifes position.

In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

When there is no showing of a clear, valid and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal and the burden is
on the employer to prove that the termination was for a valid or authorized cause. This
burden of proof appropriately lies on the shoulders of the employer and not on the
employee because a workers job has some of the characteristics of property rights and
is therefore within the constitutional mantle of protection. No person shall be deprived
of life, liberty or property without due process of law, nor shall any person be denied
the equal protection of the laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms
that the burden of proving the validity of the termination of employment rests on the
employer. Failure to discharge this evidential burden would necessarily mean that the
dismissal was not justified, and, therefore, illegal.[27]
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
The law mandates that the burden of proving the validity of the termination of
employment rests with the employer. Failure to discharge this evidentiary burden
would necessarily mean that the dismissal was not justified, and, therefore, illegal.
Unsubstantiated suspicions, accusations and conclusions of employers do not provide
for legal justification for dismissing employees. In case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of our labor laws and
Constitution.[28]

This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to
mean substantial evidence, to wit:
The Labor Code provides that an employer may terminate the services of an
employee for just cause and this must be supported by substantial evidence. The settled
rule in administrative and quasi-judicial proceedings is that proof beyond
reasonable doubt is not required in determining the legality of an employers dismissal
of an employee, and not even a preponderance of evidence is necessary as substantial
evidence is considered sufficient. Substantial evidence is more than a mere scintilla of
evidence or relevant evidence as a reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise.[29]

Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife
even failed to identify the specific acts by which Tongkos employment was terminated much less
support the same with substantial evidence. To repeat, mere conjectures cannot work to deprive
employees of their means of livelihood. Thus, it must be concluded that Tongko was illegally dismissed.

Moreover, as to Manulifes failure to comply with the twin notice rule, it reasons that Tongko not
being its employee is not entitled to such notices. Since we have ruled that Tongko is its employee,
however, Manulife clearly failed to afford Tongko said notices. Thus, on this ground too, Manulife is
guilty of illegal dismissal. In Quebec, Sr., we also stated:
Furthermore, not only does our legal system dictate that the reasons for
dismissing a worker must be pertinently substantiated, it also mandates that the
manner of dismissal must be properly done, otherwise, the termination itself is gravely
defective and may be declared unlawful.[30]

For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP
30,000 as indemnity in the form of nominal damages.[31]
Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko
made by the NLRC by claiming that Songco v. National Labor Relations Commission[32] is inapplicable to
the instant case, considering that Songco was dismissed on the ground of retrenchment.

An examination of Songco reveals that it may be applied to the present case. In that case, Jose
Songco was a salesman of F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of
retrenchment due to financial losses. The issue raised to the Court, however, was whether commissions
are considered as part of wages in order to determine separation pay. Thus, the fact that Songco was
dismissed due to retrenchment does not hamper the application thereof to the instant case. What is
pivotal is that we ruled in Songco that commissions are part of wages for the determination of
separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.

In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally
dismissed employee shall be entitled to backwages and separation pay, if reinstatement is no longer
viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs,
namely: backwages and reinstatement. These are separate and distinct from each other.
However, separation pay is granted where reinstatement is no longer feasible because
of strained relations between the employee and the employer. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable and backwages.[33]

Taking into consideration the cases of Songco and Triad, we find correct the computation of the
NLRC that the monthly gross wage of Tongko in 2001 was PhP 518,144.76. For having been illegally
dismissed, Tongko is entitled to reinstatement with full backwages under Art. 279 of the Labor
Code. Due to the strained relationship between Manulife and Tongko, reinstatement, however, is no
longer advisable. Thus, Tongko will be entitled to backwages from January 2, 2002 (date of dismissal) up
to the finality of this decision. Moreover, Manulife will pay Tongko separation pay of one (1) month
salary for every year of service that is from 1977 to 2001 amounting to PhP 12,435,474.24, considering
that reinstatement is not feasible.Tongko shall also be entitled to an award of attorneys fees in the
amount of ten percent (10%) of the aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA
in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the
NLRC is REINSTATED with the following modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent
from January 2, 2002 up to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001
amounting to PhP 12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements;
and
(4) Attorneys fees equivalent to ten percent (10%) of the aforementioned backwages and
separation pay.
Costs against respondent Manulife.
SO ORDERED.

Serrano v. NLRC, G.R. No. 117040, January 27, 2000

EN BANC
[G.R. No. 117040. January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ISETANN
DEPARTMENT STORE, respondents.
DECISION
MENDOZA, J.:
This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the
National Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and
dismissed petitioner Ruben Serranos complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:
Petitioner was hired by private respondent Isetann Department Store as a security checker to
apprehend shoplifters and prevent pilferage of merchandise.[1] Initially hired on October 4, 1984 on
contractual basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he became
head of the Security Checkers Section of private respondent.[2]
Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire
security section and engage the services of an independent security agency. For this reason, it wrote
petitioner the following memorandum:[3]
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
......In view of the retrenchment program of the company, we hereby reiterate our
verbal notice to you of your termination as Security Section Head effective October 11,
1991.
......Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal
dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and
overtime pay.[4]
The parties were required to submit their position papers, on the basis of which the Labor Arbiter
defined the issues as follows:[5]
Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of

wages, nonpayment of salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding
petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it
had retrenched its security section to prevent or minimize losses to its business; that private respondent
failed to accord due process to petitioner; that private respondent failed to use reasonable standards in
selecting employees whose employment would be terminated; that private respondent had not shown
that petitioner and other employees in the security section were so inefficient so as to justify their
replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to
monitor and prevent shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioners dismissal, private respondent employed a safety and
security supervisor with duties and functions similar to those of petitioner.
Accordingly, the Labor Arbiter ordered:[6]
WHEREFORE, above premises considered, judgment is hereby decreed:
(a)......Finding the dismissal of the complainant to be illegal and
concomitantly, Respondent is ordered to pay complainant full
backwages without qualification or deduction in the amount
of P74,740.00from the time of his dismissal until reinstatement
(computed till promulgation only) based on his monthly salary
of P4,040.00/month at the time of his termination but limited to (3)
three years;
(b)......Ordering the Respondent to immediately reinstate the
complainant to his former position as security section head or to a
reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order is
immediately executory even pending appeal;
(c)......Ordering the Respondent to pay complainant unpaid wages in the
amount of P2,020.73 and proportionate 13th month pay in the amount
of P3,198.30;
(d)......Ordering the Respondent to pay complainant the amount
of P7,995.91, representing 10% attorneys fees based on the total
judgment award of P79,959.12.
All other claims of the complainant whether monetary or otherwise is
hereby dismissed for lack of merit.
SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the
decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month
pay for every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion
for reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondents security section and the hiring of an
independent security agency constituted an exercise by private respondent of "[a] legitimate business
decision whose wisdom we do not intend to inquire into and for which we cannot substitute our
judgment"; that the distinction made by the Labor Arbiter between "retrenchment" and the
employment of "cost-saving devices" under Art. 283 of the Labor Code was insignificant because the
company official who wrote the dismissal letter apparently used the term "retrenchment" in its "plain
and ordinary sense: to layoff or remove from ones job, regardless of the reason therefor"; that the rule
of "reasonable criteria" in the selection of the employees to be retrenched did not apply because all
positions in the security section had been abolished; and that the appointment of a safety and security
supervisor referred to by petitioner to prove bad faith on private respondents part was of no moment
because the position had long been in existence and was separate from petitioners position as head of
the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT
TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF
THE EMPLOYEES CLASSED UNDER THE LATTER?[7]
Petitioner contends that abolition of private respondents Security Checkers Section and the
employment of an independent security agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioners contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operations of
the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least one (1) month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closure or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to at least
one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.

In De Ocampo v. National Labor Relations Commission,[8] this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a company
rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the companys cost-saving
program, the services rendered by the mechanics became redundant and superfluous,
and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the
management abused its discretion or acted in a malicious or arbitrary manner, the court
will not interfere with the exercise of such prerogative.[9]
In Asian Alcohol Corporation v. National Labor Relations Commission,[10] the Court likewise upheld the
termination of employment of water pump tenders and their replacement by independent contractors.
It ruled that an employers good faith in implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent contractor to replace the services of the
terminated employees to promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. To it belongs the ultimate determination of whether services should be performed by its
personnel or contracted to outside agencies . . . [While there] should be mutual consultation, eventually
deference is to be paid to what management decides."[11]Consequently, absent proof that management
acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer.[12]
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section,
private respondents real purpose was to avoid payment to the security checkers of the wage increases
provided in the collective bargaining agreement approved in 1990.[13] Such an assertion is not a
sufficient basis for concluding that the termination of petitioners employment was not a bona
fide decision of management to obtain reasonable return from its investment, which is a right
guaranteed to employers under the Constitution.[14] Indeed, that the phase-out of the security section
constituted a "legitimate business decision" is a factual finding of an administrative agency which must
be accorded respect and even finality by this Court since nothing can be found in the record which fairly
detracts from such finding.[15]
Accordingly, we hold that the termination of petitioners services was for an authorized
cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given
separation pay at the rate of one month pay for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for any of the authorized
causes the employer must serve "a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof." In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before the termination of his employment, and the
question is the appropriate sanction for the violation of petitioners right.

To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC,[16] workers in a
garment factory were temporarily laid off due to the cancellation of orders and a garment embargo. The
Labor Arbiter found that the workers had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand, found that this was a case of
retrenchment due to business losses and ordered the payment of separation pay without backwages.
This Court sustained the NLRCs finding. However, as the company did not comply with the 30-day
written notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the
workersP2,000.00 each as indemnity.
The decision followed the ruling in several cases involving dismissals which, although based on any of
the just causes under Art. 282,[17] were effected without notice and hearing to the employee as required
by the implementing rules.[18] As this Court said: "It is now settled that where the dismissal of one
employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to
due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of, or for failure to observe, due process."[19]
The rule reversed a long standing policy theretofore followed that even though the dismissal is based on
a just cause or the termination of employment is for an authorized cause, the dismissal or termination is
illegal if effected without notice to the employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.[20] In announcing the change, this Court said:[21]
The Court holds that the policy of ordering the reinstatement to the service of an
employee without loss of seniority and the payment of his wages during the period of
his separation until his actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded due process, although
his dismissal was found to be for just and authorized cause in an appropriate proceeding
in the Ministry of Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the services of an
employee who has been shown to be guilty of the charges that warranted his dismissal
from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
....
However, the petitioner must nevertheless be held to account for failure to extend to
private respondent his right to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee must be for just or authorized
cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice
and conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.
The
fines
imposed
for
violations
of
the
notice
from P1,000.00[22] to P2,000.00[23] to P5,000.00[24] to P10,000.00.[25]

requirement

have

varied

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice
requirement in light of our experience during the last decade or so with the Wenphil doctrine. The
number of cases involving dismissals without the requisite notice to the employee, although effected for
just or authorized causes, suggests that the imposition of fine for violation of the notice requirement has
not been effective in deterring violations of the notice requirement. Justice Panganiban finds the
monetary sanctions "too insignificant, too niggardly, and sometimes even too late." On the other hand,
Justice Puno says there has in effect been fostered a policy of "dismiss now, pay later" which moneyed
employers find more convenient to comply with than the requirement to serve a 30-day written notice
(in the case of termination of employment for an authorized cause under Arts. 283-284) or to give notice
and hearing (in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even
though there are just or authorized causes for such dismissal or layoff. Consequently, in their view, the
employee concerned should be reinstated and paid backwages.
Validity of Petitioners Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the
sanction of fine for an employers disregard of the notice requirement. We do not agree, however, that
disregard of this requirement by an employer renders the dismissal or termination of employment null
and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such rule was
abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who
is guilty, for example, of an attempt on the life of the employer or the latters family, or when the
employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employees right to notice before he is dismissed or
laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes
enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts.
283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring employer violations of the
notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the
employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a
labor-saving device, but the employer did not give him and the DOLE a 30-day written notice of
termination in advance, then the termination of his employment should be considered ineffectual and
he should be paid backwages. However, the termination of his employment should not be considered
void but he should simply be paid separation pay as provided in Art. 283 in addition to backwages.

Justice Puno argues that an employers failure to comply with the notice requirement constitutes a
denial of the employees right to due process. Prescinding from this premise, he quotes the statement of
Chief Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco[26] that "acts of Congress, as well as
of the Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering
from the same flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an employee without notice and hearing,
even if for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284,
is a nullity. Hence, even if just or authorized causes exist, the employee should be reinstated with full
back pay. On the other hand, Justice Panganiban quotes from the statement in People v. Bocar[27] that
"[w]here the denial of the fundamental right of due process is apparent, a decision rendered in
disregard of that right is void for lack of jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by
the State, which is not the case here. There are three reasons why, on the other hand, violation by the
employer of the notice requirement cannot be considered a denial of due process resulting in the nullity
of the employees dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the Labor
Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life,
liberty, or property without due process of law. . . ." The reason is simple: Only the State has authority to
take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure
that the exercise of this power is consistent with what are considered civilized methods.
The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not
to afford him an opportunity to be heard on any charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to
determine whether economic causes do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not
to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial
stage. Then that is the time we speak of notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement before he dismisses an employee does
not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any
decision taken by the employer shall be without prejudice to the right of the worker to contest the
validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which
gave either party to the employer-employee relationship the right to terminate their relationship by
giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month.[28] This provision was repealed by Art. 2270

of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise
known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.[29]
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of
which was to give the employer the opportunity to find a replacement or substitute, and the employee
the equal opportunity to look for another job or source of employment. Where the termination of
employment was for a just cause, no notice was required to be given to the employee.[30] It was only on
September 4, 1981 that notice was required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No.
6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee.
Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause
and without prior notice to his employer, his act should be void instead of simply making him liable for
damages.
The third reason why the notice requirement under Art. 283 can not be considered a requirement of the
Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of
his own cause. This is also the case in termination of employment for a just cause under Art. 282
(i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer,
gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of
crime against the employer or the latters immediate family or duly authorized representatives, or other
analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won
by employees before the grievance committees manned by impartial judges of the company." The
grievance machinery is, however, different because it is established by agreement of the employer and
the employees and composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. v. Court of Appeals,[31] which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement between him and [his
employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation
of his property without due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery. Accordingly in Montemayor v.
Araneta University Foundation,[32] although a professor was dismissed without a hearing by his
university, his dismissal for having made homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the
Justinian precept, embodied in the Civil Code,[33] to act with justice, give everyone his due, and observe
honesty and good faith toward ones fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this precept is to make
him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee should have received were it not for the

termination of his employment without prior notice. If warranted, nominal and moral damages may also
be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a
procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of
the Civil Code[34] in rescinding a contract for the sale of immovable property. Under these provisions,
while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases
involving the sale of immovable property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand.[35] Consequently, a notice of rescission given in the letter of
an attorney has no legal effect, and the vendee can make payment even after the due date since no
valid notice of rescission has been given.[36]
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. This is clear from Art. 279 which provides:
Security of Tenure. - In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement.[37]
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause the employee concerned
should be reinstated and paid backwages would be to amend Art. 279 by adding another ground for
considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he is leaving the service of the latter, at
least one month in advance, his failure to comply with the legal requirement does not result in making
his resignation void but only in making him liable for damages.[38] This disparity in legal treatment, which
would result from the adoption of the theory of the minority cannot simply be explained by invoking
President Ramon Magsaysays motto that "he who has less in life should have more in law." That would
be a misapplication of this noble phrase originally from Professor Thomas Reed Powell of the Harvard
Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,[39] in support of his view that an illegal dismissal
results not only from want of legal cause but also from the failure to observe "due process." The PepsiCola case actually involved a dismissal for an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial of due
process, but because the dismissal was without cause. The statement that the failure of management to
comply with the notice requirement "taints the dismissal with illegality" was merely a dictum thrown in
as additional grounds for holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the
payment of backwages for the period when the employee is considered not to have been effectively
dismissed or his employment terminated. The sanction is not the payment alone of nominal damages as
Justice Vitug contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal
The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not
giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even
of an attempt against the life of the employer, an employer will be forced to keep in his employ such
guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force."[40] But so does it declare
that it "recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investment."[41] The Constitution bids the State to "afford full protection
to labor."[42] But it is equally true that "the law, in protecting the rights of the laborer, authorizes neither
oppression nor self-destruction of the employer."[43] And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination
of employment was due to an authorized cause, then the employee concerned should not be ordered
reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must
be granted separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one month for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six months shall be considered one (1) whole year.
If the employees separation is without cause, instead of being given separation pay, he should be
reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full
backwages if he has been laid off without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee
was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that
article, he should not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the termination of his employment
without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is
MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation
pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate
13th month pay and, in addition, full backwages from the time his employment was terminated on
October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary
awards to petitioner.
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, and De Leon, Jr.,
JJ., concur.
Bellosillo, J., see separate opinion.
Puno, J., see dissenting opinion.
Vitug, J., see separate opinion.
Panganiban, J., see separate opinion.
Ynares-Santiago, J., joins the dissenting opinion of J. Puno.

Agabon v. NLRC, G.R. No. 158693, November 17, 2004

EN BANC

JENNY M. AGABON and G.R. No. 158693

VIRGILIO C. AGABON,
Petitioners, Present:
Davide, Jr., C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,

- versus - Carpio,
Austria-Martinez,
Corona,
Carpio-Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario, and
Garcia, JJ.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC. Promulgated:
and VICENTE ANGELES,
Respondents. November 17, 2004
x ---------------------------------------------------------------------------------------- x
DECISION

YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision[1] of the Court of Appeals dated January 23, 2003,
in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRCNCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as
gypsum board and cornice installers on January 2, 1992[2] until February 23, 1999 when they were
dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims[3] and on
December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered
private respondent to pay the monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the complainants illegal.
Accordingly, respondent is hereby ordered to pay them their backwages up to
November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for
every year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service
incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for
holidays and rest days and Virgilio Agabons 13th month pay differential amounting to

TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of
ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100
(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND
EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as
per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit,
NCR.
SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned
their work, and were not entitled to backwages and separation pay. The other money claims awarded by
the Labor Arbiter were also denied for lack of evidence.[5]
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court
of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the
decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioners money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as
their service incentive leave pay for said years, and to pay the balance of petitioner
Virgilio Agabons 13th month pay for 1998 in the amount of P2,150.00.
SO ORDERED.[6]
Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.[7]
Petitioners assert that they were dismissed because the private respondent refused to give
them assignments unless they agreed to work on a pakyaw basis when they reported for duty on
February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as
Social Security System (SSS) members. Petitioners also claim that private respondent did not comply
with the twin requirements of notice and hearing.[8]
Private respondent, on the other hand, maintained that petitioners were not dismissed but had
abandoned their work.[9] In fact, private respondent sent two letters to the last known addresses of the
petitioners advising them to report for work. Private respondents manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific
Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not
report for work because they had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted,
petitioners stopped reporting for work and filed the illegal dismissal case.[10]

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so when
such findings were affirmed by the Court of Appeals.[11] However, if the factual findings of the NLRC and
the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and
examine for itself the questioned findings.[12]
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners
dismissal was for a just cause. They had abandoned their employment and were already working for
another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins
the employer to give the employee the opportunity to be heard and to defend himself.[13] Article 282 of
the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latters representative
in connection with the employees work; (b) gross and habitual neglect by the employee of his duties; (c)
fraud or willful breach by the employee of the trust reposed in him by his employer or his duly
authorized representative; (d) commission of a crime or offense by the employee against the person of
his employer or any immediate member of his family or his duly authorized representative; and (e) other
causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.[14] It
is a form of neglect of duty, hence, a just cause for termination of employment by the employer.[15] For a
valid finding of abandonment, these two factors should be present: (1) the failure to report for work or
absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to discontinue
the employment must be shown by clear proof that it was deliberate and unjustified.[16]
In February 1999, petitioners were frequently absent having subcontracted for an installation work for
another company. Subcontracting for another company clearly showed the intention to sever the
employer-employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in determining the penalty that
should be meted out to him.[17]
In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately absented from work
without leave or permission from his employer, for the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should apply that rule with more reason here where
petitioners were absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On
the other hand, the law also recognizes the right of the employer to expect from its workers not only
good performance, adequate work and diligence, but also good conduct[19] and loyalty. The employer

may not be compelled to continue to employ such persons whose continuance in the service will
patently be inimical to his interests.[20]
After establishing that the terminations were for a just and valid cause, we now determine if the
procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of
the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of
employment, the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282
of the Code:
(a) A written notice served on the employee specifying the ground or grounds
for termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to the
charge, present his evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstances, grounds have been established to justify his
termination.
In case of termination, the foregoing notices shall be served on the employees last
known address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which allow the
employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal
was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must
give the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of
the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284,
the employer must give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized cause and there was no
due process; and (4) the dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the
time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured,
it should not invalidate the dismissal. However, the employer should be held liable for non-compliance
with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent,
however, did not follow the notice requirements and instead argued that sending notices to the last
known addresses would have been useless because they did not reside there anymore. Unfortunately
for the private respondent, this is not a valid excuse because the law mandates the twin notice
requirements to the employees last known address.[21] Thus, it should be held liable for non-compliance
with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to clarify the
various rulings on employment termination in the light of Serrano v. National Labor Relations
Commission.[22]
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,[23] we reversed this
long-standing rule and held that the dismissed employee, although not given any notice and hearing,
was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and
insubordination, a just ground for termination under Article 282. The employee had a violent temper
and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that
reinstating the employee and awarding backwages may encourage him to do even worse and will render
a mockery of the rules of discipline that employees are required to observe.[24] We further held that:
Under the circumstances, the dismissal of the private respondent for just cause should
be maintained. He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to
extend to private respondent his right to an investigation before causing his dismissal.

The rule is explicit as above discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal
notice and conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.[25]
The rule thus evolved: where the employer had a valid reason to dismiss an employee but did
not follow the due process requirement, the dismissal may be upheld but the employer will be penalized
to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held
that the violation by the employer of the notice requirement in termination for just or authorized causes
was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual
and the employer must pay full backwages from the time of termination until it is judicially declared that
the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant
number of cases involving dismissals without requisite notices. We concluded that the imposition of
penalty by way of damages for violation of the notice requirement was not serving as a deterrent.
Hence, we now required payment of full backwages from the time of dismissal until the time the Court
finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to dismiss now and pay later by imposing full
backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279
of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or authorized
causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified
only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent
has prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be
deemed fundamental to a civilized society as conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and just.[26] It is a constitutional restraint on
the legislative as well as on the executive and judicial powers of the government provided by the Bill of
Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and
procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in
the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines
in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.[27] Breaches of these due
process requirements violate the Labor Code. Therefore statutory due process should be differentiated
from failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him of his
rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor
Code and Implementing Rules protects employees from being unjustly terminated without just cause
after notice and hearing.
In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for a just and valid
cause but the employee was not accorded due process. The dismissal was upheld by the Court but the
employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the omission committed by the employer.
In Nath v. National Labor Relations Commission,[29] it was ruled that even if the employee was
not given due process, the failure did not operate to eradicate the just causes for dismissal. The
dismissal being for just cause, albeit without due process, did not entitle the employee to reinstatement,
backwages, damages and attorneys fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor
Relations Commission,[30] which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly
observed by an employer, it would not be right to order either the reinstatement of the
dismissed employee or the payment of backwages to him. In failing, however, to comply
with the procedure prescribed by law in terminating the services of the employee, the
employer must be deemed to have opted or, in any case, should be made liable, for the
payment of separation pay. It might be pointed out that the notice to be given and the
hearing to be conducted generally constitute the two-part due process requirement of
law to be accorded to the employee by the employer. Nevertheless, peculiar
circumstances might obtain in certain situations where to undertake the above steps
would be no more than a useless formality and where, accordingly, it would not be
imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay,
nominal damages to the employee. x x x.[31]

After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the twin
requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer.
Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be
able to achieve a fair result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not
complying with statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of company policy are
rewarded by invoking due process. This also creates absurd situations where there is a just or authorized
cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case
where the employee is caught stealing or threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious business losses demand that operations
be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also
discourage investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of labor does not prevent us from
sustaining the employer when it is in the right, as in this case.[32] Certainly, an employer should not be
compelled to pay employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The
law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer.[33]
It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would undoubtedly result
in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the
Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to
correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on
the recognition of the necessity of interdependence among diverse units of a society and of the
protection that should be equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective of the state of promoting
the health, comfort, and quiet of all persons, and of bringing about the greatest good to the greatest
number.[34]
This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and
related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing
times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case:

We have repeatedly stressed that social justice or any justice for that matter is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true
that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to
whom the Constitution fittingly extends its sympathy and compassion. But never is it
justified to give preference to the poor simply because they are poor, or reject the rich
simply because they are rich, for justice must always be served for the poor and the rich
alike, according to the mandate of the law.[35]
Justice in every case should only be for the deserving party. It should not be presumed that every case of
illegal dismissal would automatically be decided in favor of labor, as management has rights that should
be fully respected and enforced by this Court. As interdependent and indispensable partners in nationbuilding, labor and management need each other to foster productivity and economic growth; hence,
the need to weigh and balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor
Relations Commission.[36] The indemnity to be imposed should be stiffer to discourage the abhorrent
practice of dismiss now, pay later, which we sought to deter in the Serrano ruling. The sanction should
be in the nature of indemnification or penalty and should depend on the facts of each case, taking into
special consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.[37]
As enunciated by this Court in Viernes v. National Labor Relations Commissions,[38] an employer is liable
to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in
effecting such dismissal, the employer fails to comply with the requirements of due process. The Court,
after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to
the employees one month salary. This indemnity is intended not to penalize the employer but to
vindicate or recognize the employees right to statutory due process which was violated by the
employer.[39]
The violation of the petitioners right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed to
the sound discretion of the court, taking into account the relevant circumstances.[40] Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this
form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners
holiday pay, service incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners money claims. Private respondent is
liable for petitioners holiday pay, service incentive leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the employee must
allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather
than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel
files, payrolls, records, remittances and other similar documents which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid are not in the
possession of the worker but in the custody and absolute control of the employer.[41]
In the case at bar, if private respondent indeed paid petitioners holiday pay and service incentive leave
pay, it could have easily presented documentary proofs of such monetary benefits to disprove the
claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented
cash vouchers showing payments of the benefit in the years disputed.[42]Allegations by private
respondent that it does not operate during holidays and that it allows its employees 10 days leave with
pay, other than being self-serving, do not constitute proof of payment. Consequently, it failed to
discharge the onus probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabons 13 th month
pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to
grant an additional income in the form of the 13th month pay to employees not already receiving the
same[43] so as to further protect the level of real wages from the ravages of world-wide
inflation.[44] Clearly, as additional income, the 13th month pay is included in the definition of wage under
Article 97(f) of the Labor Code, to wit:
(f) Wage paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money whether fixed or ascertained
on a time, task, piece , or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services rendered or to be rendered
and includes the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the
employee
from which an employer is prohibited under Article 113[45] of the same Code from making any
deductions without the employees knowledge and consent. In the instant case, private respondent
failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio
Agabons 13th month pay was authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims
against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter
ordering the private respondent to pay each of the petitioners holiday pay for four regular holidays from
1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount
of P3,255.00 and the balance of Virgilio Agabons thirteenth month pay for 1998 in the amount of
P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals
dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners Jenny and Virgilio Agabon
abandoned their work, and ordering private respondent to pay each of the petitioners holiday pay for
four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the
same period in the amount of P3,255.00 and the balance of Virgilio Agabons thirteenth month pay for
1998 in the amount of P2,150.00 isAFFIRMED with the MODIFICATION that private respondent Riviera
Home Improvements, Inc. is further ORDERED to pay each of the petitioners the amount of P30,000.00
as nominal damages for non-compliance with statutory due process.
No costs.
SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

De Jesus v. Hon. Aquino, G.R. No. 164662, February 18, 2013

G.R. No. 164662

February 18, 2013

MARIA LOURDES C. DE JESUS, Petitioner,

vs.
HON. RAUL T. AQUINO, PRESIDING COMMISSIONER, NATIONAL LABOR RELATIONS COMMISSION,
SECOND DIVISION, QUEZON CITY, and SUPERSONIC SERVICES, INC., Respondents.
x-----------------------x
G.R. No. 165787
SUPERSONIC SERVICES, INC., Petitioner
vs.
MARIA LOURDES C. DE JESUS, Respondent.
DECISION
BERSAMIN, J.:
The dismissal of an employee for a just or authorized cause is valid despite the employer's nonobservance of the due process of law the Labor Code has guaranteed to the employee. The dismissal is
effective against the employee subject to the payment by the employer of an indemnity.

Under review on certiorariis the July 23, 2004 Decision promulgated in C.A.-G.R. SP No. 81798
entitled Maria Lourdes C. De Jesus v. Hon. Raul T. Aquino, Presiding Commissioner, NLRC, Second
Division, Quezon City, and Supersonic Services, Inc.,1whereby the Court of Appeals (CA) affirmed the
validity of the dismissal from her employment of Maria Lourdes C. De Jesus(petitionerin G.R. No.
164622), but directedher employer, Supersonic Services, Inc. (Supersonic), to pay her full backwages
from the time her employment was terminated until the finality of the decision because of the failure of
Supersonic to comply with the two-written notice rule, citing the rulinginSerrano v. National Labor
Relations Commission.2
Antecedents
The antecedent facts, as summarized by the CA, follow:
On February 20, 2002, petitioner Ma. Lourdes De Jesus (De Jesus for brevity) filed with the Labor Arbiter
a complaint for illegal dismissal against private respondents Supersonic Services Inc., (Supersonic for
brevity), Pakistan Airlines, Gil Puyat, Jr. and Divina Abad Santos praying for the payment of separation
pay, full backwages, moral and exemplary damages, etc.
De Jesus alleged that: she was employed by Supersonic since February 1976 until her illegal dismissal of
March 15, 2001; from 1976 to 1992, she held the position of eservation staff, and from 1992 until her
illegal dismissal on March 15, 2001, she held the position of Sales Promotion Officer where she solicited
clients for Supersonic and sold plane tickets to various travel agencies on credit; on March 12, 2001, she
had an emergency hysterectomy operation preceded by continuous bleeding; she stayed at the Makati
Medical Center for three (3) days and applied for a sixty-(60) day leave in the meantime; on June 1,
2001, she went to Supersonic and found the drawers of her desk opened and her personal belongings
packed, without her knowledge and consent; while there, Divina Abad Santos (Santos for brevity), the
companys general manager, asked her to sign a promissory note and directed her secretary, Cora
Malubay (Malubay for brevity) not to allow her to leave unless she execute a promissory note; she was
later forced to execute a promissory note which she merely copied from the draft prepared by Santos
and Malubay; she was also forced to indorse to Supersonic her SSS check in the amount of P25,000.00
which represents her benefits from the hysterectomy operation; there was no notice and hearing nor
any opportunity given her to explain her side prior to the termination of her employment; Supersonic
even filed a case for Estafa against her for her alleged failure to remit collections despite the fact that
she had completely remitted all her collections; and the termination was done in bad faith and in
violation of due process.
Supersonic countered that: as Sales Promotion Officer, De Jesus was fully authorized to solicit clients
and receive payments for and in its behalf, and as such, she occupied a highly confidential and financially
sensitive position in the company; De Jesus was able to solicit several ticket purchases for Pakistan
International Airlines (PIA) routed from Manila to various destinations abroad and received all payments
for the PIA tickets in its behalf; for the period starting May 30, 2000 until September 28, 2000, De Jesus
issued PIA tickets to Monaliza Placement Agency, a client under her special solicitation and account, in
the amount of U.S.$15,085.00; on January 24, 2001, the companys general manager sent a
memorandum to De Jesus informing her of the official endorsement of collectibles from clients under
her account; in March 2001, another memorandum was issued to De Jesus reminding her to collect
payments of accounts guaranteed by her and which had been past due since the year 2000; based on
the company records, an outstanding balance of U.S.$36,168.39 accumulated under the account of De
Jesus; after verifications with its clients, it discovered that the amount of U.S.$36, 168.39 were already

paid to De Jesus but this was not turned over and duly accounted for by her; hence, another
memorandum was issued to De Jesus directing her to explain in writing why she should not be dismissed
for cause for failure to account for the total amount of U.S.$36, 168.39; De Jesus was informed that her
failure to explain in writing shall be construed that she misappropriated said amount for her own use
and benefit to the damage of the company; De Jesus was likewise verbally notified of the companys
intention to dismiss her for cause; after due investigation and confrontation, De Jesus admitted that she
received the U.S.$36,168.39 from their clients and even executed a promissory note in her own
handwriting acknowledging her obligation; she was fully aware of her dismissal and even obligated
herself to offset her obligation with any amount she would receive from her retirement; when De Jesus
failed to comply with her promise to settle her obligation, a demand letter was sent to her; because of
her persistent failure to settle the unremitted collections, it was constrained to suspend her as a
precautionary measure and to protect its interests; despite demands, De Jesus failed to fulfill her
promise, hence, a criminal case for estafa was filed against her; and in retaliation to the criminal case
filed against her, she filed this illegal dismissal case.3
After due proceedings, on October 30, 2002, the Labor Arbiterruled against De Jesus,4 declaring her
dismissal to be for just cause and finding that she had been accorded due process of law.
Aggrieved, De Jesusappealed to the National Labor Relations Commission (NLRC), insisting that she had
not been afforded the opportunity to explain her side.
On July 31, 2003, however, the NLRC rendered its Resolution,5 affirming the Labor Arbiters Decision and
dismissing De Jesus appeal for its lack of merit, stating:
Records show that pursuant to a Memorandum dated May 12, 2001, complainant was required to
explain in writing why she should not be dismissed from employment for her failure to account for the
cash collections in her custody (Records, p. 37). In a letter dated June 1, 2001, complainant
acknowledged her failure to effect a turn-over of the amount of US$36,168.39 to the respondent
(Records, p. 40). More than this, she offered no explanation for her failure to immediately account for
her collections. Further, her allegation of duress may not be accorded credence, there being no
evidence as to the circumstances under which her consent was allegedly vitiated. Having been given the
opportunity to explain her side, complainant may not successfully claim that she was denied due
process. Further, her admission and other related evidence, particularly the finding of a prima facie case
for estafa against her, and corroborative statements from respondents client, sufficiently controvert
complainants assertion that no just cause existed for the dismissal.
WHEREFORE, premises considered, the decision under review is AFFIRMED, and complainants appeal,
DISMISSED, for lack of merit.
SO ORDERED.
The NLRC denied the Motion for Reconsideration filed by De Jesus on October 30, 2003.6
De Jesusbrought a petition for certiorari to the CA, charging the NLRC with committing grave abuse of
discretion amounting to lack or excess of jurisdiction in finding that she had not been denied due
process; and in finding that her dismissal had been for just cause.

On July 23, 2004, the CA promulgated its assailed decision,7 relevantly stating as follows:
The petition is partly meritorious.
In termination of employment based on just cause , it is not enough that the employee is guilty of
misfeasance towards his employer, or that his continuance in service is patently inimical to the
employers interest. The law requires the employer to furnish the employee concerned with two written
notices one, specifying the ground or grounds for termination and giving said employee reasonable
opportunity within which to explain his side, and another, indicating that upon due consideration of all
the circumstances, rounds have been established to justify his termination. In addition to this, a hearing
or conference is also required, whereby the employee may present evidence to rebut the accusations
against him.
There appears to be no dispute upon the fact that De Jesus failed to remit and account for some of her
collections. This she admitted and explained in her letters dated April 5, 2001 and May 15, 2001 to
Santos, the companys general manager. Without totally disregarding her allegations of duress in
executing the promissory note, the facts disclose therein also coincide with the fact that De Jesus was
somehow remiss in her duties. Considering that she occupied a confidential and sensitive position in the
company, the circumstances presented fairly justified her termination from employment based on just
cause. De Jesus failure to fully account her collections is sufficient justification for the company to lose
its trust and confidence in her. Loss of trust and confidence as a ground for dismissing an employee does
not require proof beyond reasonable doubt. It is sufficient if there is "some basis" for such loss of
confidence, or if the employer has reasonable grounds to believe that the employee concerned is
responsible for the misconduct, as to be unworthy of the trust and confidence demanded by his
position.
Nonetheless, while this Court is inclined to rule that De Jesus dismissal was for just cause, the manner
by which the same was effected does not comply with the procedure outlined under the Labor Code and
as enunciated in the landmark case of Serrano vs. NLRC.
The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus
prior to her dismissal. The various memoranda given her were not the same notices required by law, as
they were mere internal correspondence intended to remind De Jesus of her outstanding
accountabilities to the company. Assuming for the sake of argument that the memoranda furnished to
De Jesus may have satisfied the minimum requirements of due process, still, the same did not satisfy the
notice requirement under the Labor Code because the intention to sever the employees services must
be made clear in the notice. Such was not apparent from the memoranda. As the Supreme Court held
in Serrano, the violation of the notice requirement is not strictly a denial of due process. This is because
such notice is precisely intended to enable the employee not only to prepare himself for the legal battle
to protect his tenure of employment, but also to find other means of employment and ease the impact
of the loss of his job and, necessarily, his income.
Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore
be struck as ineffectual.
WHEREFORE, premises considered, the Resolutions dated July 31, 2003 and October 30, 2003 of the
NLRC, Second Division in NLRC NCR 30-02-01058-02 (CA NO. 033714-02) are herebyMODIFIED, in that

while the dismissal is hereby held to be valid, the same must declaredineffectual. As a consequence
thereof, Supersonic is hereby required to pay petitioner Maria Lourdes De Jesus full backwages from the
time her employment was terminated up to the finality of this decision.
SO ORDERED.
De Jesusappealed by petition for review on certiorari to the Court (G.R. No. 164662), while Supersonic
first sought the reconsideration of the Decision in the CA.Upon the denial of its motion for
reconsideration on October 21, 2004, Supersonic likewise appealed to the Court by petition for review
on certiorari(G.R. No. 165787).Theappeals were consolidated on October 5, 2005.8
In G.R. No. 164662, De Jesus avers that:
I. The Honorable Court of Appeals erred in finding that respondent Supersonic is liable only on
the backwages and not for the damages prayed for.
II. The Honorable Court of Appeals erred in finding that the dismissal was valid and at the same
time, declaring it ineffectual.9
In G.R. No. 165787,Supersonic ascribes the following errors to the CA, to wit:
I. Respondent Court of Appeals committed serious errors which are not in accordance with law
and applicable decisions of the Honorable Supreme Court when it concluded that the two-notice
requirement has not been complied with when respondent De Jesus was terminated from
service.
II. Respondent Court of Appeals committed serious errors by concluding that the Serrano
Doctrine applies squarely to the facts and legal issues of the present case which are contrary to
the law and jurisprudence.
III. Serrano Doctrine has already been abandoned in the case of Agabon v. NLRC, which is
prevailing and landmark doctrine applicable in the resolution of the present case.
IV. Respondent Court of Appeals committed serious errors by disregarding the law and
jurisprudence when it awarded damages to private respondent which is excessive and unduly
penalized petitioner SSI.10
Based on the foregoing, thedecisive issues to be passed upon are: (1) Whether or not Supersonic was
justified in terminating De Jesus employment; (2) Whether or not Supersonic complied with the twowritten notice rule; and (3) Whether or not De Jesus was entitled to full backwages and damages.
Ruling
We partially grant the petition for review of Supersonic in G.R. No. 165787.
Anent the first issue, Supersonic substantially proved that De Jesus had failed to remit and had
misappropriated the amounts she had collected in behalf of Supersonic. In that regard, the factual

findings of the Labor Arbiter and NLRC on the presence of the just cause for terminating her
employment, being already affirmed by the CA, are binding if not conclusive upon this Court. There
being no cogent reason to disturb such findings, the dismissal of De Jesus was valid.
Article 282 of the Labor Code enumerates the causes by which the employer may validly terminate the
employment of the employee, viz:
Article 282.Termination by employer. - An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
The CA observed that De Jesus had not disputed her failure to remit and account for some of her
collections, for, in fact, she herself had expressly admitted her failure to do so through her letters dated
April 5, 2001 and May 15, 2001 sent to Supersonics general manager. Thereby, the CA concluded, she
defrauded her employer or willfully violated the trust reposed in her by Supersonic. In that regard, the
CA rightly observed that proof beyond reasonable doubt of her violation of the trust was not required,
for it was sufficient that the employer had "reasonable grounds to believe that the employee concerned
is responsible for the misconduct as to be unworthy of the trust and confidence demanded by [her]
position."11
Concerning the second issue, the NLRC and the CA differed from each other, with the CA concluding,
unlike the NLRC, that Supersonic did not comply with the two-written notice rule. In the exercise of its
equity jurisdiction, then, this Court should now re-evaluate and re-examine the relevant findings.12
A careful consideration of the records persuades us to affirm the decision of the CA holding that
Supersonic had not complied with the twowritten notice rule.
It ought to be without dispute that the betrayal of the trust the employer reposed in De Jesus was the
essence of the offense for which she was to be validly penalized with the supreme penalty of
dismissal.13 Nevertheless, she was still entitled to due processin order to effectivelysafeguard her
security of tenure. The law affording to her due process as an employee imposed on Supersonic as the
employer the obligation to send to her two written notices before finally dismissing her. This
requirement of two written notices is enunciated in Article 277of the Labor Code, as amended, which
relevantly states:

Article 277.Miscellaneous provisions.xxx

xxxx
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminateda written notice containing a statement of the causes for termination and
shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated
pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the
employer shall be without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The
burden of proving that the termination was for a valid or authorized cause shall rest on the employer.
The Secretary of the Department of Labor and Employment may suspend the effects of the termination
pending resolution of the dispute in the event of a prima facie finding by the appropriate official of the
Department of Labor and Employment before whom such dispute is pending that the termination may
cause a serious labor dispute or is in implementation of a mass lay-off.14
xxxx
and in Section 215 and Section7,16 Rule I, Book VI of the Implementing Rules of the Labor Code. The
firstwritten notice would inform her of the particular acts or omissions for which her dismissal was being
sought. The second written notice would notify her of the employers decision to dismiss her. But the
second written notice must not be made until after she was given a reasonable period after receiving
the first written notice within which to answer the charge, and after she was given the ample
opportunity to be heard and to defend herself with the assistance of her representative, if she so
desired.17 The requirement was mandatory.18
Did Supersonic observe due process before dismissing De Jesus?
Supersonic contends that it gave the two written notices to De Jesus in the form of the memoranda
dated March 26, 2001 and May 12, 2001, to wit:
Memorandum dated March 26, 2001
26 March 2001
MEMORANDUM
TO : MA LOURDES DE JESUS SALES PROMOTION OFFICER
FROM : DIVINA S. ABAD SANTOS
SUBJECT : PAST DUE ACCOUNTS

We have repeatedly reminded you to collect payment of accounts guaranteed by you and which have
been past due since last year. You have assured us that these will be settled by the end of February
2001.
Our books show, that as of today, March 26, 2001, the following accounts have outstanding balances:
Wafa

$6,585

Monaliza/Ragab

4,326.39

Salah

1,950

Jerico

1,300

Rafat

4,730

Mahmood/Alhirsh 3,205
Amina

2,000

MMML

1,653

RDRI

361

HMD

2,100

Amru

1,388

Iyad Ali

97

Ali

740

Maher

675

Sharikat

350

Imad

905

Rubies

2,678

Adel

1,125
$36,168.39

Please give us an updated report on your collection efforts and the status of each of the above accounts
to enable us to take necessary actions. This would be submitted on or before April 2, 2001
(SGD)
General Manager19

DIVINA

Memorandum dated May 12, 2001

12 May 2001

ABAD

SANTOS

MEMORANDUM
TO : MA. LOURDES DE JESUS SALES PROMOTION OFFICER
FROM : DIVINA S. ABAD SANTOS GENERAL MANAGER
SUBJECT : PAST DUE ACCOUNTS
You are asked to refer to my memorandum dated 26 March 2001. We were informed that the following
accounts have been paid to you but not accounted/turned over to the office:
NAME

AMOUNTS

Wafa

$6,585

Monaliza/Ragab

4,326.39

Salah

1,950

Jerico

1,300

Rafat

4,730

Mahmood/Alhirsh 3,205
Amina

2,000

MMML

1,653

RDRI

361

HMD

2,100

Amru

1,388

Iyad Ali

97

Ali

740

Maher

675

Sharikat

350

Imad

905

Rubies

2,678

Adel

1,125
$36,168.39

You are hereby directed to explain in writing within 72 hours from receipt of this memorandum, why
you should not be dismissed for cause for failure to account for above amounts.

By your failure to explain in writing the above accountabilities, within the set deadline, we shall assume
that you have misappropriated the same for your own use and benefit to the damage of the office.
(SGD.)DIVINA
General Manager20

S.

ABAD

SANTOS

Contrary to Supersonics contention, however, the aforequotedmemoranda did not satisfy the
requirement for the two written notices under the law. The March 26, 2001 memorandum did not
specify the grounds for which her dismissal would be sought, and for that reasonwas at best a mere
reminder to De Jesus to submit her report on the status of her accounts. The May 12, 2001
memorandumdid not provide the notice of dismissal under the law because itonly directed her to
explain why she should not be dismissed for cause. The latter memorandum was apparently only the
first written noticeunder the requirement.The insufficiency of the two memoranda as compliance with
the two-written notices requirement of due process was, indeed, indubitable enough to impelthe CA to
hold:
The evidence on record is bereft of any indicia that the two written notices were furnished to De Jesus
prior to her dismissal. The various memoranda given her were not the same notices required by law, as
they were mere internal correspondences intended to remind De Jesus of her outstanding
accountabilities to the company. Assuming for the sake of argument that the memoranda furnished to
De Jesus may have satisfied the minimum requirements of due process, still, the same did not satisfy the
notice requirement under the Labor Code because the intention to sever the employees services must
be made clear in the notice. Such was not apparent from the memoranda. As the Supreme Court held
in Serrano, the violation of the notice requirement is not strictly a denial of due process. This is because
such notice is precisely intended to enable the employee not only to prepare himself for the legal battle
to protect his tenure of employment, but also to find other means of employment and ease the impact
of the loss of his job and, necessarily, his income.
Conformably with the doctrine laid down in Serrano vs. NLRC, the dismissal of De Jesus should therefore
be struck (down) as ineffectual.21
On the third issue, Supersonicposits that the CA gravely erred in declaring the dismissal of De Jesus
ineffectual pursuant to the ruling inSerrano v. National Labor Relations Commission;andinsiststhat the
CA should have instead applied the ruling in Agabonv. National Labor Relations Commission,22 which
meanwhile abandonedSerrano.
InSerrano, the Court pronounced as follows:
x xx, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed
for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not
be reinstated. However, he must be paid backwages from the time his employment was terminated
until it is determined that the termination of employment is for a just cause because the failure to hear
him before he is dismissed renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is
MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation
pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate

13th month pay and, in addition, full backwages from the time his employment was terminated on
October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary
awards to petitioner.
SO ORDERED.23
The CA did not err. Relying on Serrano,the CA precisely ruled that the violation by Supersonic of the twowritten notice requirement renderedineffectual the dismissal of De Jesus for just cause under Article
282 of the Labor Code, and entitled her to be paid full backwages from the time of her dismissal until the
finality of its decision.The Court cannot ignore thatthe applicable case law when the CA promulgated its
decision on July 23, 2004, and when it denied Supersonics motion for reconsideration on October 21,
2004 was still Serrano. Considering that the Court determines in this appeal by petition for review
on certiorarionly whether or not the CA committed an error of law in promulgating its assailed decision
of July 23, 2004,the CA cannot be declared to have erred on the basis ofSerrano being meanwhile
abandoned through Agabonif all thatthe CA did was to fully apply the law and jurisprudence applicable
at the time of its rendition of the judgment.As a rule, a judicial interpretation becomes a part of the law
as of the date that the law was originally passed, subject only to the qualification that when a doctrine
of the Court is overruled and the Court adoptsa different view, and more so when there is a reversal
ofthe doctrine, the new doctrine should be applied prospectively and should not apply to parties who
relied on the old doctrine and acted in good faith.24 To hold otherwise would be to deprive the law of its
quality of fairness and justice, for, then, there is no recognition of what had transpired prior to such
adjudication.25
Although Agabon,being promulgatedonly on November 17, 2004, ought to be prospective, not
retroactive, in its operation because its language did not expressly state that it would also operate
retroactively,26 the Court has already deemed it to be the wise judicial course to let its abandonment
of Serranobe retroactive as its means of giving effect to its recognition of the unfairness of declaring
illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due
process.27 Under Agabon, the new doctrine is that the failure of the employer to observe the
requirements of due process in favor of the dismissed employee (that is, the two-written notices rule)
should not invalidate or render ineffectual the dismissal for just or authorized cause. The AgabonCourt
plainly saw the likelihood of Serrano producing unfair butfar-reaching consequences, such as, but not
limited to, encouraging frivolous suits where even the most notorious violators of company policies
would be rewarded by invoking due process; to having the constitutional policy of providing protection
to labor be used as a sword to oppress the employers; and to compelling the employers to continue
employing persons who were admittedly guilty of misfeasance or malfeasance and whose continued
employment would be patently inimical to the interest of employers.28
Even so, the Agabon Court still deplored the employer's violation of the employee's right to statutory
due process by directing the payment of indemnity in the form of nominal damages, the amount of
which would be addressed to the sound discretion of the labor tribunal upon taking into account the
relevant circumstances. Thus, the AgabonCourt designed such form of damages as a deterrent to
employers from committing in the future violations of the statutory due process rights of employees,
and, at the same time, as at the very least a vindication or recognition of the fundamental right granted
to the employees under the Labor Code and its implementing rules.29Accordingly, consistent with
precedent30 the amount of P50,000.00 as nominal damages is hereby fixed for the purpose of
indemnifying De Jesus for the violation of her right to due process.1wphi1

WHEREFORE, the Court DENIES the petition for review on certiorari in G.R. No. 164662 entitled Maria
Lourdes C. De Jesus v. Han. Raul T Aquino, Presiding Commissioner, NLRC, Second Division, Quezon City,
and Supersonic Services, Inc.; PARTIALLY GRANTS the petition for review on certiorari in G.R. No. 165787
entitled Supersonic Services, Inc. v. Maria Lourdes C. De Jesus and, accordingly, DECLARES the dismissal
of Maria Lourdes C. De Jesus for just or authorized cause as valid and effectual; and ORDERS Supersonic
Services, Inc. to pay to Maria Lourdes C. De Jesus P50,000.00 as nominal damages to indemnify her for
the violation of her right to due process.
No pronouncements on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice

Abbott v. Alcaraz, G.R. No. 192571, July 23, 2013

G.R. No. 192571

July 23, 2013

ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T.

YABUTMISA,
TERESITA
C.
BERNARDO,
AND
ALLAN
G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated December 10,2009 and
Resolution3dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 101045 which pronounced
that the National Labor Relations Commission (NLRC) did not gravely abuse its discretion when it ruled
that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the publication in a major
broadsheet newspaper of its need for a Medical and Regulatory Affairs Manager (Regulatory Affairs
Manager) who would: (a) be responsible for drug safety surveillance operations, staffing, and budget;
(b) lead the development and implementation of standard operating procedures/policies for drug safety
surveillance and vigilance; and (c) act as the primary interface with internal and external customers
regarding safety operations and queries.4 Alcaraz - who was then a Regulatory Affairs and Information

Manager at Aventis Pasteur Philippines, Incorporated (another pharmaceutical company like Abbott)
showed interest and submitted her application on October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position which was an item
under the companys Hospira Affiliate Local Surveillance Unit (ALSU) department.6 In Abbotts offer
sheet.7 it was stated that Alcaraz was to be employed on a probationary basis.8 Later that day, she
accepted the said offer and received an electronic mail (e-mail) from Abbotts Recruitment Officer,
petitioner Teresita C. Bernardo (Bernardo), confirming the same. Attached to Bernardos e-mail were
Abbotts organizational chart and a job description of Alcarazs work.9
On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia, that she was to
be placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005.
The said contract was also signed by Abbotts General Manager, petitioner Edwin Feist (Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby appointed as
follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : P110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and regulations of the company, as
well as those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to earlier termination
by the Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify your conformity below and
return a copy to HRD.
Welcome to Abbott!
Very truly yours,

Sgd.
EDWIN
General Manager

D.

FEIST

CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcarazs pre-employment orientation, petitioner Allan G. Almazar (Almazar), Hospiras Country
Transition Manager, briefed her on her duties and responsibilities as Regulatory Affairs Manager, stating
that: (a) she will handle the staff of Hospira ALSU and will directly report to Almazar on matters
regarding Hopiras local operations, operational budget, and performance evaluation of the Hospira
ALSU Staff who are on probationary status; (b) she must implement Abbotts Code of Good Corporate
Conduct (Code of Conduct), office policies on human resources and finance, and ensure that Abbott will
hire people who are fit in the organizational discipline; (c) petitioner Kelly Walsh (Walsh), Manager of
the Literature Drug Surveillance Drug Safety of Hospira, will be her immediate supervisor; (d) she should
always coordinate with Abbotts human resource officers in the management and discipline of the staff;
(e) Hospira ALSU will spin off from Abbott in early 2006 and will be officially incorporated and known as
Hospira, Philippines. In the interim, Hospira ALSU operations will still be under Abbotts management,
excluding the technical aspects of the operations which is under the control and supervision of Walsh;
and (f) the processing of information and/or raw material data subject of Hospira ALSU operations will
be strictly confined and controlled under the computer system and network being maintained and
operated from the United States. For this purpose, all those involved in Hospira ALSU are required to
use two identification cards: one, to identify them as Abbotts employees and another, to identify them
as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbotts Human Resources (HR)
Director, sent Alcaraz an e-mail which contained an explanation of the procedure for evaluating the
performance of probationary employees and further indicated that Abbott had only one evaluation
system for all of its employees. Alcaraz was also given copies of Abbotts Code of Conduct and
Probationary Performance Standards and Evaluation (PPSE) and Performance Excellence Orientation
Modules (Performance Modules) which she had to apply in line with her task of evaluating the Hospira
ALSU staff.12
Abbotts PPSE procedure mandates that the job performance of a probationary employee should be
formally reviewed and discussed with the employee at least twice: first on the third month and second
on the fifth month from the date of employment. The necessary Performance Improvement Plan should
also be made during the third-month review in case of a gap between the employees performance and
the standards set. These performance standards should be discussed in detail with the employee within
the first two (2) weeks on the job. It was equally required that a signed copy of the PPSE form must be
submitted to Abbotts Human Resources Department (HRD) and shall serve as documentation of the
employees performance during his/her probationary period. This shall form the basis for
recommending the confirmation or termination of the probationary employment.13
During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems.
Thus, she would reprimand them for their unprofessional behavior such as non-observance of the dress
code, moonlighting, and disrespect of Abbott officers. However, Alcarazs method of management was

considered by Walsh to be "too strict."14 Alcaraz approached Misa to discuss these concerns and was
told to "lie low" and let Walsh handle the matter. Misa even assured her that Abbotts HRD would
support her in all her management decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on the staffs
performance evaluation as their probationary periods were about to end. This Alcaraz eventually
submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible), Abbotts former HR
Director, to discuss certain issues regarding staff performance standards. In the course thereof, Alcaraz
accidentally saw a printed copy of an e-mail sent by Walsh to some staff members which essentially
contained queries regarding the formers job performance. Alcaraz asked if Walshs action was the
normal process of evaluation. Terrible said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed that
she failed to meet the regularization standards for the position of Regulatory Affairs
Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be
forced to terminate her services. She was also told that, regardless of her choice, she should no longer
report for work and was asked to surrender her office identification cards. She requested to be given
one week to decide on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales), that she would
be on leave for that day. However, Gonzales told her that Walsh and Terrible already announced to the
whole Hospira ALSU staff that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her
services had been terminated effective May 19, 2005.21 The letter detailed the reasons for Alcarazs
termination particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to gain the
trust of her staff and to build an effective rapport with them; (c) failed to train her staff effectively; and
(d) was not able to obtain the knowledge and ability to make sound judgments on case processing and
article review which were necessary for the proper performance of her duties.22 On May 27, 2005,
Alcaraz received another copy of the said termination letter via registered mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a complaint for illegal
dismissal and damages against Abbott and its officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible,
and Feist.24 She claimed that she should have already been considered as a regular and not a
probationary employee given Abbotts failure to inform her of the reasonable standards for her
regularization upon her engagement as required under Article 29525 of the Labor Code. In this relation,
she contended that while her employment contract stated that she was to be engaged on a
probationary status, the same did not indicate the standards on which her regularization would be
based.26 She further averred that the individual petitioners maliciously connived to illegally dismiss her
when: (a) they threatened her with termination; (b) she was ordered not to enter company premises
even if she was still an employee thereof; and (c) they publicly announced that she already resigned in
order to humiliate her.27

On the contrary, petitioners maintained that Alcaraz was validly terminated from her probationary
employment given her failure to satisfy the prescribed standards for her regularization which were
made known to her at the time of her engagement.28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcarazs complaint for lack of merit.
The LA rejected Alcarazs argument that she was not informed of the reasonable standards to qualify as
a regular employee considering her admissions that she was briefed by Almazar on her work during her
pre-employment orientation meeting30 and that she received copies of Abbotts Code of Conduct and
Performance Modules which were used for evaluating all types of Abbott employees.31 As Alcaraz was
unable to meet the standards set by Abbott as per her performance evaluation, the LA ruled that the
termination of her probationary employment was justified.32 Lastly, the LA found that there was no
evidence to conclude that Abbotts officers and employees acted in bad faith in terminating Alcarazs
employment.33
Displeased with the LAs ruling, Alcaraz filed an appeal with the National Labor Relations Commission
(NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision,34 annulling and setting aside the LAs ruling, the
dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby reversed, annulled
and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed illegal
dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former position
without loss of seniority rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May 2005 until finality
of this decision. As of the date hereof the backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00
b. 13th month pay -

110,000.00

TOTAL

PhP 1,760,000.00

4. Respondents are ordered to pay complainant moral damages of P50,000.00 and exemplary
damages ofP50,000.00.
5. Respondents are also ordered to pay attorneys fees of 10% of the total award.

6. All other claims are dismissed for lack of merit.

SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence showing that Alcaraz had
been apprised of her probationary status and the requirements which she should have complied with in
order to be a regular employee.36 It held that Alcarazs receipt of her job description and Abbotts Code
of Conduct and Performance Modules was not equivalent to her being actually informed of the
performance standards upon which she should have been evaluated on.37 It further observed that
Abbott did not comply with its own standard operating procedure in evaluating probationary
employees.38 The NLRC was also not convinced that Alcaraz was terminated for a valid cause given that
petitioners allegation of Alcarazs "poor performance" remained unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a Resolution dated July
31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction, docketed as CA G.R. SP No. 101045 (First CA
Petition), alleging grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was illegally
dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRCs Decision
before the LA, which petitioners strongly opposed. The LA denied the said motion in an Order dated July
8, 2008 which was, however, eventually reversed on appeal by the NLRC.42 Due to the foregoing,
petitioners filed another Petition for Certiorari with the CA, docketed as CA G.R. SP No. 111318 (Second
CA Petition), assailing the propriety of the execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December 10, 2009, affirmed the
ruling of the NLRC and held that the latter did not commit any grave abuse of discretion in finding that
Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the reasonable standards
under which she could qualify as a regular employee.45 This was based on its examination of the
employment contract which showed that the same did not contain any standard of performance or any
stipulation that Alcaraz shall undergo a performance evaluation before she could qualify as a regular
employee.46 It also found that Abbott was unable to prove that there was any reasonable ground to
terminate Alcarazs employment.47 Abbott moved for the reconsideration of the aforementioned ruling
which was, however, denied by the CA in a Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May 18, 2010
Resolution) and ruled that the NLRC was correct in upholding the execution of the NLRC
Decision.49 Thus, petitioners filed a motion for reconsideration.
While the petitioners motion for reconsideration of the CAs May 18, 2010 Resolution was pending,
Alcaraz again moved for the issuance of a writ of execution before the LA. On June 7, 2010, petitioners

received the LAs order granting Alcarazs motion for execution which they in turn appealed to the NLRC
through a Memorandum of Appeal dated June 16, 2010 (June 16, 2010 Memorandum of Appeal ) on
the ground that the implementation of the LAs order would render its motion for reconsideration moot
and academic.50
Meanwhile, petitioners motion for reconsideration of the CAs May 18, 2010 Resolution in the Second
CA Petition was denied via a Resolution dated October 4, 2010.51 This attained finality on January 10,
2011 for petitioners failure to timely appeal the same.52 Hence, as it stands, only the issues in the First
CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that petitioners were guilty
of forum shopping when they filed the Second CA Petition pending the resolution of their motion for
reconsideration of the CAs December 10, 2009 Decision i.e., the decision in the First CA Petition.53 She
also contends that petitioners have not complied with the certification requirement under Section 5,
Rule 7 of the Rules of Court when they failed to disclose in the instant petition the filing of the June 16,
2010 Memorandum of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Courts resolution: (a) whether or not petitioners are guilty
of forum shopping and have violated the certification requirement under Section 5, Rule 7 of the Rules
of Court; (b) whether or not Alcaraz was sufficiently informed of the reasonable standards to qualify her
as a regular employee; (c) whether or not Alcaraz was validly terminated from her employment; and (d)
whether or not the individual petitioners herein are liable.
The Courts Ruling
A.
Violation
of the Rules of Court.

Forum
of

Section

Shopping
5,

Rule

and
7

At the outset, it is noteworthy to mention that the prohibition against forum shopping is different from
a violation of the certification requirement under Section 5, Rule 7 of the Rules of Court. In Sps. Ong v.
CA,55 the Court explained that:
x x x The distinction between the prohibition against forum shopping and the certification requirement
should by now be too elementary to be misunderstood. To reiterate, compliance with the certification
against forum shopping is separate from and independent of the avoidance of the act of forum shopping
itself. There is a difference in the treatment between failure to comply with the certification
requirement and violation of the prohibition against forum shopping not only in terms of imposable
sanctions but also in the manner of enforcing them. The former constitutes sufficient cause for the
dismissal without prejudice to the filing of the complaint or initiatory pleading upon motion and after
hearing, while the latter is a ground for summary dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits involving the same parties,
either simultaneously or successively, to secure a favorable judgment. It exists where the elements of
litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent the

same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity with respect to the two preceding particulars in the two
(2) cases is such that any judgment that may be rendered in the pending case, regardless of which party
is successful, would amount to res judicata in the other case.57
In this case, records show that, except for the element of identity of parties, the elements of forum
shopping do not exist. Evidently, the First CA Petition was instituted to question the ruling of the NLRC
that Alcaraz was illegally dismissed. On the other hand, the Second CA Petition pertains to the propriety
of the enforcement of the judgment award pending the resolution of the First CA Petition and the
finality of the decision in the labor dispute between Alcaraz and the petitioners. Based on the foregoing,
a judgment in the Second CA Petition will not constitute res judicata insofar as the First CA Petition is
concerned. Thus, considering that the two petitions clearly cover different subject matters and causes of
action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the certification requirement
under Section 5, Rule 7 of the Rules of Court58 by not disclosing the fact that it filed the June 16, 2010
Memorandum of Appeal before the NLRC in the instant petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files a case should
provide a complete statement of the present status of any pending case if the latter involves the same
issues as the one that was filed. If there is no such similar pending case, Section 5(a) of the same rule
provides that the plaintiff is obliged to declare under oath that to the best of his knowledge, no such
other action or claim is pending.
Records show that the issues raised in the instant petition and those in the June 16, 2010 Memorandum
of Appeal filed with the NLRC likewise cover different subject matters and causes of action. In this case,
the validity of Alcarazs dismissal is at issue whereas in the said Memorandum of Appeal, the propriety
of the issuance of a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present petition the filing of
their June 16, 2010 Memorandum of Appeal with the NLRC. In any event, considering that the issue on
the propriety of the issuance of a writ of execution had been resolved in the Second CA Petition which
in fact had already attained finality the matter of disclosing the June 16, 2010 Memorandum of Appeal
is now moot and academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive
issues.
B.
grounds for termination.

Probationary

employment;

A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an additional ground is
provided under Article 295 of the Labor Code, i.e., the probationary employee may also be terminated
for failure to qualify as a regular employee in accordance with the reasonable standards made known by
the employer to the employee at the time of the engagement.59 Thus, the services of an employee who
has been engaged on probationary basis may be terminated for any of the following: (a) a just or (b) an

authorized cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides
that if the employer fails to inform the probationary employee of the reasonable standards upon which
the regularization would be based on at the time of the engagement, then the said employee shall be
deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where no
standards are made known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is made to comply with two (2) requirements when dealing with a
probationary employee: first, the employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such communication at the time of the
probationary employees engagement. If the employer fails to comply with either, the employee is
deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made known the standards that would qualify
a probationary employee to be a regular employee when it has exerted reasonable efforts to apprise the
employee of what he is expected to do or accomplish during the trial period of probation. This goes
without saying that the employee is sufficiently made aware of his probationary status as well as the
length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of
maids, cooks, drivers, or messengers.61 Also, in Aberdeen Court, Inc. v. Agustin,62 it has been held that
the rule on notifying a probationary employee of the standards of regularization should not be used to
exculpate an employee who acts in a manner contrary to basic knowledge and common sense in regard
to which there is no need to spell out a policy or standard to be met. In the same light, an employees
failure to perform the duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employees non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to qualify as a regular
employee according to Abbotts standards which were made known to her at the time of her
engagement. Contrarily, Alcaraz claims that Abbott never apprised her of these standards and thus,
maintains that she is a regular and not a mere probationary employee.
The Court finds petitioners assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied with the above-stated
requirements. This conclusion is largely impelled by the fact that Abbott clearly conveyed to Alcaraz her
duties and responsibilities as Regulatory Affairs Manager prior to, during the time of her engagement,
and the incipient stages of her employment. On this score, the Court finds it apt to detail not only the
incidents which point out to the efforts made by Abbott but also those circumstances which would show
that Alcaraz was well-apprised of her employers expectations that would, in turn, determine her
regularization:

(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its
need for a Regulatory Affairs Manager, indicating therein the job description for as well as the
duties and responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit
her application to Abbott on October 4, 2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on
a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter
alia, that she was to be placed on probation for a period of six (6) months beginning February
15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo sent her copies of
Abbotts organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her
that she had to implement Abbotts Code of Conduct and office policies on human resources
and finance and that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and Performance Modules from Misa
who explained to her the procedure for evaluating the performance of probationary employees;
she was further notified that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had
admitted to have an "extensive training and background" to acquire the necessary skills for her
job.63
Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that Alcaraz
was well-aware that her regularization would depend on her ability and capacity to fulfill the
requirements of her position as Regulatory Affairs Manager and that her failure to perform such would
give Abbott a valid cause to terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the adequate performance of ones duties is, by
and of itself, an inherent and implied standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped into technical indicators in
every case. In this regard, it must be observed that the assessment of adequate duty performance is in
the nature of a management prerogative which when reasonably exercised as Abbott did in this case
should be respected. This is especially true of a managerial employee like Alcaraz who was tasked with
the vital responsibility of handling the personnel and important matters of her department.
In fine, the Court rules that Alcarazs status as a probationary employee and her consequent dismissal
must stand. Consequently, in holding that Alcaraz was illegally dismissed due to her status as a regular
and not a probationary employee, the Court finds that the NLRC committed a grave abuse of discretion.

To elucidate, records show that the NLRC based its decision on the premise that Alcarazs receipt of her
job description and Abbotts Code of Conduct and Performance Modules was not equivalent to being
actually informed of the performance standards upon which she should have been evaluated on.64 It,
however, overlooked the legal implication of the other attendant circumstances as detailed herein
which should have warranted a contrary finding that Alcaraz was indeed a probationary and not a
regular employee more particularly the fact that she was well-aware of her duties and responsibilities
and that her failure to adequately perform the same would lead to her non-regularization and
eventually, her termination.
Accordingly, by affirming the NLRCs pronouncement which is tainted with grave abuse of discretion, the
CA committed a reversible error which, perforce, necessitates the reversal of its decision.
C.
termination procedure.

Probationary

employment;

A different procedure is applied when terminating a probationary employee; the usual two-notice rule
does not govern.65 Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that "if
the termination is brought about by the x x x failure of an employee to meet the standards of the
employer in case of probationary employment, it shall be sufficient that a written notice is served the
employee, within a reasonable time from the effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which she
received on May 23, 2005 and again on May 27, 2005. Stated therein were the reasons for her
termination, i.e., that after proper evaluation, Abbott determined that she failed to meet the reasonable
standards for her regularization considering her lack of time and people management and decisionmaking skills, which are necessary in the performance of her functions as Regulatory Affairs
Manager.66 Undeniably, this written notice sufficiently meets the criteria set forth above, thereby
legitimizing the cause and manner of Alcarazs dismissal as a probationary employee under the
parameters set by the Labor Code.67
D. Employers violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcarazs employment and
Abbotts compliance with the Labor Code termination procedure, it is readily apparent that Abbott
breached its contractual obligation to Alcaraz when it failed to abide by its own procedure in evaluating
the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the employer and
employee. In Parts Depot, Inc. v. Beiswenger,68 it has been held that:
Employer statements of policy . . . can give rise to contractual rights in employees without evidence that
the parties mutually agreed that the policy statements would create contractual rights in the employee,
and, hence, although the statement of policy is signed by neither party, can be unilaterally amended by
the employer without notice to the employee, and contains no reference to a specific employee, his job
description or compensation, and although no reference was made to the policy statement in pre-

employment interviews and the employee does not learn of its existence until after his hiring. Toussaint,
292 N.W .2d at 892. The principle is akin to estoppel. Once an employer establishes an express
personnel policy and the employee continues to work while the policy remains in effect, the policy is
deemed an implied contract for so long as it remains in effect. If the employer unilaterally changes the
policy, the terms of the implied contract are also thereby changed.1wphi1 (Emphasis and underscoring
supplied.)
Hence, given such nature, company personnel policies create an obligation on the part of both the
employee and the employer to abide by the same.
Records show that Abbotts PPSE procedure mandates, inter alia, that the job performance of a
probationary employee should be formally reviewed and discussed with the employee at least twice:
first on the third month and second on the fifth month from the date of employment. Abbott is also
required to come up with a Performance Improvement Plan during the third month review to bridge the
gap between the employees performance and the standards set, if any.69 In addition, a signed copy of
the PPSE form should be submitted to Abbotts HRD as the same would serve as basis for recommending
the confirmation or termination of the probationary employment.70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz.
For one, there lies a hiatus of evidence that a signed copy of Alcarazs PPSE form was submitted to the
HRD. It was not even shown that a PPSE form was completed to formally assess her performance.
Neither was the performance evaluation discussed with her during the third and fifth months of her
employment. Nor did Abbott come up with the necessary Performance Improvement Plan to properly
gauge Alcarazs performance with the set company standards.
While it is Abbotts management prerogative to promulgate its own company rules and even
subsequently amend them, this right equally demands that when it does create its own policies and
thereafter notify its employee of the same, it accords upon itself the obligation to faithfully implement
them. Indeed, a contrary interpretation would entail a disharmonious relationship in the work place for
the laborer should never be mired by the uncertainty of flimsy rules in which the latters labor rights and
duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcarazs probationary employment for her failure to
meet the standards required for her regularization, and while it must be further pointed out that Abbott
had satisfied its statutory duty to serve a written notice of termination, the fact that it violated its own
company procedure renders the termination of Alcarazs employment procedurally infirm, warranting
the payment of nominal damages. A further exposition is apropos.
Case law has settled that an employer who terminates an employee for a valid cause but does so
through invalid procedure is liable to pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the dismissal is for a just cause, the
lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However,
the employer should indemnify the employee for the violation of his statutory rights. 72 Thus, in Agabon,
the employer was ordered to pay the employee nominal damages in the amount of P30,000.00.73

Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing
Corporation v. Pacot (Jaka)74 where it created a distinction between procedurally defective dismissals
due to a just cause, on one hand, and those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article 282 of the Labor Code (now
Article 296) but the employer failed to comply with the notice requirement, the sanction to be imposed
upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable
to the employee; if the dismissal is based on an authorized cause under Article 283 (now Article 297) but
the employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employers exercise of his management prerogative.75 Hence, in
Jaka, where the employee was dismissed for an authorized cause of retrenchment76 as
contradistinguished from the employee in Agabon who was dismissed for a just cause of neglect of
duty77 the Court ordered the employer to pay the employee nominal damages at the higher amount
of P50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to deter
employers from future violations of the statutory due process rights of employees.78 In similar regard,
the Court deems it proper to apply the same principle to the case at bar for the reason that an
employers contractual breach of its own company procedure albeit not statutory in source has the
parallel effect of violating the laborers rights. Suffice it to state, the contract is the law between the
parties and thus, breaches of the same impel recompense to vindicate a right that has been violated.
Consequently, while the Court is wont to uphold the dismissal of Alcaraz because a valid cause exists,
the payment of nominal damages on account of Abbotts contractual breach is warranted in accordance
with Article 2221 of the Civil Code.79
Anent the proper amount of damages to be awarded, the Court observes that Alcarazs dismissal
proceeded from her failure to comply with the standards required for her regularization. As such, it is
undeniable that the dismissal process was, in effect, initiated by an act imputable to the employee, akin
to dismissals due to just causes under Article 296 of the Labor Code. Therefore, the Court deems it
appropriate to fix the amount of nominal damages at the amount of P30,000.00, consistent with its
rulings in both Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees or officers attaches only
when: (a) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith
or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to
the corporation, its stockholders or other persons; (b) they consent to the issuance of watered down
stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary
their written objection; (c) they agree to hold themselves personally and solidarily liable with the
corporation; or (d) they are made by specific provision of law personally answerable for their corporate
action.80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the supposed
crude manner by which her probationary employment was terminated and thus, should be held liable

together with Abbott. In the same vein, she further attributes the loss of some of her remaining
belongings to them.81
Alcarazs contention fails to persuade.
A judicious perusal of the records show that other than her unfounded assertions on the matter, there is
no evidence to support the fact that the individual petitioners herein, in their capacity as Abbotts
officers and employees, acted in bad faith or were motivated by ill will in terminating
Alcarazs services. The fact that Alcaraz was made to resign and not allowed to enter the workplace does
not necessarily indicate bad faith on Abbotts part since a sufficient ground existed for the latter to
actually proceed with her termination. On the alleged loss of her personal belongings, records are bereft
of any showing that the same could be attributed to Abbott or any of its officers. It is a well-settled rule
that bad faith cannot be presumed and he who alleges bad faith has the onus of proving it. All told, since
Alcaraz failed to prove any malicious act on the part of Abbott or any of its officers, the Court finds the
award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and Resolution dated
June 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are hereby REVERSED and SET ASIDE.
Accordingly, the Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
MODIFICATION that petitioner Abbott Laboratories, Philippines be ORDERED to pay respondent Pearlie
Ann F. Alcaraz nominal damages in the amount of P30,000.00 on account of its breach of its own
company procedure.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

Duncan v. Glaxo, G.R. No. 162994, September 17, 2004

G.R. No. 162994

September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:

and

PEDRO

A.

TECSON, petitioners,

Confronting the Court in this petition is a novel question, with constitutional overtones, involving the
validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees
of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as
medical representative on October 24, 1995, after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to
study and abide by existing company rules; to disclose to management any existing or future
relationship by consanguinity or affinity with co-employees or employees of competing drug companies
and should management find that such relationship poses a possible conflict of interest, to resign from
the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform
management of any existing or future relationship by consanguinity or affinity with co-employees or
employees of competing drug companies. If management perceives a conflict of interest or a potential
conflict between such relationship and the employees employment with the company, the
management and the employee will explore the possibility of a "transfer to another department in a
non-counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales
area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her company and prepared marketing
strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding
the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and
Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of
interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would
resign from their jobs, although they told him that they wanted to retain him as much as possible
because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with
an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to
merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package
to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest
would be eliminated. At the same time, they would be able to avail of the attractive redundancy
package from Astra.

In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson
applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk division, the
potential conflict of interest would be eliminated. His application was denied in view of Glaxos "leastmovement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area.
Tecson asked Glaxo to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos
Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7,
2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as
medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued
samples of products which were competing with similar products manufactured by Astra. He was also
not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the
matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for
every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy
on relationships between its employees and persons employed with competitor companies, and
affirming Glaxos right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the
ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy
prohibiting its employees from having personal relationships with employees of competitor companies
is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied
by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the
NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a
competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxos policy against employees marrying employees of competitor companies
violates the equal protection clause of the Constitution because it creates invalid distinctions among
employees on account only of marriage. They claim that the policy restricts the employees right to
marry.7
They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1)
he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan

sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training
sessions for medical representatives, and (4) he was prohibited from promoting respondents products
which were competing with Astras products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from
having a relationship with and/or marrying an employee of a competitor company is a valid exercise of
its management prerogatives and does not violate the equal protection clause; and that Tecsons
reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and
Agusan del Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a
genuine interest in ensuring that its employees avoid any activity, relationship or interest that may
conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and decisions
and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor
company from gaining access to its secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future
relationships with employees of competitor companies, and is therefore not violative of the equal
protection clause. It maintains that considering the nature of its business, the prohibition is based on
valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential
conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo.
Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its
management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and
was even encouraged not to resign but to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy because when he
signed his contract of employment, he was aware that such policy was stipulated therein. In said
contract, he also agreed to resign from respondent if the management finds that his relationship with an
employee of a competitor company would be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars
regarding respondents new products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-Camarines
Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in
effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons hometown
was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from
the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be
relocating to a familiar territory and minimizing his travel expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug
was due to the fact that said product was in direct competition with a drug which was soon to be sold by
Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecsons receipt
of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City

sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the
supplier thought he already transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that
Glaxos policy against its employees marrying employees from competitor companies is valid, and in not
holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was
constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners
provides:

10. You agree to disclose to management any existing or future relationship you may have,
either by consanguinity or affinity with co-employees or employees of competing drug
companies. Should it pose a possible conflict of interest in management discretion, you agree to
resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo,
and to study and become acquainted with such policies.18 In this regard, the Employee Handbook of
Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run counter
to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any competitor
supplier or other businesses which may consciously or unconsciously influence their
actions or decisions and thus deprive Glaxo Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company
plans to advance their outside personal interests, that of their relatives, friends and
other businesses.
c. To avoid outside employment or other interests for income which would impair their
effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.

1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity with coemployees of competing drug companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential conflict of interest, every effort
shall be made, together by management and the employee, to arrive at a solution within six (6)
months, either by transfer to another department in a non-counter checking position, or by
career preparation toward outside employment after Glaxo Wellcome. Employees must be
prepared for possible resignation within six (6) months, if no other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting
an employee from having a relationship with an employee of a competitor company is a valid exercise of
management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information from competitors, especially so that it and Astra are rival
companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies upon
Glaxos employees is reasonable under the circumstances because relationships of that nature might
compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims
to protect its interests against the possibility that a competitor company will gain access to its secrets
and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the
Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to
reasonable returns on investments and to expansion and growth.20 Indeed, while our laws endeavor to
give life to the constitutional policy on social justice and the protection of labor, it does not mean that
every labor dispute will be decided in favor of the workers. The law also recognizes that management
has rights which are also entitled to respect and enforcement in the interest of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality
and protect a competitive position by even-handedly disqualifying from jobs male and female applicants
or employees who are married to a competitor. Consequently, the court ruled than an employer that
discharged an employee who was married to an employee of an active competitor did not violate Title
VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was applied to men and women
equally, and noted that the employers business was highly competitive and that gaining inside
information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as
petitioners erroneously suggest. It is a settled principle that the commands of the equal protection
clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has
been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no
shield against merely private conduct, however, discriminatory or wrongful.25 The only exception occurs
when the state29 in any of its manifestations or actions has been found to have become entwined or
involved in the wrongful private conduct.27 Obviously, however, the exception is not present in this case.
Significantly, the company actually enforced the policy after repeated requests to the employee to

comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed
manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook, it
is clear that Glaxo does not impose an absolute prohibition against relationships between its employees
and those of competitor companies. Its employees are free to cultivate relationships with and marry
persons of their own choosing. What the company merely seeks to avoid is a conflict of interest
between the employee and the company that may arise out of such relationships. As succinctly
explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company
remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a
personal prerogative that belongs only to the individual. However, an employees personal
decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of
respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by
Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with
Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the
stipulations therein have the force of law between them and, thus, should be complied with in good
faith."29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he
was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao CityAgusan del Sur sales area, and when he was excluded from attending the companys seminar on new
products which were directly competing with similar products manufactured by Astra. Constructive
dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment
becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay;
or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.30 None of these conditions are present in the instant case. The record does not show that
Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate
court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City
sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping with
the policy of the company in avoidance of conflict of interest, and thus validNote that
[Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employercompany which requires her to work in close coordination with District Managers and Medical
Representatives. Her duties include monitoring sales of Astra products, conducting sales drives,
establishing and furthering relationship with customers, collection, monitoring and managing
Astras inventoryshe therefore takes an active participation in the market war characterized as
it is by stiff competition among pharmaceutical companies. Moreover, and this is significant,
petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is
supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all
in the same Bicol Region, renders the conflict of interest not only possible, but actual, as
learning by one spouse of the others market strategies in the region would be inevitable.

[Managements] appreciation of a conflict of interest is therefore not merely illusory and

wanting in factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint
filed by a medical representative against his employer drug company for illegal dismissal for allegedly
terminating his employment when he refused to accept his reassignment to a new area, the Court
upheld the right of the drug company to transfer or reassign its employee in accordance with its
operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds
application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is expected to
travel. He should anticipate reassignment according to the demands of their business. It would
be a poor drug corporation which cannot even assign its representatives or detail men to new
markets calling for opening or expansion or to areas where the need for pushing its products is
great. More so if such reassignments are part of the employment contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly
for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to
eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship
was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his
employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave
him time to resolve the conflict by either resigning from the company or asking his wife to resign from
Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory
performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise
acceded to his repeated requests for more time to resolve the conflict of interest. When the problem
could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales
area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from
employment but only reassigned him to another area where his home province, Agusan del Sur, was
included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly,
the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Yrasuegui v. PAL, G.R. No. 168081, October 17, 2008

Republic of the Philippines

Supreme Court

Manila
THIRD DIVISION

ARMANDO G. YRASUEGUI, G.R. No. 168081

Petitioner,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
PHILIPPINE AIRLINES, INC.,
Respondent. October 17, 2008
x--------------------------------------------------x
DECISION

REYES, R.T., J.:

THIS case portrays the peculiar story of an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the airline company.
He is now before this Court via a petition for review on certiorari claiming that he was illegally
dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the Labor
Code; (2) continuing adherence to the weight standards of the company is not a bona fide occupational
qualification;
and
(3)
he
was
discriminated
against

because other overweight employees were promoted instead of being disciplined.

After a meticulous consideration of all arguments pro and con, We uphold the legality of
dismissal. Separation pay, however, should be awarded in favor of the employee as an act of social
justice or based on equity. This is so because his dismissal is not for serious misconduct. Neither is it
reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines,
Inc. (PAL). He stands five feet and eight inches (58) with a large body frame. The proper weight for a
man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as
mandated by the Cabin and Crew Administration Manual[1] ofPAL.
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an
extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently,
petitioner
failed
to
meet
the
companys
weight
standards, prompting another leave without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to work. But petitioners
weight problem recurred. He again went on leave without pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with
company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was formally
requested to trim down to his ideal weight and report for weight checks on several
dates. He was also told that he may avail of the services of the company physician should he wish to do
so. He was advised that his case will be evaluated on July 3, 1989.[2]
On February 25, 1989, petitioner underwent weight check. It was discovered that he gained,
instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the
limit. Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining 2
pounds from his previous weight. After the visit, petitioner made a commitment[3] to reduce weight in a
letter addressed to Cabin Crew Group Manager Augusto Barrios.The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217
pounds to 200 pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable percentage until
such time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time
schedule you will set for my weight check.

Respectfully Yours,
F/S Armando Yrasuegui[4]
Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained
overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded until
such time that he satisfactorily complies with the weight standards. Again, he was directed to report
every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to
comply with the weight requirement. As usual, he was asked to report for weight check on different
dates. He was reminded that his grounding would continue pending satisfactory compliance with the
weight standards.[5]
Again, petitioner failed to report for weight checks, although he was seen submitting his
passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight
check would be dealt with accordingly. He was given another set of weight check dates.[6] Again,
petitioner ignored the directive and did not report for weight checks. On June 26, 1990, petitioner was
required to explain his refusal to undergo weight checks.[7]
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was
still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his case requesting for
leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and205
pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for
violation of company standards on weight requirements. He was given ten (10) days from receipt of the
charge within which to file his answer and submit controverting evidence.[8]
On December 7, 1992, petitioner submitted his Answer.[9] Notably, he did not deny being
overweight. What he claimed, instead, is that his violation, if any, had already been condoned
by PAL since no action has been taken by the company regarding his case since 1988. He also claimed
that PAL discriminated against him because the company has not been fair in treating the cabin crew
members who are similarly situated.
On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was
undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain his ideal
weight.[10]
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his
ideal weight, and considering the utmost leniency extended to him which spanned a period covering a
total of almost five (5) years, his services were considered terminated effective immediately.[11]

His motion for reconsideration having been denied,[12] petitioner filed a complaint for illegal
dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled[13] that petitioner was illegally
dismissed. The dispositive part of the Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring
the complainants dismissal illegal, and ordering the respondent to reinstate him to his
former position or substantially equivalent one, and to pay him:

a. Backwages of Php10,500.00 per month from his dismissal on June 15,

1993 until reinstated, which for purposes of appeal is hereby set from June 15, 1993 up
to August 15, 1998 at P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.
SO ORDERED.[14]
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of
the job of petitioner.[15] However, the weight standards need not be complied with under pain of
dismissal since his weight did not hamper the performance of his duties.[16] Assuming that it did,
petitioner could be transferred to other positions where his weight would not be a negative
factor.[17] Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were
promoted instead of being disciplined.[18]
Both parties appealed to the National Labor Relations Commission (NLRC).[19]
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of
petitioner without loss of seniority rights and other benefits.[20]
On February 1, 2000, the Labor Arbiter denied[21] the Motion to Quash Writ of
Execution[22] of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC.[23]
On June 23, 2000, the NLRC rendered judgment[24] in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18
November 1998 as modified by our findings herein, is hereby AFFIRMED and that part of
the dispositive portion of said decision concerning complainants entitlement
to backwages shall be deemed to refer to complainants entitlement to his
full backwages, inclusive of allowances and to his other benefits or their monetary
equivalent instead of simply backwages, from date of dismissal until his actual

reinstatement or finality hereof. Respondent is enjoined to manifests (sic) its choice of

the form of the reinstatement of complainant, whether physical or through payroll
within ten (10) days from notice failing which, the same shall be deemed as
complainants reinstatement through payroll and execution in case of non-payment shall
accordingly be issued by the Arbiter. Both appeals of respondent thus,
are DISMISSED for utter lack of merit.[25]
According to the NLRC, obesity, or the tendency to gain weight uncontrollably regardless of the
amount of food intake, is a disease in itself.[26] As a consequence, there can be no intentional defiance or
serious misconduct by petitioner to the lawful order of PAL for him to lose weight.[27]
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However,
it found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance of
his duties as flight steward despite being overweight. According to the NLRC, the Labor Arbiter should
have limited himself to the issue of whether the failure of petitioner to attain his ideal weight
constituted willful defiance of the weight standards of PAL.[28]

PAL moved for reconsideration to no avail.[29] Thus, PAL elevated the matter to the Court of
Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.[30]
By Decision dated August 31, 2004, the CA reversed[31] the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed
NLRC decision is declared NULL and VOID and is hereby SET ASIDE. The private
respondents complaint is hereby DISMISSED. No costs.
SO ORDERED.[32]
The CA opined that there was grave abuse of discretion on the part of the NLRC because it
looked at wrong and irrelevant considerations[33] in evaluating the evidence of the parties.Contrary to
the NLRC ruling, the weight standards of PAL are meant to be a continuing qualification for an
employees position.[34] The failure to adhere to the weight standards is ananalogous cause for the
dismissal of an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is not
willful disobedience as the NLRC seemed to suggest.[35] Said the CA, the element of willfulness that the
NLRC decision cites is an irrelevant consideration in arriving at a conclusion on whether the dismissal is
legally proper.[36] In other words, the relevant question to ask is not one of willfulness but one of
reasonableness of the standard and whether or not the employee qualifies or continues to qualify under
this standard.[37]

Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are
reasonable.[38] Thus, petitioner was legally dismissed because he repeatedly failed to meet the

prescribed weight standards.[39] It is obvious that the issue of discrimination was only invoked by
petitioner for purposes of escaping the result of his dismissal for being overweight.[40]
On May 10, 2005, the CA denied petitioners motion for reconsideration.[41] Elaborating on its
earlier ruling, the CA held that the weight standards of PAL are a bona fide occupational
qualification which, in case of violation, justifies an employees separation from the service.[42]
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONERS OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e)
OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONERS DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE BONA FIDE
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE;
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS
DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN
FLYING DUTIES OR PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED
ASIDE PETITIONERS CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING
MOOT AND ACADEMIC.[43] (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article 282(e) [44] of the Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a
continuing qualification of an employee in order to keep the job. Tersely put, an employee may be
dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight
standards. The dismissal of the employee would thus fall under Article 282(e) of the Labor Code. As
explained by the CA:
x x x [T]he standards violated in this case were not mere orders of the employer; they
were the prescribed weights that a cabin crew must maintain in order to qualify for and
keep his or her position in the company. In other words, they were standards that
establish continuing qualifications for an employees position. In this sense, the failure
to maintain these standards does not fall under Article 282(a) whose express terms
require the element of willfulness in order to be a ground for dismissal. The failure to

meet the employers qualifying standards is in fact a ground that does not squarely fall
under grounds (a) to (d) and is therefore one that falls under Article 282(e) the other
causes analogous to the foregoing.
By its nature, these qualifying standards are norms that apply prior to and after an
employee is hired. They apply prior to employment because these are the standards a
job applicant must initially meet in order to be hired. They apply after hiring because an
employee must continue to meet these standards while on the job in order to keep his
job. Under this perspective, a violation is not one of the faults for which an employee
can be dismissed pursuant to pars. (a) to (d) of Article 282; the employee can be
dismissed simply because he no longer qualifies for his job irrespective of whether or
not the failure to qualify was willful or intentional. x xx[45]
Petitioner, though, advances a very interesting argument. He claims that obesity is a physical
abnormality and/or illness.[46] Relying on Nadura v. Benguet Consolidated, Inc.,[47] he says his dismissal is
illegal:
Conscious of the fact that Naduras case cannot be made to fall squarely within the
specific causes enumerated in subparagraphs 1(a) to (e), Benguet invokes the provisions
of subparagraph 1(f) and says that Nadurasillness occasional attacks of asthma is a
cause analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to
convince anyone that, as the trial court said, illness cannot be included as an analogous
cause by any stretch of imagination.
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others
expressly enumerated in the law are due to the voluntary and/or willful act of the
employee. How Naduras illness could be considered as analogous to any of them is
beyond our understanding, there being no claim or pretense that the same was
contracted through his own voluntary act.[48]
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the
case at bar. First, Nadura was not decided under the Labor Code. The law applied in that case was
Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale
there cannot apply here. Third, in Nadura, the employee who was aminer, was laid off from work
because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the weight
standards of PAL. He was not dismissed due to illness.Fourth, the issue in Nadura is whether
or not the dismissed employee is entitled to separation pay and damages. Here, the issue centers on the
propriety of the dismissal of petitioner for his failure to meet the weight standards of PAL. Fifth,
in Nadura, the employee was not accorded due process. Here, petitioner was accorded utmost leniency.
He was given more than four (4) years to comply with the weight standards of PAL.

In the case at bar, the evidence on record militates against petitioners claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible for
him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during

the clarificatory hearing on December 8, 1992, petitioner himself claimed that [t]he issue is could I bring
my weight down to ideal weight which is 172, then the answer is yes. I can do it now.[49]
True, petitioner claims that reducing weight is costing him a lot of expenses.[50] However,
petitioner has only himself to blame. He could have easily availed the assistance of the company
physician, per the advice of PAL.[51] He chose to ignore the suggestion. In fact, he repeatedly failed to
report when required to undergo weight checks, without offering a valid explanation. Thus, his
fluctuating weight indicates absence of willpower rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation
and Hospitals,[52] decided by the United States Court of Appeals (First Circuit).In that case, Cook worked
from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally retarded at the
Ladd Center that was being operated by respondent. She twice resigned voluntarily with an
unblemished record. Even respondent admitted that her performance met the Centers legitimate
expectations. In 1988, Cook re-applied for a similar position. At that time, she stood 52 tall and weighed
over 320 pounds. Respondent claimed that the morbid obesity of plaintiff compromised her ability to
evacuate patients in case of emergency and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to discrimination on the basis of a
handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973,[53] which
incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent claimed,
however, that morbid obesity could never constitute a handicap within the purview of the Rehabilitation
Act. Among others, obesity is a mutable condition, thus plaintiff could simply lose weight and rid herself
of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability under the
Rehabilitation Act and that respondent discriminated against Cook based on perceived disability.The
evidence included expert testimony that morbid obesity is a physiological disorder. It involves a
dysfunction of both the metabolic system and the neurological appetite suppressing signal system,
which is capable of causing adverse effects within the musculoskeletal, respiratory, and cardiovascular
systems. Notably, the Court stated that mutability is relevant only in determining the substantiality of
the limitation flowing from a given impairment, thus mutability only precludes those conditions that an
individual can easily and quickly reverse by behavioral alteration.
Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the
District of Rhode Island, Cook was sometime before 1978 at least one hundred pounds more than what
is considered appropriate of her height. According to the Circuit Judge, Cook weighed over 320 pounds
in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than 50 pounds over
his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As the CA
correctly puts it, [v]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This element runs through all
just causes under Article 282, whether they be in the nature of a wrongful action or omission. Gross and

habitual neglect, a recognized just cause, is considered voluntary although it lacks the element of intent
found in Article 282(a), (c), and (d).[54]
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or national
origin unless the employer can show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide occupational qualification (BFOQ).[55] In
the United States, there are a few federal and many state job discrimination laws that contain an
exception allowing an employer to engage in an otherwise unlawful form of prohibited discrimination
when the action is based on a BFOQ necessary to the normal operation of a business or enterprise.[56]
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute
providing for it.[57] Further, there is no existing BFOQ statute that could justify his dismissal.[58]
Both arguments must fail.
First, the Constitution,[59] the Labor Code,[60] and RA No. 7277[61] or the Magna Carta for Disabled
Persons contain provisions similar to BFOQ.
[62]

Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British Columbia
Government and Service Employees Union (BCGSEU),[63] the Supreme Court of Canada adopted the socalled Meiorin Test in determining whether an employment policy is justified. Under this test, (1) the
employer must show that it adopted the standard for a purpose rationally connected to the
performance of the job;[64] (2) the employer must establish that the standard is reasonably
necessary[65] to the accomplishment of that work-related purpose; and (3) the employer must establish
that the standard is reasonably necessary in order to accomplish the legitimate work-related
purpose. Similarly, in Star Paper Corporation v.Simbol,[66] this Court held that in order to justify a BFOQ,
the employer must prove that (1) the employment qualification is reasonably related to the essential
operation of the job involved; and (2) that there is factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly perform the duties of the job.[67]
In short, the test of reasonableness of the company policy is used because it is parallel to
BFOQ.[68] BFOQ is valid provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.[69]
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,[70] the Court
did not hesitate to pass upon the validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company policy is reasonable considering
that its purpose is the protection of the interests of the company against possible competitor infiltration
on its trade secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting
statute. Too, the Labor Arbiter,[71] NLRC,[72] and CA[73] are one in holding that the weight standards
of PAL are reasonable. A common carrier, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence for the safety of the passengers it transports.[74] It is
bound to carry its passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances.[75]

The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only
logical to hold that the weight standards of PAL show its effort to comply with the exacting obligations
imposed upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport its
passengers. In order to achieve this, it must necessarily rely on its employees, most particularly the
cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as
imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin
crew is flight safety. It cannot be gainsaid that cabin attendants must maintain agility at all times in
order to inspire passenger confidence on their ability to care for the passengers when something goes
wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to
public confidence on their safety records. People, especially the riding public, expect no less than that
airline companies transport their passengers to their respective destinations safely and soundly. A lesser
performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the
whims and caprices of the passengers. The most important activity of the cabin crew is to care for the
safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger safety
goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who have the
necessary strength to open emergency doors, the agility to attend to passengers in cramped working
conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to
consider in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit
doors. Thus, the arguments of respondent that [w]hether the airlines flight attendants are overweight or
not has no direct relation to its mission of transporting passengers to their destination; and that the
weight standards has nothing to do with airworthiness of respondents airlines, must fail.
The rationale in Western Air Lines v. Criswell[76] relied upon by petitioner cannot apply to his
case. What was involved there were two (2) airline pilots who were denied reassignment as flight
engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60. They
sued the airline company, alleging that the age-60 retirement for flight engineers violated the Age
Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are not the
same. The case of overweight cabin attendants is another matter. Given the cramped cabin space and
narrow aisles and emergency exit doors of the airplane, any overweight cabin attendant would certainly
have difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task. That an
obese cabin attendant occupies more space than a slim one is an unquestionable fact which courts can
judicially recognize without introduction of evidence.[77] It would also be absurd to require airline
companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate
overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding
passengers from evacuating the aircraft, should the occasion call for it. The job of a cabin attendant
during emergencies is to speedily get the passengers out of the aircraft safely. Being overweight

necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin attendants are
dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might slow
down just because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are
not remote.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made
known to him prior to his employment. He is presumed to know the weight limit that he must maintain
at all times.[78] In fact, never did he question the authority of PAL when he was repeatedly asked to trim
down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that what is agreed upon
shall be done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and
body frame for both male and female cabin attendants. A progressive discipline is imposed to allow noncompliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut
rules obviate any possibility for the commission of abuse or arbitrary action on the part of PAL.
III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate
against him.[79] We are constrained, however, to hold otherwise. We agree with the CA that [t]he
element of discrimination came into play in this case as a secondary position for the private respondent
in order to escape the consequence of dismissal that being overweight entailed. It is a confession-andavoidance position that impliedly admitted the cause of dismissal, including the reasonableness of the
applicable standard and the private respondents failure to comply.[80] It is a basic rule in evidence that
each party must prove his affirmative allegation.[81]
Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner
has to prove his allegation with particularity. There is nothing on the records which could support the
finding of discriminatory treatment. Petitioner cannot establish discrimination by simply naming the
supposed cabin attendants who are allegedly similarly situated with him.Substantial proof must be
shown as to how and why they are similarly situated and the differential treatment petitioner got
from PAL despite the similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner
miserably failed to indicate their respective ideal weights; weights over their ideal weights; the periods
they were allowed to fly despite their being overweight; the particular flights assigned to them; the
discriminating treatment they got from PAL; and other relevant data that could have adequately
established a case of discriminatory treatment by PAL. In the words of the CA, PAL really had no
substantial case of discrimination to meet.[82]
We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and
the NLRC, are accorded respect, even finality.[83] The reason is simple: administrative agencies are
experts in matters within their specific and specialized jurisdiction.[84] But the principle is not a hard and
fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it can be
shown that administrative bodies grossly misappreciated evidence of such nature so as to compel a
conclusion to the contrary, their findings of facts must necessarily be reversed. Factual findings of

administrative agencies do not have infallibility and must be set aside when they fail the test of
arbitrariness.[85]
Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their
findings.
To make his claim more believable, petitioner invokes the equal protection clause guaranty[86] of
the Constitution. However, in the absence of governmental interference, the liberties guaranteed by the
Constitution cannot be invoked.[87] Put differently, the Bill of Rights is not meant to be invoked against
acts of private individuals.[88] Indeed, the United States Supreme Court, in interpreting the Fourteenth
Amendment,[89] which is the source of our equal protection guarantee, is consistent in saying that
the equal protection erects no shield against privateconduct,
however
discriminatory
or
wrongful.[90] Private actions, no matter how egregious, cannot violate the equal protection guarantee.[91]

IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages have not been
mooted. He is entitled to reinstatement and his full backwages, from the time he was illegally dismissed
up to the time that the NLRC was reversed by the CA.[92]
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation
or, at the option of the employer, merely reinstated in the payroll. The posting of a bond
by the employer shall not stay the execution for reinstatement provided herein.
The law is very clear. Although an award or order of reinstatement is self-executory and does
not require a writ of execution,[93] the option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the
courts.
Contrary to the allegation of petitioner that PAL did everything under the sun to frustrate his
immediate return to his previous position,[94] there is evidence that PAL opted to physically reinstate him
to a substantially equivalent position in accordance with the order of the Labor

Arbiter.[95] In fact, petitioner duly received the return to work notice on February 23, 2001, as shown by
his signature.[96]
Petitioner cannot take refuge in the pronouncements of the Court in a case[97] that [t]he
unjustified refusal of the employer to reinstate the dismissed employee entitles him to payment of his
salaries effective from the time the employer failed to reinstate him despite the issuance of a writ of
execution[98] and even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the wages of the employee during the
period of appeal until reversal by the higher court.[99] He failed to prove that he complied with the
return to work order of PAL. Neither does it appear on record that he actually rendered services
for PAL from the moment he was dismissed, in order to insist on the payment of his full backwages.
In insisting that he be reinstated to his actual position despite being overweight, petitioner in
effect wants to render the issues in the present case moot. He asks PAL to comply with the
impossible. Time and again, the Court ruled that the law does not exact compliance with the
impossible.[100]
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced
from the language of Article 279 of the Labor Code that [a]n employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld from him up to the time of his actual
reinstatement. Luckily for petitioner, this is not an ironclad rule.
Exceptionally, separation pay is granted to a legally dismissed employee as an act social
justice,[101] or based on equity.[102] In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the moral character of the employee.[103]
Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every year
of service.[104] It should include regular allowances which he might have been receiving.[105] We are not
blind to the fact that he was not dismissed for any serious misconduct or to any act which would reflect
on his moral character. We also recognize that his employment with PAL lasted for more or less a
decade.
WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that
petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to one-half (1/2)
months pay for every year of service, which should include his regular allowances.

SO ORDERED.

RUBEN T. REYES
Associate Justice

Opinaldo v. Ravina, G.R. No. 196573, October 16, 2013

G.R. No. 196573

October 16, 2013

VICTORINO OPINALDO, Petitioner,

vs.
NARCISA RAVINA, Respondent.
DECISION
VILLARAMA, JR., J.:
On appeal under Rule 45 is the Decision1 dated October 19, 2010 and Resolution2 dated March 17, 2011
of the Court of Appeals (CA), Cebu City, in CA-G.R. SP No. 04479 which reversed and set aside the
Decision3 and Resolution4 of the National Labor Relations Commission (NLRC), Cebu City, and dismissed
petitioner s complaint for illegal dismissal against respondent.
The facts follow.
Respondent Narcisa Ravina (Ravina) is the general manager and sole proprietor of St. Louisse Security
Agency (the Agency). Petitioner Victorino Opinaldo (Opinaldo) is a security guard who had worked for
the Agency until his alleged illegal dismissal by respondent on December 22, 2006.
Agency hired the services of petitioner on October 5, 2005, with a daily salary of P176.66 and detailed
him to PAIJR Furniture Accessories (PAIJR) in Mandaue City.5
In a letter dated August 15, 2006, however, the owner of PAIJR submitted a written complaint to
respondent stating as follows:
I have two guards assigned here in my company, namely, SG. Opinaldo and SGT. Sosmenia. Hence, ... I
hereby formalize our request to relieve one of our company guards and I choose SG. VICTORINO B.
OPINALDO, detailed/assigned at PAIJR FURNITURE ACCESSORIES located at TAWASON, MANDAUE CITY.
For the reason: He is no longer physically fit to perform his duties and responsibilities as a company
guard because of his health condition.
Looking forward to your immediate action. Thank you.6

Acceding to PAIJRs request, respondent relieved petitioner from his work. Respondent also required
petitioner to submit a medical certificate to prove that he is physically and mentally fit for work as
security guard.
On September 6, 2006, respondent reassigned petitioner to Gomez Construction at Mandaue City. After
working for a period of two weeks for Gomez Construction and upon receipt of his salary for services
rendered within the said two-week period, petitioner ceased to report for work.7 The records show that
petitioners post at Gomez Construction was the last assignment given to him by respondent.
On November 7, 2006, petitioner filed a complaint8 against respondent with the Department of Labor
and Employment (DOLE) Regional Office in Cebu City for underpayment of salary and nonpayment of
other labor standard benefits. The parties agreed to settle and reached a compromise agreement. On
November 27, 2006, petitioner signed a Quitclaim and Release9 before the DOLE Regional Office in Cebu
City for the amount ofP5,000.10
After almost four weeks from the settlement of the case, petitioner returned to respondents office on
December 22, 2006. Petitioner claims that when he asked respondent to sign an SSS11 Sickness
Notification which he was going to use in order to avail of the discounted fees for a medical check-up,
respondent allegedly refused and informed him that he was no longer an employee of the Agency.
Respondent allegedly told him that when he signed the quitclaim and release form at the DOLE Regional
Office, she already considered him to have quit his employment.12 Respondent, on the other hand,
counterclaims that she did not illegally dismiss petitioner and that it was a valid exercise of management
prerogative that he was not given any assignment pending the submission of the required medical
certificate of his fitness to work.13
On January 26, 2007, petitioner filed a Complaint14 for Illegal Dismissal with a prayer for the payment of
separation pay in lieu of reinstatement against respondent and the Agency before the NLRC Regional
Arbitration Branch No. VII, Cebu City. After trial and hearing, Labor Arbiter Maria Christina S. Sagmit
rendered a Decision15on June 18, 2008 holding respondent and the Agency liable for illegal dismissal and
ordering them to pay petitioner separation pay and back wages. The Labor Arbiter ruled,
In the instant case, respondents failed to establish that complainant was dismissed for valid causes. For
one, there is no evidence that complainant was suffering from physical illness which will explain his lack
of assignment. Further, there is no admissible proof that Ravina even required complainant to submit a
medical certificate. Thus, complainant could not be deemed to have refused or neglected to comply
with this order.
xxxx
Considering that there is no evidence that complainant was physically unfit to perform his duties,
respondents must be held liable for illegal dismissal. Ordinarily, complainant will be entitled to
reinstatement and full backwages. However, complainant has expressed his preference not to be
reinstated. Hence, respondents must be ordered to give complainant separation pay in lieu of
reinstatement equivalent to one months salary for every year of service. Complainant is also entitled to
full backwages from the time he was terminated until the date of this Decision. WHEREFORE,
respondents Narcisa Ravina and/or St. Louisse Security Agency are ordered to pay complainant the total

amount EIGHTY-TWO THOUSAND THREE HUNDRED FORTY PESOS (P82,340.00), consisting ofP22,500.00
in separation pay and P59,840.00 in full backwages.
SO ORDERED.16
Respondent appealed to the NLRC which, however, affirmed the decision of the Labor Arbiter and
dismissed the appeal for lack of merit.17 The NLRC ruled that there was no just and authorized cause for
dismissal and held that "without a certification from a competent public authority that petitioner suffers
from a disease of such nature or stage that cannot be cured within a period of six (6) months even with
proper medical attendance, respondents are not justified in refusing petitioners presence in the
workplace."18 The NLRC also ruled that neither did petitioner abandon his job as his failure to work was
due to "respondents turning him down."19 Respondent moved for reconsideration but the motion was
denied in a Resolution20 dated June 30, 2009 where the NLRC reiterated its finding of illegal dismissal
given the absence of any just or authorized cause for the termination of petitioner and the failure to
prove abandonment on his part.
Respondent elevated the case to the CA on a Petition for Certiorari.21 On October 19, 2010, the
appellate court ruled for respondent and reversed and set aside the decision and resolution of the NLRC.
Ruling on the issue raised by petitioner that respondents petition should have been dismissed outright
as her motion for reconsideration before the NLRC was filed out of time, the appellate court held that
the issue was rendered moot and academic when the NLRC gave due course to the motion and decided
the case on the merits. The appellate court further held that petitioner should have filed his comment or
opposition upon the filing of the subject motion for reconsideration and not after the termination of the
proceedings before the NLRC. As to the issue of illegal dismissal, the appellate court ruled that it was
petitioner himself who failed to report for work and therefore severed his employment with the Agency.
The CA further held that petitioners claims relative to his alleged illegal dismissal were not
substantiated. The pertinent portions of the assailed Decision reads,
Based from the evidence on record, the chain of events started when PAIJR sent to Ravina its 15 August
2006 letter-complaint to relieve Opinaldo. This led to Opinaldos reassignment to work for Engr. Gomez
on 06 September 2006. Upon his failure to continue working for Engr. Gomez due to his refusal to obtain
a medical certificate, Opinaldo filed the complaint for money claims on 07 November 2006. This was
however settled when Opinaldo and Ravina signed a quitclaim on 27 November 2006. Still, Opinaldo did
not obtain the medical certificate required by Ravina. Then, Opinaldos hasty filing of a complaint for
illegal dismissal against Ravina on 26 January 2007.
xxxx
The requirement to undergo a medical examination is a lawful exercise of management prerogative on
Ravinas part considering the charges that Opinaldo was not only suffering from hypertension but was
also sleeping while on duty. The management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, time, place
and manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay off of workers and discipline, dismissal and recall of workers.

Besides, as a security guard, the need to be physically fit cannot be downplayed. If at all, Opinaldos
obstinate refusal to submit his medical certificate is equivalent to willful disobedience to a lawful order.
x x x.
xxxx
Verily, the totality of Opinaldos acts justifies the dismissal of his complaint for illegal dismissal against
Ravina. While it is true that the state affirms labor as a primary social economic force, we are also
mindful that the management has rights which must also be respected and enforced.22
Petitioner moved for reconsideration of the Decision but his motion was denied in the questioned
Resolution of March 17, 2011 on the ground that there are neither cogent reasons nor new and
substantial grounds which would warrant a reversal of the appellate courts findings. Hence, petitioner
filed this petition alleging that:
I THE HONORABLE COURT OF APPEALS ERRED AND DECIDED THE CASE NOT IN ACCORDANCE WITH LAW
AND ESTABLISHED JURISPRUDENCE WHEN IT GAVE DUE COURSE TO THE RESPONDENTS PETITION FOR
CERTIORARI UNDER RULE 65 DESPITE BEING FILED OUT OF TIME AND NOT PROPERLY VERIFIED
II THE HONORABLE COURT OF APPEALS ERRED AND DECIDED THE CASE NOT IN ACCORDANCE WITH LAW
AND ESTABLISHED JURISPRUDENCE WHEN IT REVERSED AND SET ASIDE THE DECISION AND RESOLUTION
OF THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, BY DECLARING
THAT THE DISMISSAL OF PETITIONER WAS LEGAL AND PROPER23
We first rule on the procedural issue.
Petitioner questions the appellate court for ruling that the issue of the timeliness of the filing of
respondents motion for reconsideration of the NLRC decision has become moot and academic when
the NLRC dismissed the said motion based on the merits and affirmed its decision. It is the opinion of
petitioner that "this should not and cannot be understood to mean that the motion for reconsideration
was filed within the period allowed," and that "the Commission may have accommodated the motion
for reconsideration although belatedly filed and had chosen to decide it based on its merits x x x but it
does not change the fact that the motion for reconsideration before the Commission was filed beyond
the reglementary period."24 Petitioner believes that respondents filing of the motion for
reconsideration on time is a precondition to the application of the rule that a petition for certiorari must
be filed within 60 days from the notice of the denial of the motion for reconsideration. As petitioner
puts it, "the counting of the sixty (60)-day period from the notice of the denial of the motion for
reconsideration is proper only when the motion was filed on time."25
The CA, ruling that the procedural issue is already moot and academic, ratiocinated as follows:
Anent the first issue, Ravina argues that the issue of timeliness of filing a Motion for Reconsideration
with the NLRC has been dispensed with when it resolved to dismiss said Motion based on the merits and
not on the mere technical issue of timeliness. Ravina further insists that had the NLRC denied said
Motion based on the issue of timeliness, it would have just outrightly dismissed it based on said ground
and not on the merits she raised in her Motion for Reconsideration.

The period within which to file a certiorari petition is 60 days as provided under Section 4, Rule 65 of the
1997 Rules of Civil Procedure as amended by Circular No. 39-98 and further amended by A.M. No. 00-203-SC, thusly:
SECTION 4. When and where petition filed. The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is
timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from
notice of the denial of said motion.
xxxx
xxxx
To reiterate, the NLRC promulgated its challenged Decision on 24 April 2009. Ravina alleged that her
former counsel received a copy of said decision on 08 June 2009. However, she changed her counsel
who, in turn, obtained a copy of the decision on 17 June 2009. The NLRC then promulgated its assailed
Resolution on 30 June 2009 which Ravina received on 29 July 2009. Ravinas Petition for Certiorari,
dated 28 August 2009, was filed on 09 September 2009.
The reckoning period for the filing of a certiorari petition is sixty (60) days counted from notice of the
denial of said motion. Prescinding from the foregoing, the Petition for Certiorari was filed within the 60day period.
At this stage of the proceeding, it is futile to belabor on the timeliness of the Motion for
Reconsideration. This is due to the fact that the issue of timeliness has become moot and academic
considering that Ravinas Motion for Reconsideration was given due course by the NLRC. In fact, the
NLRC even decided the motion on the merits and not merely on technicality. Moreover, Opinaldo should
have filed a Comment or Opposition as soon as the Motion for Reconsideration was filed. Opinaldo
should not have waited for the termination of the proceedings before the NLRC. In point of fact, the
belated questioning of the issue of timeliness even operated to estop Opinaldo.26(Emphasis ours.)
Time and again, we have ruled and it has become doctrine that the perfection of an appeal within the
statutory or reglementary period and in the manner prescribed by law is mandatory and jurisdictional.
Failure to do so renders the questioned decision final and executory and deprives the appellate court of
jurisdiction to alter the final judgment, much less to entertain the appeal.27 In labor cases, the
underlying purpose of this principle is to prevent needless delay, a circumstance which would allow the
employer to wear out the efforts and meager resources of the worker to the point that the latter is
constrained to settle for less than what is due him.28
In the case at bar, the applicable rule on the perfection of an appeal from the decision of the NLRC is
Section 15, Rule VII of the 2005 Revised Rules of Procedure of the National Labor Relations Commission:
Section 15. Motions for Reconsideration. Motion for reconsideration of any decision, resolution or
order of the Commission shall not be entertained except when based on palpable or patent errors;
provided that the motion is under oath and filed within ten (10) calendar days from receipt of decision,
resolution or order, with proof of service that a copy of the same has been furnished, within the

reglementary period, the adverse party; and provided further, that only one such motion from the same
party shall be entertained.
Should a motion for reconsideration be entertained pursuant to this SECTION, the resolution shall be
executory after ten (10) calendar days from receipt thereof.
We are not, however, unmindful that the NLRC is not bound by the technical rules of procedure and is
allowed to be liberal in the application of its rules in deciding labor cases. Thus, under Section 2, Rule I of
the 2005 Revised Rules of Procedure of the National Labor Relations Commission it is stated:
Section 2. Construction. These Rules shall be liberally construed to carry out the objectives of the
Constitution, the Labor Code of the Philippines and other relevant legislations, and to assist the parties
in obtaining just, expeditious and inexpensive resolution and settlement of labor disputes.
It is significant that the 2011 NLRC Rules of Procedure, under Section 2, Rule I thereof, also carries
exactly the same provision. Further, the 2005 Revised Rules and the 2011 Rules carry identical provisions
appearing under Section 10, Rule VII of both laws:
Section 10. Technical rules not binding. The rules of procedure and evidence prevailing in courts of law
and equity shall not be controlling and the Commission shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process.
In any proceeding before the Commission, the parties may be represented by legal counsel but it shall
be the duty of the Chairman, any Presiding Commissioner or Commissioner to exercise complete control
of the proceedings at all stages.
All said, despite this jurisdictions stance towards the exercise of liberality, the rules should not be
relaxed when it would render futile the very purpose for which the principle of liberality is
adopted.29 The liberal interpretation stems from the mandate that the workingmans welfare should be
the primordial and paramount consideration.30We are convinced that the circumstances in the case at
bar warranted the NLRCs exercise of liberality when it decided respondents motion for reconsideration
on the merits.
The subject motion for reconsideration of the NLRC decision was filed on June 25, 2009. The evidence
on record shows that the decision of the NLRC dated April 24, 2009 was received by respondent herself
on June 17, 2009. The same decision was, however, earlier received on June 8, 2009 by respondents
former counsel who allegedly did not inform respondent of the receipt of such decision until respondent
went to his office on June 23, 2009 to get the files of the case. If we follow a strict construction of the
ten-day rule under the 2005 Revised Rules of Procedure of the National Labor Relations Commission and
consider notice to respondents former counsel as notice to respondent herself, the expiration of the
period to file a motion for reconsideration should have been on June 18, 2009. The NLRC, however,
chose a liberal application of its rules: it decided the motion on the merits. Nevertheless, it denied
reconsideration.
We defer to the exercise of discretion by the NLRC and uphold its judgment in applying a liberal
construction of its procedural and technical rules to this case in order to ventilate and resolve the issues

raised by respondent in the motion for reconsideration and fully resolve the case on the merits. It would
be purely conjectural to challenge the NLRCs exercise of such liberality for being tainted with grave
abuse of discretion especially that it did not reverse, but even affirmed, its questioned decision which
sustained the ruling of the Labor Arbiter that respondent illegally dismissed petitioner. In view of such
disposition, that the NLRC gave due course to the motion in the interest of due process and to render a
full resolution of the case on the merits is the more palpable explanation for the liberal application of its
rules. It is significant to note that neither did petitioner ever raise the issue of the NLRCs ruling on the
merits of the subject motion for reconsideration. And the reason is clear: the motion for reconsideration
was resolved in favor of petitioner. Furthermore, if the NLRC accorded credibility to the explanation
proffered by respondent for its belated filing of the motion, we cannot now second-guess the NLRCs
judgment in view of the circumstances of the case and in the absence of any showing that it gravely
abused its discretion.
In light of the foregoing, we cannot uphold the stand of petitioner that the petition for certiorari before
the CA was filed out of time, and at the same time rule that the NLRC acted in the proper exercise of its
jurisdiction when it liberally applied its rules and resolved the motion for reconsideration on the merits.
To so hold would nullify the latitude of discretion towards liberal construction granted to the NLRC
under the 2005 Revised Rules of Procedure of the National Labor Relations Commission including the
decisions and resolutions rendered in the exercise of such discretion.
Petitioner also claims that the verification in respondents petition for certiorari before the CA suffers
from infirmity because it was based only on "personal belief and information." As it is, petitioner argues
that it does not comply with Section 4,31 Rule 7 of the 1997 Rules on Civil Procedure, as amended, which
requires a pleading to be verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic records.32 The
petition must therefore be considered as an unsigned pleading producing no legal effect under Section
3,33 Rule 7 of the Rules and should have resulted in the outright dismissal of the petition.
It is a matter of procedural consequence in the case at bar that whether we strictly or liberally apply the
technical rules on the requirement of verification in pleadings, the disposition of the case will be the
same. If we sustain petitioners stance that the petition before the CA should have been outrightly
dismissed, the NLRC decision finding the dismissal of petitioner as illegal would have reached finality. On
the other hand, if we adopt respondents view that the defect in the verification of the petition is merely
a formal defect and is neither jurisdictional nor fatal, we will be sustaining the appellate courts giving
due course to the petition. However, on substantive grounds, we reverse the appellate courts decision
and reinstate the finding of illegal dismissal by the NLRC and the Labor Arbiter.
The appellate court reversed both the NLRC and the Labor Arbiter in consideration of the following
factors: that petitioner did not counter respondents receipt of the letter-complaint of PAIJR relative to
his work performance; that petitioner did not refute the fact that respondent required him to submit a
medical certificate; and, that petitioner failed to comply with the requirement to submit the medical
certificate. Hence, when petitioner failed to submit the required medical certificate, the appellate court
found it to be a valid exercise of management prerogative on the part of respondent not to give
petitioner any work assignment pending its submission.
We do not agree.

Jurisprudence is replete with cases recognizing the right of the employer to have free reign and enjoy
sufficient discretion to regulate all aspects of employment, including the prerogative to instill discipline
in its employees and to impose penalties, including dismissal, upon erring employees. This is a
management prerogative where the free will of management to conduct its own affairs to achieve its
purpose takes form.34 Even labor laws discourage interference with the exercise of such prerogative and
the Court often declines to interfere in legitimate business decisions of employers.35 However, the
exercise of management prerogative is not unlimited. Managerial prerogatives are subject to limitations
provided by law, collective bargaining agreements, and general principles of fair play and
justice.36 Hence, in the exercise of its management prerogative, an employer must ensure that the
policies, rules and regulations on work-related activities of the employees must always be fair and
reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved
and to the degree of the infraction.37
In the case at bar, we recognize, as did the appellate court, that respondents act of requiring petitioner
to undergo a medical examination and submit a medical certificate is a valid exercise of management
prerogative. This is further justified in view of the letter-complaint from one of respondents clients,
PAIJR, opining that petitioner was "no longer physically fit to perform his duties and responsibilities as a
company guard because of his health condition."38 To be sure, petitioners job as security guard
naturally requires physical and mental fitness under Section 5 of Republic Act No. 5487,39 as amended
by Presidential Decree No. 100.40
While the necessity to prove ones physical and mental fitness to be a security guard could not be more
emphasized, the question to be settled is whether it is a valid exercise of respondents management
prerogative to prevent petitioners continued employment with the Agency unless he presents the
required medical certificate. Respondent argues, viz.:
Thus, respondents in the exercise of their MANAGEMENT PREROGATIVE required Complainant to submit
a Medical Certificate to prove that he is "PHYSICALLY AND MENTALLY FIT" for work as Security Guard.
Unfortunately, however, up to the present time, complainant failed to submit said Medical Examination
and Findings giving him clean bill of health, to respondents. Herein respondents are ready and willing to
accept him as such Security Guard once he could submit said Medical Examination and Findings.
The requirement anent the presentation of such MEDICAL CERTIFICATE by Complainant to Respondents
is but a Management Measure of ensuring Respondents including Complainant that Complainant is
physically and mentally fit for continued Employment and will not in any manner pose a danger or,
threat to the respondents properties and lives of their customers and other employees as well as to the
person and life of Complainant himself.41
It is utterly significant in the case at bar that a considerably long period has lapsed from petitioners last
day of recorded work on September 21, 2006 until he was informed by respondent on December 22,
2006 that he was no longer an employee of the Agency. In the words of petitioner, he had been on a
"floating status"42 for three months. Within this period, petitioner did not have any work assignment
from respondent who proffers the excuse that he has not submitted the required medical certificate.
While it is a management prerogative to require petitioner to submit a medical certificate, we hold that
respondent cannot withhold petitioners employment without observing the principles of due process
and fair play. The Labor Arbiter and the CA have conflicting findings with respect to the submission of
the medical certificate.

The Labor Arbiter observed that "there is no admissible proof that respondent even required petitioner
to submit a medical certificate. Thus, petitioner could not be deemed to have refused or neglected to
comply with this order."43 The CA countered that while there is no documentary evidence to prove it,
the admission of both parties establishes that there is a pending requirement for a medical certificate
and it was not complied with by petitioner. We agree with the appellate court that despite the lack of
documentary evidence, both parties have admitted to respondents medical certificate requirement. We
so hold despite petitioners protestations that what respondent required of him was to submit himself
to a medical check-up, and not to submit a medical certificate. Even if petitioners allegation is to be
believed, the fact remains that he did not undergo the medical check-up which he himself claims to have
been required by respondent.
All said, what behooves the Court is the lack of evidence on record which establishes that respondent
informed petitioner that his failure to submit the required medical certificate will result in his lack of
work assignment. It is a basic principle of labor protection in this jurisdiction that a worker cannot be
deprived of his job without satisfying the requirements of due process.44 Labor is property and the right
to make it available is next in importance to the rights of life and liberty.45 As enshrined under the Bill of
Rights, no person shall be deprived of life, liberty or property without due process of law.46 The due
process requirement in the deprivation of ones employment is transcendental that it limits the exercise
of the management prerogative of the employer to control and regulate the affairs of the business. In
the case at bar, all that respondent employer needed to prove was that petitioner employee was
notified that his failure to submit the required medical certificate will result in his lack of work
assignment and eventually the termination of his employment as a security guard. There is no iota of
evidence in the records, save for the bare allegations of respondent, that petitioner was notified of such
consequence for non-submission. In truth, the facts of the case clearly show that respondent even
reassigned petitioner to Gomez Construction from his PAIJR post despite the non-submission of a
medical certificate. If it was indeed the policy of respondent not to give petitioner any work assignment
without the medical certificate, why was petitioner reassigned despite his noncompliance?
That is not all. In addition to invoking management prerogative as a defense, respondent also alleges
abandonment.1wphi1 Respondent claims that after petitioner received his last salary from his
assignment with Gomez Construction, he no longer reported for work. The assailed Decision found that
petitioner indeed abandoned his work, viz.:
It was only when Opinaldo refused to report for work on his assignment for Engr. Gomez after having
received his salary for work rendered starting on 06 September 2006 that Ravina became firm that the
medical certificate should be submitted. But, Opinaldo did not heed Ravinas order. It was Opinaldo who
altogether failed to report for work.47
We disagree.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.48 To
constitute abandonment of work, two elements must concur: (1) the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and, (2) there must have
been a clear intention on the part of the employee to sever the employer-employee relationship
manifested by some overt act.49 None of these elements is present in the case at bar. As succinctly
stated by the NLRC:

From respondents own admission in their position paper, it is clear that they prevented petitioners
continued employment with them unless the latter presents a medical certificate that he is physically
and mentally fit for work x x x.
xxxx
Moreover, if it was really true that complainant abandoned his work, then why have not respondents
sent him a notice to report back for work? It is evident then that respondents found an excuse to decline
complainants continued stay with them on the pretext that he has to submit first a medical certificate
before he could be allowed to resume employment.50
Finally, respondent harps that she could not be held liable for illegal dismissal because, in the first place,
she did not dismiss petitioner. Respondent maintains that she merely refused to give petitioner any
work assignment until the submission of a medical certificate. On this issue, the CA concurred with
respondent and ruled that petitioner failed to "establish the facts which would paint the picture that
respondent terminated him."51
We need not reiterate that respondent did not properly exercise her management prerogative when she
withheld petitioners employment without due process. Respondent failed to prove that she has notified
petitioner that her continuous refusal to provide him any work assignment was due to his nonsubmission of the medical certificate. Had respondent exercised the rules of fair play, petitioner would
have had the option of complying or not complying with the medical certificate requirement having
full knowledge of the consequences of his actions. Respondent failed to do so and she cannot now hide
behind the defense that there was no illegal termination because petitioner cannot show proof that he
had been illegally dismissed. It is a time-honored legal principle that the employer has the onus
probandi to show that the dismissal or termination was for a just and authorized cause under the Labor
Code. Respondent failed to show that the termination was justified and authorized, nor was it done as a
valid exercise of management prerogative. Given the circumstances in the case at bar, it is not fair to
shift the burden to petitioner, and rule that he failed to prove his claim, when respondent had
successfully terminated the employer-employee relationship without leaving a paper trail in a clear case
o illegal dismissal.
WHEREFORE, the petition for review on certiorari is GRANTED. The assailed Decision dated October 19
2010 and Resolution dated March 17 2011 o the Court o Appeals in CA-G.R. SP No. 04479 dismissing
petitioner s Complaint for Illegal Dismissal are hereby REVERSED and SET ASIDE. The Decision and
Resolution dated April24, 2009 and June 30, 2009, respectively, o the NLRC in NLRC Case No. VAC 01000081-2009 (RAB Case No. Vll-01-0208-2007) requiring respondent Narcisa Ravina and/or St. Louisse
Security Agency to pay petitioner Victorino Opinaldo the total amount o P82,340 consisting o P22,500 in
separation pay and P59,840 in full back wages, are hereby REINSTATED and UPHELD.
No costs.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice

Phimco Industries v. PILA, G.R. No. 170830, August 11, 2010

Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

PHIMCO INDUSTRIES, INC., G.R. No. 170830

Petitioner,
Present:
versus CARPIO MORALES, J., Chairperson
PHIMCO INDUSTRIES LABOR BRION,
ASSOCIATION (PILA), and BERSAMIN,
ERLINDA VAZQUEZ, RICARDO ABAD, and
SACRISTAN, LEONIDA CATALAN, VILLARAMA, JR., JJ.
MAXIMO PEDRO, NATHANIELA
DIMACULANGAN,* RODOLFO
MOJICO, ROMEO CARAMANZA, Promulgated:
REYNALDO GANITANO, ALBERTO
BASCONCILLO,** and RAMON August 11, 2010
FALCIS, in their capacity as officers
of PILA, and ANGELITA BALOSA,***
DANILO BANAAG, ABRAHAM
CADAY, ALFONSO CLAUDIO,
FRANCISCO DALISAY,****
ANGELITO DEJAN,***** PHILIP
GARCES, NICANOR ILAGAN,
FLORENCIO LIBONGCOGON,******
NEMESIO MAMONONG, TEOFILO
MANALILI, ALFREDO PEARSON,*******
MARIO PEREA,******** RENATO
RAMOS, MARIANO ROSALES,
PABLO SARMIENTO, RODOLFO
TOLENTINO, FELIPE VILLAREAL,
ARSENIO ZAMORA, DANILO

BALTAZAR, ROGER CABER,*********

REYNALDO CAMARIN, BERNARDO
CUADRA,********** ANGELITO DE
GUZMAN, GERARDO FELICIANO,***********
ALEX IBAEZ, BENJAMIN JUAN, SR.,
RAMON MACAALAY, GONZALO
MANALILI, RAUL MICIANO,
HILARIO PEA, TERESA
PERMOCILLO,************ ERNESTO RIO,
RODOLFO SANIDAD, RAFAEL
STA. ANA, JULIAN TUGUIN and AMELIA
ZAMORA, as members of PILA,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION

BRION, J.:

Before us is the petition for review on certiorari[1] filed by petitioner Phimco Industries, Inc.
(PHIMCO), seeking to reverse and set aside the decision,[2] dated February 10, 2004, and the
resolution,[3] dated December 12, 2005, of the Court of Appeals (CA) in CA-G.R. SP No. 70336. The
assailed CA decision dismissed PHIMCOs petition for certiorari that challenged the resolution, dated
December 29, 1998, and the decision, dated February 20, 2002, of the National Labor Relations
Commission (NLRC); the assailed CA resolution denied PHIMCOs subsequent motion for reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the records, are briefly summarized below.
PHIMCO is a corporation engaged in the production of matches, with principal address at
Phimco Compound, Felix Manalo St., Sta. Ana, Manila. Respondent Phimco Industries Labor Association
(PILA) is the duly authorized bargaining representative of PHIMCOs daily-paid workers. The 47
individually named respondents are PILA officers and members.
When the last collective bargaining agreement was about to expire on December 31, 1994,
PHIMCO and PILA negotiated for its renewal. The negotiation resulted in a deadlock on economic issues,
mainly due to disagreements on salary increases and benefits.
On March 9, 1995, PILA filed with the National Conciliation and Mediation Board (NCMB) a
Notice of Strike on the ground of the bargaining deadlock. Seven (7) days later, or on March 16, 1995,
the union conducted a strike vote; a majority of the union members voted for a strike as its response to

the bargaining impasse. On March 17, 1995, PILA filed the strike vote results with the NCMB. Thirty-five
(35) days later, or on April 21, 1995, PILA staged a strike.
On May 3, 1995, PHIMCO filed with the NLRC a petition for preliminary injunction and
temporary restraining order (TRO), to enjoin the strikers from preventing through force, intimidation
and coercion the ingress and egress of non-striking employees into and from the company premises. On
May 15, 1995, the NLRC issued an ex-parte TRO, effective for a period of twenty (20) days, or until June
5, 1995.
On June 23, 1995, PHIMCO sent a letter to thirty-six (36) union members, directing them to
explain within twenty-four (24) hours why they should not be dismissed for the illegal acts they
committed during the strike. Three days later, or on June 26, 1995, the thirty-six (36) union members
were informed of their dismissal.
On July 6, 1995, PILA filed a complaint for unfair labor practice and illegal dismissal (illegal
dismissal case) with the NLRC. The case was docketed as NLRC NCR Case No. 00-07-04705-95, and
raffled to Labor Arbiter (LA) Pablo C. Espiritu, Jr.
On July 7, 1995, then Acting Labor Secretary Jose S. Brillantes assumed jurisdiction over the
labor dispute, and ordered all the striking employees (except those who were handed termination
papers on June 26, 1995) to return to work within twenty-four (24) hours from receipt of the order. The
Secretary ordered PHIMCO to accept the striking employees, under the same terms and conditions
prevailing prior to the strike.[4] On the same day, PILA ended its strike.
On August 28, 1995, PHIMCO filed a Petition to Declare the Strike Illegal (illegal strike case) with
the NLRC, with a prayer for the dismissal of PILA officers and members who knowingly participated in
the illegal strike. PHIMCO claimed that the strikers prevented ingress to and egress from the PHIMCO
compound, thereby paralyzing PHIMCOs operations. The case was docketed as NLRC NCR Case No. 0008-06031-95, and raffled to LA Jovencio Ll. Mayor.
On March 14, 1996, the respondents filed their Position Paper in the illegal strike case. They
countered that they complied with all the legal requirements for the staging of the strike, they put up no
barricade, and conducted their strike peacefully, in an orderly and lawful manner, without incident.
LA Mayor decided the case on February 4, 1998,[5] and found the strike illegal; the respondents
committed prohibited acts during the strike by blocking the ingress to and egress from PHIMCOs
premises and preventing the non-striking employees from reporting for work. He observed that it was
not enough that the picket of the strikers was a moving picket, since the strikers should allow the free
passage to the entrance and exit points of the company premises. Thus, LA Mayor declared that the
respondent employees, PILA officers and members, have lost their employment status.
On March 5, 1998, PILA and its officers and members appealed LA Mayors decision to the NLRC.
THE NLRC RULING
The NLRC decided the appeal on December 29, 1998, and set aside LA Mayors decision.[6] The
NLRC did not give weight to PHIMCOs evidence, and relied instead on the respondents evidence
showing that the union conducted a peaceful moving picket.

On January 28, 1999, PHIMCO filed a motion for reconsideration in the illegal strike case.[7]
In a parallel development, LA Espiritu decided the unions illegal dismissal case on March 2,
1999. He ruled the respondents dismissal as illegal, and ordered their reinstatement with payment of
backwages. PHIMCO appealed LA Espiritus decision to the NLRC.
Pending the resolution of PHIMCOs motion for reconsideration in the illegal strike case and the
appeal of the illegal dismissal case, PHIMCO moved for the consolidation of the two (2) cases. The NLRC
acted favorably on the motion and consolidated the two (2) cases in its Order dated August 5, 1999.
On February 20, 2002, the NLRC rendered its Decision in the consolidated cases, ruling totally in
the unions favor.[8] It dismissed the appeal of the illegal dismissal case, and denied PHIMCOs motion for
reconsideration in the illegal strike case. The NLRC found that the picket conducted by the striking
employees was not an illegal blockade and did not obstruct the points of entry to and exit from the
companys premises; the pictures submitted by the respondents revealed that the picket was moving,
not stationary. With respect to the illegal dismissal charge, the NLRC observed that the striking
employees were not given ample opportunity to explain their side after receipt of the June 23, 1995
letter. Thus, the NLRC affirmed the Decision of LA Espiritu with respect to the payment of backwages
until the promulgation of the decision, plus separation pay at one (1) month salary per year of service in
lieu of reinstatement, and 10% of the monetary award as attorneys fees. It ruled out reinstatement
because of the damages sustained by the company brought about by the strike.
On March 14, 2002, PHIMCO filed a motion for reconsideration of the consolidated decision.
On April 26, 2002, without waiting for the result of its motion for reconsideration, PHIMCO
elevated its case to the CA through a petition for certiorari under Rule 65 of the Rules of Court.[9]
THE CA RULING
In a Decision[10] promulgated on February 10, 2004, the CA dismissed PHIMCOs petition
for certiorari. The CA noted that the NLRC findings, that the picket was peaceful and that PHIMCOs
evidence failed to show that the picket constituted an illegal blockade or that it obstructed the points of
entry to and exit from the company premises, were supported by substantial evidence.
PHIMCO came to us through the present petition after the CA denied[11] PHIMCOs motion for
reconsideration.[12]
THE PETITION
The petitioner argues that the strike was illegal because the respondents committed the
prohibited acts under Article 264(e) of the Labor Code, such as blocking the ingress and egress of the
company premises, threat, coercion, and intimidation, as established by the evidence on record.
THE CASE FOR THE RESPONDENTS
The respondents, on the other hand, submit that the issues raised in this case are factual in
nature that we cannot generally touch in a petition for review, unless compelling reasons exist; the

company has not shown any such compelling reason as the picket was peaceful and uneventful, and no
human barricade blocked the company premises.
THE ISSUE
In Montoya v. Transmed Manila Corporation,[13] we laid down the basic approach that should be
followed in the review of CA decisions in labor cases, thus:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast
with the review for jurisdictional error that we undertake under Rule 65. Furthermore,
Rule 45 limits us to the review of questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to view the CA decision in the same
context that the petition for certiorari it ruled upon was presented to it; we have to
examine the CA decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision on the merits of the case was correct. In other
words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that
should be basic in a Rule 45 review of a CA ruling in a labor case. In question form, the
question to ask is: Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?
In this light, the core issue in the present case is whether the CA correctly ruled that the NLRC
did not act with grave abuse of discretion in ruling that the unions strike was legal.
OUR RULING
We find the petition partly meritorious.
Requisites of a valid strike
A strike is the most powerful weapon of workers in their struggle with management in the
course of setting their terms and conditions of employment. Because it is premised on the concept of
economic war between labor and management, it is a weapon that can either breathe life to or destroy
the union and its members, and one that must also necessarily affect management and its members.[14]
In light of these effects, the decision to declare a strike must be exercised responsibly and must
always rest on rational basis, free from emotionalism, and unswayed by the tempers and tantrums of
hot heads; it must focus on legitimate union interests. To be legitimate, a strike should not be
antithetical to public welfare, and must be pursued within legal bounds. The right to strike as a means of
attaining social justice is never meant to oppress or destroy anyone, least of all, the employer.[15]
Since strikes affect not only the relationship between labor and management but also the
general peace and progress of the community, the law has provided limitations on the right tostrike.
Procedurally, for a strike to be valid, it must comply with Article 263[16] of the Labor Code, which
requires that: (a) a notice of strike be filed with the Department of Labor and Employment (DOLE) 30
days before the intended date thereof, or 15 days in case of unfair labor practice; (b) a strike vote be
approved by a majority of the total union membership in the bargaining unit concerned, obtained by
secret ballot in a meeting called for that purpose; and (c) a notice be given to the DOLE of the results of
the voting at least seven days before the intended strike.

These requirements are mandatory, and the unions failure to comply renders the strike
illegal. The 15 to 30-day cooling-off period is designed to afford the parties the opportunity to
amicably resolve the dispute with the assistance of the NCMB conciliator/mediator, while the seven-day
strike ban is intended to give the DOLE an opportunity to verify whether the projected strike really
carries the imprimatur of the majority of the union members.[18]
In the present case, the respondents fully satisfied the legal procedural requirements; a strike
notice was filed on March 9, 1995; a strike vote was reached on March 16, 1995; notification of the
strike vote was filed with the DOLE on March 17, 1995; and the actual strike was launched only on April
25, 1995.
[17]

Strike may be illegal for commission of

prohibited acts
Despite the validity of the purpose of a strike and compliance with the procedural requirements,
a strike may still be held illegal where the means employed are illegal.[19] The means become illegal
when they come within the prohibitions under Article 264(e) of the Labor Code which provides:
No person engaged in picketing shall commit any act of violence, coercion or
intimidation or obstruct the free ingress to or egress from the employer's premises for
lawful purposes, or obstruct public thoroughfares.

Based on our examination of the evidence which the LA viewed differently from the NLRC and
the CA, we find the PILA strike illegal. We intervene and rule even on the evidentiary and factual issues
of this case as both the NLRC and the CA grossly misread the evidence, leading them to inordinately
incorrect conclusions, both factual and legal. While the strike undisputably had not been marred by
actual violence and patent intimidation, the picketing that respondent PILA officers and members
undertook as part of their strike activities effectively blocked the free ingress to and egress from
PHIMCOs premises, thus preventing non-striking employees and company vehicles from entering the
PHIMCO compound. In this manner, the picketers violated Article 264(e) of the Labor Code.

The Evidence
We gather from the case record the following pieces of relevant evidence adduced in the compulsory
arbitration proceedings.[20]
For the Company
1.
Pictures taken during the strike, showing that the respondents prevented free
ingress to and egress from the company premises;[21]
2.
Affidavit of PHIMCO Human Resources Manager Francis Ferdinand Cinco, stating that he
was one of the employees prevented by the strikers from entering the PHIMCO premises;[22]

3.
Affidavit of Cinco, identifying Erlinda Vazquez, Ricardo Sacristan, Leonida
Catalan, Maximo Pedro, Nathaniela R. Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo
Ganitano, Alberto Basconcillo, and Ramon Falcis as PILA officers;[23]
4.
Affidavit of Cinco identifying other members of PILA;[24]
5.
Folder 1, containing pictures taken during the strike identifying and showing Leonida
Catalan, Renato Ramos, Arsenio Zamora, Reynaldo Ganitano, Amelia Zamora, Angelito Dejan, Teresa
Permocillo, and Francisco Dalisay as the persons preventing Cinco and his group from entering the
company premises;[25]
6.
Folder 2, with pictures taken on May 30, 1995, showing Cinco, together with nonstriking PHIMCO employees, reporting for work but being refused entry by strikers Teofilo Manalili,
Nathaniela Dimaculangan, Bernando Cuadra, Maximo Pedro, Nicanor Ilagan, Julian Tuguin, Nemesio
Mamonong, Abraham Caday, Ernesto Rio, Benjamin Juan, Sr., Ramon Macaalay, Gerardo Feliciano,
Alberto Basconcillo, Rodolfo Sanidad, Mariano Rosales, Roger Caber, Angelito de Guzman, Angelito
Balosa and Philip Garces who blocked the company gate;[26]
7.
Folder 3, with pictures taken on May 30, 1995, showing the respondents denying
free ingress to and egress from the company premises;[27]
8.
Folder 4, with pictures taken during the strike, showing that non-striking employees
failed to enter the company premises as a result of the respondents refusal to let them in;[28]
9.
Affidavit of Joaquin Aguilar stating that the pictures presented by Cinco were taken
during the strike;[29]
10.
Pictures taken by Aguilar during the strike, showing non-striking employees being
refused entry by the respondents;[30]
11.
Joint affidavit of Orlando Marfil and Rodolfo Digo, identifying the pictures they
took during the strike, showing that the respondents blocked ingress to and egress from the company
premises;[31] and,
12.
Testimonies of PHIMCO employees Rodolfo Eva, Aguilar and Cinco, as well as those of
PILA officers Maximo Pedro and Leonida Catalan.
For the Respondents
1. Affidavit of Leonida Catalan, stating that the PILA strike complied with all the legal
requirements, and the strike/picket was conducted peacefully with no incident of any illegality;[32]
2.
Affidavit of Maximo Pedro, stating that the strike/picket was conducted peacefully;
the picket was always moving with no acts of illegality having been committed during the strike;[33]
3.
Certification of Police Station Commander Bienvenido de los Reyes that during the
strike there was no report of any untoward incident;[34]
4.
Certification of Rev. Father Erick Adeviso of Dambanang Bayan Parish Church that
the strike was peaceful and without any untoward incident;[35]
5.
Certification of Priest-In-Charge Angelito Fausto of the Philippine Independent
Church in Punta, Santa Ana, that the strike complied with all the requirements for a lawful strike, and
the strikers conducted themselves in a peaceful manner;[36]
6.
Clearance issued by Punong Barangay Mario O. dela Rosa and Barangay Secretary
Pascual Gesmundo, Jr. that the strike from April 21 to July 7, 1995 was conducted in an orderly manner
with no complaints filed;[37] and,
7. Testimonies at the compulsory arbitration proceedings.
In its resolution of December 29, 1998,[38] the NLRC declared that the string of proofs the
company presented was overwhelmingly counterbalanced by the numerous pieces of evidence adduced

by respondents x x x all depicting a common story that respondents put up a peaceful moving picket,
and did not commit any illegal acts x x x specifically obstructing the ingress to and egress from the
company premises[.][39]
We disagree with this finding as the purported peaceful moving picket upon which the NLRC
resolution was anchored was not an innocuous picket, contrary to what the NLRC said it was; the picket,
under the evidence presented, did effectively obstruct the entry and exit points of the company
premises on various occasions.
To strike is to withhold or to stop work by the concerted action of employees as a result of an
industrial or labor dispute.[40] The work stoppage may be accompanied by picketing by the striking
employees outside of the company compound. While a strike focuses on stoppage of work, picketing
focuses on publicizing the labor dispute and its incidents to inform the public of what is happening in the
company struck against. A picket simply means to march to and from the employers premises, usually
accompanied by the display of placards and other signs making known the facts involved in a labor
dispute.[41] It is a strike activity separate and different from the actual stoppage of work.
While the right of employees to publicize their dispute falls within the protection of freedom of
expression[42] and the right to peaceably assemble to air grievances,[43] these rights are by no means
absolute. Protected picketing does not extend to blocking ingress to and egress from the company
premises.[44] That the picket was moving, was peaceful and was not attended by actual violence may not
free it from taints of illegality if the picket effectively blocked entry to and exit from the company
premises.
In this regard, PHIMCO employees Rodolfo Eva and Joaquin Aguilar, and the companys Human
Resources Manager Francis Ferdinand Cinco testified during the compulsory arbitration hearings:
ATTY. REYES: this incident on May 22, 1995, when a coaster or bus attempted to enter
PHIMCO compound, you mentioned that it was refused entry. Why was this (sic)
it refused entry?
WITNESS: Because at that time, there was a moving picket at the gate that is why the
bus was not able to enter.[45]
xxxx
Q: Despite this TRO, which was issued by the NLRC, were you allowed entry by the
strikers?
A: We made several attempts to enter the compound, I remember on May 7, 1995, we
tried to enter the PHIMCO compound but we were not allowed entry.
Q: Aside from May 27, 1995, were there any other instances wherein you were not
allowed entry at PHIMCO compound?
A: On May 29, I recall I was riding with our Production Manager with the Pick-up. We
tried to enter but we were not allowed by the strikers.[46]

xxxx
ARBITER MAYOR: How did the strikers block the ingress of the company?
A: They hold around, joining hands, moving picket.[47]
xxxx
ARBITER MAYOR: Reform the question, and because of that moving picket conducted by
the strikers, no employees or vehicles can come in or go out of the premises?
A: None, sir.[48]
These accounts were confirmed by the admissions of respondent PILA officers Maximo Pedro
and Leonida Catalan that the strikers prevented non-striking employees from entering the company
premises. According to these union officers:
ATTY. CHUA: Mr. witness, do you recall an incident when a group of managers of
PHIMCO, with several of the monthly paid employees who tried to enter the
PHIMCO compound during the strike?
MR. PEDRO: Yes, sir.
ATTY. CHUA: Can you tell us if these (sic) group of managers headed by Francis Cinco
entered the compound of PHIMCO on that day, when they tried to enter?
MR. PEDRO: No, sir. They were not able to enter.[49]
xxxx
ATTY. CHUA: Despite having been escorted by police Delos Reyes, you still did not give
way, and instead proceeded with your moving picket?
MR. PEDRO: Yes, sir.
ATTY. CHUA: In short, these people were not able to enter the premises of PHIMCO, Yes
or No.
MR. PEDRO: Yes, sir. [50]
xxxx
ATTY. CHUA: Madam witness, even if Major Delos Reyes instructed you to give way so as
to allow the employees and managers to enter the premises, you and your coemployees did not give way?
MS. CATALAN: No sir.

ATTY. CHUA: the managers and the employees were not able to enter the premises?
MS. CATALAN: Yes, sir.[51]
The NLRC resolution itself noted the above testimonial evidence, all building up a scenario that
the moving picket put up by [the] respondents obstructed the ingress to and egress from the company
premises[,][52] yet it ignored the clear import of the testimonies as to the true nature of the picket.
Contrary to the NLRC characterization that it was a peaceful moving picket, it stood, in fact, as an
obstruction to the companys points of ingress and egress.
Significantly, the testimonies adduced were validated by the photographs taken of the strike
area, capturing the strike in its various stages and showing how the strikers actually conducted the
picket. While the picket was moving, it was maintained so close to the company gates that it virtually
constituted an obstruction, especially when the strikers joined hands, as described by Aguilar, or were
moving in circles, hand-to-shoulder, as shown by the photographs, that, for all intents and purposes,
blocked the free ingress to and egress from the company premises. In fact, on closer examination, it
could be seen that the respondents were conducting the picket right at the company gates.[53]
The obstructive nature of the picket was aggravated by the placement of benches, with strikers
standing on top, directly in front of the open wing of the company gates, clearly obstructing the entry
and exit points of the company compound.[54]
With a virtual human blockade and real physical obstructions (benches and makeshift structures
both outside and inside the gates),[55] it was pure conjecture on the part of the NLRC to say that [t]he
non-strikers and their vehicles were x x x free to get in and out of the company compound undisturbed
by the picket line.[56] Notably, aside from non-strikers who wished to report for work, company vehicles
likewise could not enter and get out of the factory because of the picket and the physical obstructions
the respondents installed. The blockade went to the point of causing the build up of traffic in the
immediate vicinity of the strike area, as shown by photographs.[57] This, by itself, renders the picket a
prohibited activity. Pickets may not aggressively interfere with the right of peaceful ingress to and egress
from the employers shop or obstruct public thoroughfares; picketing is not peaceful where the sidewalk
or entrance to a place of business is obstructed by picketers parading around in a circle or lying on the
sidewalk.[58]
What the records reveal belies the NLRC observation that the evidence x x x tends to show that
what respondents actually did was walking or patrolling to and fro within the company vicinity and by
word of mouth, banner or placard, informing the public concerning the dispute.[59]
The peaceful moving picket that the NLRC noted, influenced apparently by the certifications
(Mayor delos Reyes, Fr. Adeviso, Fr. Fausto and Barangay Secretary Gesmundo presented in evidence by
the respondents, was peaceful only because of the absence of violence during the strike, but the
obstruction of the entry and exit points of the company premises caused by the respondents picket was
by no means a petty blocking act or an insignificant obstructive act.[60]
As we have stated, while the picket was moving, the movement was in circles, very close to the
gates, with the strikers in a hand-to-shoulder formation without a break in their ranks, thus preventing
non-striking workers and vehicles from coming in and getting out. Supported by actual blocking benches
and obstructions, what the union demonstrated was a very persuasive and quietly intimidating strategy

whose chief aim was to paralyze the operations of the company, not solely by the work stoppage of the
participating workers, but by excluding the company officials and non-striking employees from access to
and exit from the company premises. No doubt, the strike caused the company operations considerable
damage, as the NLRC itself recognized when it ruled out the reinstatement of the dismissed strikers.[61]
Intimidation
Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or intimidation
is unlawful.[62] According to American jurisprudence, what constitutes unlawful intimidation depends on
the totality of the circumstances.[63] Force threatened is the equivalent of force exercised. There may be
unlawful intimidation without direct threats or overt acts of violence. Words or acts which are
calculated and intended to cause an ordinary person to fear an injury to his person, business or property
are equivalent to threats.[64]
The manner in which the respondent union officers and members conducted the picket in the present
case had created such an intimidating atmosphere that non-striking employees and even company
vehicles did not dare cross the picket line, even with police intervention. Those who dared cross the
picket line were stopped. The compulsory arbitration hearings bear this out.
Maximo Pedro, a PILA officer, testified, on July 30, 1997, that a group of PHIMCO managers led
by Cinco, together with several monthly-paid employees, tried to enter the company premises on May
27, 1995 with police escort; even then, the picketers did not allow them to enter.[65]Leonida Catalan,
another union officer, testified that she and the other picketers did not give way despite the instruction
of Police Major de los Reyes to the picketers to allow the group to enter the company premises.[66] (To
be sure, police intervention and participation are, as a rule, prohibited acts in a strike, but we note this
intervention solely as indicators of how far the union and its members have gone to block ingress to and
egress from the company premises.)
Further, PHIMCO employee Rodolfo Eva testified that on May 22, 1995, a company coaster or bus
attempted to enter the PHIMCO compound but it was refused entry by the moving picket.[67] Cinco, the
company personnel manager, also testified that on May 27, 1995, when the NLRC TRO was in force, he
and other employees tried to enter the PHIMCO compound, but they were not allowed entry; on May
29, 1995, Cinco was with the PHIMCO production manager in a pick-up and they tried to enter the
company compound but, again, they were not allowed by the strikers.[68] Another employee, Joaquin
Aguilar, when asked how the strikers blocked the ingress of the company, replied that the strikers hold
around, joining hands, moving picket and, because of the moving picket, no employee or vehicle could
come in and go out of the premises.[69]
The evidence adduced in the present case cannot be ignored. On balance, it supports the
companys submission that the respondent PILA officers and members committed acts during the strike
prohibited under Article 264(e) of the Labor Code. The testimonies of non-striking employees, who were
prevented from gaining entry into the company premises, and confirmed no less by two officers of the
union, are on record.
The photographs of the strike scene, also on record, depict the true character of the picket;
while moving, it, in fact, constituted a human blockade, obstructing free ingress to and egress from the
company premises, reinforced by benches planted directly in front of the company gates. The
photographs do not lie these photographs clearly show that the picketers were going in circles, without

any break in their ranks or closely bunched together, right in front of the gates. Thus, company vehicles
were unable to enter the company compound, and were backed up several meters into the street
leading to the company gates.
Despite all these clear pieces of evidence of illegal obstruction, the NLRC looked the other way
and chose not to see the unmistakable violations of the law on strikes by the union and its respondent
officers and members. Needless to say, while the law protects the rights of the laborer, it authorizes
neither the oppression nor the destruction of the employer.[70] For grossly ignoring the evidence before
it, the NLRC committed grave abuse of discretion; for supporting these gross NLRC errors, the CA
committed its own reversible error.
Liabilities of union
officers and members
In the determination of the liabilities of the individual respondents, the applicable provision is
Article 264(a) of the Labor Code:
Art. 264. Prohibited activities. (a) x x x
xxxx
Any union officer who knowingly participates in an illegal strike and any worker or union
officer who knowingly participates in the commission of illegal acts during a strike may
be declared to have lost his employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by the employer during such lawful
strike.

We explained in Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines,

Inc. that the effects of illegal strikes, outlined in Article 264 of the Labor Code, make a distinction
between participating workers and union officers. The services of an ordinary striking worker cannot be
terminated for mere participation in an illegal strike; proof must be adduced showing that he or she
committed illegal acts during the strike. The services of a participating union officer, on the other hand,
may be terminated, not only when he actually commits an illegal act during a strike, but also if he
knowingly participates in an illegal strike.[72]
[71]

In all cases, the striker must be identified. But proof beyond reasonable doubt is not required;
substantial evidence, available under the attendant circumstances, suffices to justify the imposition of
the penalty of dismissal on participating workers and union officers as above described.[73]
In the present case, respondents Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo
Pedro, Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto
Basconcillo, and Ramon Falcis stand to be dismissed as participating union officers, pursuant to Article
264(a), paragraph 3, of the Labor Code. This provision imposes the penalty of dismissal on any union
officer who knowingly participates in an illegal strike. The law grants the employer the option of
declaring a union officer who participated in an illegal strike as having lost his employment.[74]

PHIMCO was able to individually identify the participating union members thru the affidavits of
PHIMCO employees Martimer Panis[75] and Rodrigo A. Ortiz,[76] and Personnel Manager Francis
Ferdinand Cinco,[77] and the photographs[78] of Joaquin Aguilar. Identified were respondents Angelita
Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco Dalisay, Angelito Dejan, Philip Garces,
Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong, Teofilo Manalili, Alfredo Pearson, Mario
Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento, Rodolfo Tolentino, Felipe Villareal, Arsenio
Zamora, Danilo Baltazar, Roger Caber, Reynaldo Camarin, Bernardo Cuadra, Angelito de Guzman,
Gerardo Feliciano, Alex Ibaez, Benjamin Juan, Sr., Ramon Macaalay, Gonzalo Manalili, Raul Miciano,
Hilario Pea, Teresa Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian Tuguin and Amelia
Zamora as the union members who actively participated in the strike by blocking the ingress to and
egress from the company premises and preventing the passage of non-striking employees. For
participating in illegally blocking ingress to and egress from company premises, these union members
stand to be dismissed for their illegal acts in the conduct of the unions strike.
PHIMCO failed to observe due process
We find, however, that PHIMCO violated the requirements of due process of the Labor Code
when it dismissed the respondents.
Under Article 277(b)[79] of the Labor Code, the employer must send the employee, who is about
to be terminated, a written notice stating the cause/s for termination and must give the employee the
opportunity to be heard and to defend himself.
We explained in Suico v. National Labor Relations Commission,[80] that Article 277(b), in relation
to Article 264(a) and (e) of the Labor Code recognizes the right to due process of all workers, without
distinction as to the cause of their termination, even if the cause was their supposed involvement in
strike-related violence prohibited under Article 264(a) and (e) of the Labor Code.
To meet the requirements of due process in the dismissal of an employee, an employer must
furnish him or her with two (2) written notices: (1) a written notice specifying the grounds for
termination and giving the employee a reasonable opportunity to explain his side and (2) another
written notice indicating that, upon due consideration of all circumstances, grounds have been
established to justify the employer's decision to dismiss the employee.[81]
In the present case, PHIMCO sent a letter, on June 23, 1995, to thirty-six (36) union members,
generally directing them to explain within twenty-four (24) hours why they should not be dismissed for
the illegal acts they committed during the strike; three days later, or on June 26, 1995, the thirty-six (36)
union members were informed of their dismissal from employment.
We do not find this company procedure to be sufficient compliance with the due process
requirements that the law guards zealously. It does not appear from the evidence that the union officers
were specifically informed of the charges against them and given the chance to explain and present their
side. Without the specifications they had to respond to, they were arbitrarily separated from work in
total disregard of their rights to due process and security of tenure.
As to the union members, only thirty-six (36) of the thirty-seven (37) union members included in
this case were notified of the charges against them thru the letters dated June 23, 1995, but they were
not given an ample opportunity to be heard and to defend themselves; the notice of termination came

on June 26, 1995, only three (3) days from the first notice - a perfunctory and superficial attempt to
comply with the notice requirement under the Labor Code. The short interval of time between the first
and second notice speaks for itself under the circumstances of this case; mere token recognition of the
due process requirements was made, indicating the companys intent to dismiss the union members
involved, without any meaningful resort to the guarantees accorded them by law.
Under the circumstances, where evidence sufficient to justify the penalty of dismissal has been
adduced but the workers concerned were not accorded their essential due process rights, our ruling
in Agabon v. NLRC[82] finds full application; the employer, despite the just cause for dismissal, must pay
the dismissed workers nominal damages as indemnity for the violation of the workers right to statutory
due process. Prevailing jurisprudence sets the amount of nominal damages at P30,000.00, which same
amount we find sufficient and appropriate in the present case.[83]
WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the decision dated
February 10, 2004 and the resolution dated December 12, 2005 of the Court of Appeals in CA-G.R. SP
No. 70336, upholding the rulings of the National Labor Relations Commission.
The Decision, dated February 4, 1998, of Labor Arbiter Jovencio Ll. Mayor should prevail and is
REINSTATED with the MODIFICATION that Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo
Pedro, Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto
Basconcillo, Ramon Falcis, Angelita Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco
Dalisay, Angelito Dejan, Philip Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong,
Teofilo Manalili, Alfredo Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento,
Rodolfo Tolentino, Felipe Villareal, Arsenio Zamora, Danilo Baltazar, Roger Caber, Reynaldo Camarin,
Bernardo Cuadra, Angelito de Guzman, Gerardo Feliciano, Alex Ibaez, Benjamin Juan, Sr., Ramon
Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Pea, Teresa Permocillo, Ernesto Rio, Rodolfo Sanidad,
Rafael Sta. Ana, Julian Tuguin, and Amelia Zamora are each awarded nominal damages in the amount
of P30,000.00. No pronouncement as to costs.

SO ORDERED.
ARTURO D. BRION
Associate Justice

BPI v. BPI Employees, G.R. No. 164301, August 10, 2010

Republic of the Philippines
Supreme Court

Manila

EN BANC

BANK OF THE PHILIPPINE ISLANDS,

Petitioner,

G.R. No. 164301

Present:

- versus -

BPI EMPLOYEES UNION-DAVAO CHAPTERFEDERATION OF UNIONS

IN BPI UNIBANK,
Respondent.

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,*
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.

Promulgated:

August 10, 2010

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

DECISION

LEONARDO-DE CASTRO, J.:

May a corporation invoke its merger with another corporation as a valid ground to exempt its absorbed
employees from the coverage of a union shop clause contained in its existing Collective Bargaining
Agreement (CBA) with its own certified labor union? That is the question we shall endeavor to answer in
this petition for review filed by an employer after the Court of Appeals decided in favor of respondent
union, which is the employees recognized collective bargaining representative.
At the outset, we should call to mind the spirit and the letter of the Labor Code provisions on
union security clauses, specifically Article 248 (e), which states, x x x Nothing in this Code or in any
other law shall stop the parties from requiring membership in a recognized collective bargaining agent
as a condition for employment, except those employees who are already members of another union at

the time of the signing of the collective bargaining agreement.[1] This case which involves the application
of a collective bargaining agreement with a union shop clause should be resolved principally from the
standpoint of the clear provisions of our labor laws, and the express terms of the CBA in question, and
not by inference from the general consequence of the merger of corporations under the Corporation
Code, which obviously does not deal with and, therefore, is silent on the terms and conditions of
employment in corporations or juridical entities.
This issue must be resolved NOW, instead of postponing it to a future time when the CBA is
renegotiated as suggested by the Honorable Justice Arturo D. Brion because the same issue may still be
resurrected in the renegotiation if the absorbed employees insist on their privileged status of being
exempt from any union shop clause or any variant thereof.
We find it significant to note that it is only the employer, Bank of the Philippine Islands (BPI), that
brought the case up to this Court via the instant petition for review; while the employees actually
involved in the case did not pursue the same relief, but had instead chosen in effect to acquiesce to the
decision of the Court of Appeals which effectively required them to comply with the union shop clause
under the existing CBA at the time of the merger of BPI with Far East Bank and Trust Company
(FEBTC), which decision had already become final and executory as to the aforesaid employees. By not
appealing the decision of the Court of Appeals, the aforesaid employees are bound by the said Court of
Appeals decision to join BPIs duly certified labor union. In view of the apparent acquiescence of the
affected FEBTC employees in the Court of Appeals decision, BPI should not have pursued this petition for
review.However, even assuming that BPI may do so, the same still cannot prosper.
What is before us now is a petition for review under Rule 45 of the Rules of Court of the
Decision[2] dated September 30, 2003 of the Court of Appeals, as reiterated in its Resolution[3] of June 9,
2004, reversing and setting aside the Decision[4] dated November 23, 2001 of Voluntary Arbitrator
Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-Davao ChapterFederation of Unions in BPI Unibank v. Bank of the Philippine Islands, et al.
The antecedent facts are as follows:
On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of Merger executed on
January 20, 2000 by and between BPI, herein petitioner, and FEBTC.[5] This Article and Plan of Merger
was approved by the Securities and Exchange Commission on April 7, 2000.[6]
Pursuant to the Article and Plan of Merger, all the assets and liabilities of FEBTC were transferred to
and absorbed by BPI as the surviving corporation. FEBTC employees, including those in its different
branches across the country, were hired by petitioner as its own employees, with their status and
tenure recognized and salaries and benefits maintained.
Respondent BPI Employees Union-Davao Chapter - Federation of Unions in BPI Unibank (hereinafter the
Union, for brevity) is the exclusive bargaining agent of BPIs rank and file employees in Davao City. The
former FEBTC rank-and-file employees in Davao City did not belong to any labor union at the time of
the merger. Prior to the effectivity of the merger, or on March 31, 2000, respondent Union invited said
FEBTC employees to a meeting regarding the Union Shop Clause (Article II, Section 2) of the existing
CBA between petitioner BPI and respondent Union.[7]
The parties both advert to certain provisions of the existing CBA, which are quoted below:

ARTICLE I
Section 1. Recognition and Bargaining Unit The BANK recognizes the UNION as the sole
and exclusive collective bargaining representative of all the regular rank and file
employees of the Bank offices in Davao City.
Section 2. Exclusions
Section 3. Additional Exclusions
Section 4. Copy of Contract
ARTICLE II

Section 1. Maintenance of Membership All employees within the bargaining unit who
are members of the Union on the date of the effectivity of this Agreement as well as
employees within the bargaining unit who subsequently join or become members of the
Union during the lifetime of this Agreement shall as a condition of their continued
employment with the Bank, maintain their membership in the Union in good standing.
Section 2. Union Shop - New employees falling within the bargaining unit as defined in
Article I of this Agreement, who may hereafter be regularly employed by the Bank
shall, within thirty (30) days after they become regular employees, join the Union as a
condition of their continued employment. It is understood that membership in good
standing in the Union is a condition of their continued employment with the
Bank.[8](Emphases supplied.)

After the meeting called by the Union, some of the former FEBTC employees joined the Union,
while others refused. Later, however, some of those who initially joined retracted their membership.[9]
Respondent Union then sent notices to the former FEBTC employees who refused to join, as well
as those who retracted their membership, and called them to a hearing regarding the matter. When
these former FEBTC employees refused to attend the hearing, the president of the Union requested BPI
to implement the Union Shop Clause of the CBA and to terminate their employment pursuant
thereto.[10]
After two months of management inaction on the request, respondent Union informed
petitioner BPI of its decision to refer the issue of the implementation of the Union Shop Clause of the
CBA to the Grievance Committee. However, the issue remained unresolved at this level and so it was
subsequently submitted for voluntary arbitration by the parties.[11]
Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision[12] dated November 23, 2001,
ruled in favor of petitioner BPIs interpretation that the former FEBTC employees were not covered by
the Union Security Clause of the CBA between the Union and the Bank on the ground that the said
employees were not new employees who were hired and subsequently regularized, but were absorbed

employees by operation of law because the former employees of FEBTC can be considered assets and
liabilities of the absorbed corporation. The Voluntary Arbitrator concluded that the former FEBTC
employees could not be compelled to join the Union, as it was their constitutional right to join or not to
join any organization.
Respondent Union filed a Motion for Reconsideration, but the Voluntary Arbitrator denied the
same in an Order dated March 25, 2002.[13]
Dissatisfied, respondent then appealed the Voluntary Arbitrators decision to the Court of
Appeals. In the herein assailed Decision dated September 30, 2003, the Court of Appeals reversed and
set aside the Decision of the Voluntary Arbitrator.[14] Likewise, the Court of Appeals denied herein
petitioners Motion for Reconsideration in a Resolution dated June 9, 2004.
The Court of Appeals pertinently ruled in its Decision:
A union-shop clause has been defined as a form of union security provision
wherein non-members may be hired, but to retain employment must become union
members after a certain period.
There is no question as to the existence of the union-shop clause in the CBA
between the petitioner-union and the company. The controversy lies in its application to
the absorbed employees.
This Court agrees with the voluntary arbitrator that the ABSORBED employees
are distinct and different from NEW employees BUT only in so far as their employment
service is concerned. The distinction ends there. In the case at bar, the absorbed
employees length of service from its former employer is tacked with their employment
with BPI. Otherwise stated, the absorbed employees service is continuous and there is
no gap in their service record.
This Court is persuaded that the similarities of new and absorbed employees far
outweighs the distinction between them. The similarities lies on the following, to wit: (a)
they have a new employer; (b) new working conditions; (c) new terms of employment
and; (d) new company policy to follow. As such, they should be considered as new
employees for purposes of applying the provisions of the CBA regarding the union-shop
clause.
To rule otherwise would definitely result to a very awkward and unfair situation
wherein the absorbed employees shall be in a different if not, better situation than the
existing BPI employees. The existing BPI employees by virtue of the union-shop clause
are required to pay the monthly union dues, remain as members in good standing of the
union otherwise, they shall be terminated from the company, and other union-related
obligations. On the other hand, the absorbed employees shall enjoy the fruits of labor of
the petitioner-union and its members for nothing in exchange. Certainly, this would
disturb industrial peace in the company which is the paramount reason for the existence
of the CBA and the union.

The voluntary arbitrators interpretation of the provisions of the CBA concerning

the coverage of the union-shop clause is at war with the spirit and the rationale why the
Labor Code itself allows the existence of such provision.
The Supreme Court in the case of Manila Mandarin Employees Union vs. NLRC
(G.R. No. 76989, September 29, 1987) rule, to quote:
This Court has held that a valid form of union security, and such
a provision in a collective bargaining agreement is not a restriction of
the right of freedom of association guaranteed by the Constitution.
A closed-shop agreement is an agreement whereby an
employer binds himself to hire only members of the contracting union
who must continue to remain members in good standing to keep their
jobs. It is THE MOST PRIZED ACHIEVEMENT OF UNIONISM. IT ADDS
MEMBERSHIP AND COMPULSORY DUES. By holding out to loyal
members a promise of employment in the closed-shop, it wields group
solidarity. (Emphasis supplied)
Hence, the voluntary arbitrator erred in construing the CBA literally at the
expense of industrial peace in the company.
With the foregoing ruling from this Court, necessarily, the alternative prayer of
the petitioner to require the individual respondents to become members or if they
refuse, for this Court to direct respondent BPI to dismiss them, follows.[15]

Hence, petitioners present recourse, raising the following issues:

I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE
FORMER FEBTC EMPLOYEES SHOULD BE CONSIDERED NEW EMPLOYEES OF BPI FOR
PURPOSES OF APPLYING THE UNION SHOP CLAUSE OF THE CBA
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE
VOLUNTARY ARBITRATORS INTERPRETATION OF THE COVERAGE OF THE UNION SHOP
CLAUSE IS AT WAR WITH THE SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF
ALLOWS THE EXISTENCE OF SUCH PROVISION[16]

In essence, the sole issue in this case is whether or not the former FEBTC employees that were
absorbed by petitioner upon the merger between FEBTC and BPI should be covered by the Union Shop
Clause found in the existing CBA between petitioner and respondent Union.

Petitioner is of the position that the former FEBTC employees are not new employees of BPI for
purposes of applying the Union Shop Clause of the CBA, on this note, petitioner points to Section 2,
Article II of the CBA, which provides:
New employees falling within the bargaining unit as defined in Article I of this
Agreement, who may hereafter be regularly employed by the Bank shall, within thirty
(30) days after they become regular employees, join the Union as a condition of their
continued employment. It is understood that membership in good standing in the
Union is a condition of their continued employment with the Bank.[17](Emphases
supplied.)

Petitioner argues that the term new employees in the Union Shop Clause of the CBA is qualified
by the phrases who may hereafter be regularly employed and after they become regular employees
which led petitioner to conclude that the new employees referred to in, and contemplated by, the
Union Shop Clause of the CBA were only those employees who were new to BPI, on account of having
been hired initially on a temporary or probationary status for possible regular employment at some
future date. BPI argues that the FEBTC employees absorbed by BPI cannot be considered as new
employees of BPI for purposes of applying the Union Shop Clause of the CBA.[18]
According to petitioner, the contrary interpretation made by the Court of Appeals of this
particular CBA provision ignores, or even defies, what petitioner assumes as its clear meaning and scope
which allegedly contradicts the Courts strict and restrictive enforcement of union security agreements.
We do not agree.
Section 2, Article II of the CBA is silent as to how one becomes a regular employee of the BPI for
the first time. There is nothing in the said provision which requires that a new regular employee first
undergo a temporary or probationary status before being deemed as such under the union shop
clause of the CBA.
Union security is a generic term which is applied to and comprehends closed shop, union shop,
maintenance of membership or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period for their
continued employment. There is maintenance of membership shop when employees, who are union
members as of the effective date of the agreement, or who thereafter become members, must maintain
union membership as a condition for continued employment until they are promoted or transferred out
of the bargaining unit or the agreement is terminated.A closed-shop, on the other hand, may be defined
as an enterprise in which, by agreement between the employer and his employees or their
representatives, no person may be employed in any or certain agreed departments of the enterprise
unless he or she is, becomes, and, for the duration of the agreement, remains a member in good
standing of a union entirely comprised of or of which the employees in interest are a part.[19]
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,[20] we ruled that:
It is the policy of the State to promote unionism to enable the workers to
negotiate with management on the same level and with more persuasiveness than if
they were to individually and independently bargain for the improvement of their

respective conditions. To this end, the Constitution guarantees to them the rights to
self-organization, collective bargaining and negotiations and peaceful concerted actions
including the right to strike in accordance with law. There is no question that these
purposes could be thwarted if every worker were to choose to go his own separate way
instead of joining his co-employees in planning collective action and presenting a united
front when they sit down to bargain with their employers. It is for this reason that the
law has sanctioned stipulations for the union shop and the closed shop as a means of
encouraging the workers to join and support the labor union of their own choice as their
representative in the negotiation of their demands and the protection of their
interest vis--vis the employer. (Emphasis ours.)
In other words, the purpose of a union shop or other union security arrangement is to
guarantee the continued existence of the union through enforced membership for the benefit of the
workers.
All employees in the bargaining unit covered by a Union Shop Clause in their CBA with management are
subject to its terms. However, under law and jurisprudence, the following kinds of employees are
exempted from its coverage, namely, employees who at the time the union shop agreement takes
effect are bona fide members of a religious organization which prohibits its members from joining labor
unions on religious grounds;[21] employees already in the service and already members of a union other
than the majority at the time the union shop agreement took effect;[22] confidential employees who
are excluded from the rank and file bargaining unit;[23] and employees excluded from the union shop by
express terms of the agreement.
When certain employees are obliged to join a particular union as a requisite for continued
employment, as in the case of Union Security Clauses, this condition is a valid restriction of the freedom
or right not to join any labor organization because it is in favor of unionism. This Court, on occasion, has
even held that a union security clause in a CBA is not a restriction of the right of freedom of association
guaranteed by the Constitution.[24]
Moreover, a closed shop agreement is an agreement whereby an employer binds himself to hire only
members of the contracting union who must continue to remain members in good standing to keep
their jobs. It is the most prized achievement of unionism. It adds membership and compulsory dues. By
holding out to loyal members a promise of employment in the closed shop, it wields group solidarity.[25]
Indeed, the situation of the former FEBTC employees in this case clearly does not fall within the
first three exceptions to the application of the Union Shop Clause discussed earlier.No allegation or
evidence of religious exemption or prior membership in another union or engagement as a confidential
employee was presented by both parties. The sole category therefore in which petitioner may prove its
claim is the fourth recognized exception or whether the former FEBTC employees are excluded by the
express terms of the existing CBA between petitioner and respondent.
To reiterate, petitioner insists that the term new employees, as the same is used in the Union Shop
Clause of the CBA at issue, refers only to employees hired by BPI as non-regularemployees who later
qualify for regular employment and become regular employees, and not those who, as a legal
consequence of a merger, are allegedly automatically deemed regular employees of BPI. However, the
CBA does not make a distinction as to how a regular employee attains such a status. Moreover, there is
nothing in the Corporation Law and the merger agreement mandating the automatic employment as
regular employees by the surviving corporation in the merger.

It is apparent that petitioner hinges its argument that the former FEBTC employees were
absorbed by BPI merely as a legal consequence of a merger based on the characterization by the
Voluntary Arbiter of these absorbed employees as included in the assets and liabilities of the dissolved
corporation - assets because they help the Bank in its operation and liabilities because redundant
employees may be terminated and company benefits will be paid to them, thus reducing the Banks
financial status. Based on this ratiocination, she ruled that the same are not new employees of BPI as
contemplated by the CBA at issue, noting that the Certificate of Filing of the Articles of Merger and Plan
of Merger between FEBTC and BPI stated that x x x the entire assets and liabilities of FAR EASTERN BANK
& TRUST COMPANY will be transferred to and absorbed by the BANK OF THE PHILIPPINE ISLANDS x x x
(underlining supplied).[26] In sum, the Voluntary Arbiter upheld the reasoning of petitioner that the
FEBTC employees became BPI employees by operation of law because they are included in the term
assets and liabilities.
Absorbed FEBTC Employees are Neither Assets nor Liabilities
In legal parlance, however, human beings are never embraced in the term assets and
liabilities. Moreover, BPIs absorption of former FEBTC employees was neither by operation of law nor by
legal consequence of contract. There was no government regulation or law that compelled the merger
of the two banks or the absorption of the employees of the dissolved corporation by the surviving
corporation. Had there been such law or regulation, the absorption of employees of the non-surviving
entities of the merger would have been mandatory on the surviving corporation.[27] In the present case,
the merger was voluntarily entered into by both banks presumably for some mutually acceptable
consideration. In fact, the Corporation Code does not also mandate the absorption of the employees
of the non-surviving corporation by the surviving corporation in the case of a merger. Section 80 of the
Corporation Code provides:
SEC. 80. Effects of merger or consolidation. The merger or consolidation, as provided in
the preceding sections shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of
merger, shall be the surviving corporation designated in the plan of merger; and, in case
of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the
surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of a
corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises of each of the constituent
corporations; and all property, real or personal, and all receivables due on whatever
account, including subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent corporation, shall be taken
and deemed to be transferred to and vested in such surviving or consolidated
corporation without further act or deed; and

5. The surviving or the consolidated corporation shall be responsible and liable for all
the liabilities and obligations of each of the constituent corporations in the same
manner as if such surviving or consolidated corporation had itself incurred such
liabilities or obligations; and any claim, action or proceeding pending by or against any
of such constituent corporations may be prosecuted by or against the surviving or
consolidated corporation, as the case may be. Neither the rights of creditors nor any lien
upon the property of any of such constituent corporations shall be impaired by such
merger or consolidated.

Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain any
specific stipulation with respect to the employment contracts of existing personnel of the non-surviving
entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the reasoning that the
general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set forth in the Articles of
Merger necessarily includes the transfer of all FEBTC employees into the employ of BPI and neither BPI
nor the FEBTC employees allegedly could do anything about it. Even if it is so, it does not follow that
the absorbed employees should not be subject to the terms and conditions of employment obtaining
in the surviving corporation.
The rule is that unless expressly assumed, labor contracts such as employment contracts
and collective bargaining agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only between the parties. A
labor contract merely creates an action in personam and does not create any real right
which should be respected by third parties. This conclusion draws its force from the
right of an employer to select his employees and to decide when to engage them as
protected under our Constitution, and the same can only be restricted by law through
the exercise of the police power.[28]

Furthermore, this Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by BPI
in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to refer only to
property rights and obligations of FEBTC and do not include the employment contracts of its
personnel. A corporation cannot unilaterally transfer its employees to another employer like
chattel. Certainly, if BPI as an employer had the right to choose who to retain among FEBTCs employees,
FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even though FEBTC
employees had no choice or control over the merger of their employer with BPI, they had a choice
whether or not they would allow themselves to be absorbed by BPI. Certainly nothing prevented the
FEBTCs employees from resigning or retiring and seeking employment elsewhere instead of going along
with the proposed absorption.
Employment is a personal consensual contract and absorption by BPI of a former FEBTC
employee without the consent of the employee is in violation of an individuals freedom to contract. It
would have been a different matter if there was an express provision in the articles of merger that as a
condition for the merger, BPI was being required to assume all the employment contracts of all existing
FEBTC employees with the conformity of the employees. In the absence of such a provision in the
articles of merger, then BPI clearly had the business management decision as to whether or not employ

FEBTCs employees. FEBTC employees likewise retained the prerogative to allow themselves to be
absorbed or not; otherwise, that would be tantamount to involuntary servitude.
There appears to be no dispute that with respect to FEBTC employees that BPI chose not to
employ or FEBTC employees who chose to retire or be separated from employment instead of being
absorbed, BPIs assumed liability to these employees pursuant to the merger is FEBTCs liability to them
in terms of separation pay,[29] retirement pay[30] or other benefits that may be due them depending on
the circumstances.
Legal Consequences of Mergers
Although not binding on this Court, American jurisprudence on the consequences of
voluntary mergers on the right to employment and seniority rights is persuasive and illuminating.We
quote the following pertinent discussion from the American Law Reports:
Several cases have involved the situation where as a result of mergers,
consolidations, or shutdowns, one group of employees, who had accumulated seniority
at one plant or for one employer, finds that their jobs have been discontinued except to
the extent that they are offered employment at the place or by the employer where the
work is to be carried on in the future. Such cases have involved the question whether
such transferring employees should be entitled to carry with them their accumulated
seniority or whether they are to be compelled to start over at the bottom of the seniority
list in the "new" job. It has been recognized in some cases that the accumulated seniority
does not survive and cannot be transferred to the "new" job.
In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of three
formerly separate railroad corporations, which had previously operated separate
facilities, was consolidated in the shops of one of the roads. Displaced employees of the
other two roads were given preference for the new jobs created in the shops of the
railroad which took over the work. A controversy arose between the employees as to
whether the displaced employees were entitled to carry with them to the new jobs the
seniority rights they had accumulated with their prior employers, that is, whether the
rosters of the three corporations, for seniority purposes, should be "dovetailed" or
whether the transferring employees should go to the bottom of the roster of their new
employer. Labor representatives of the various systems involved attempted to work out
an agreement which, in effect, preserved the seniority status obtained in the prior
employment on other roads, and the action was for specific performance of this
agreement against a demurring group of the original employees of the railroad which
was operating the consolidated shops. The relief sought was denied, the court saying
that, absent some specific contract provision otherwise, seniority rights were ordinarily
limited to the employment in which they were earned, and concluding that the contract
for which specific performance was sought was not such a completed and binding
agreement as would support such equitable relief, since the railroad, whose
concurrence in the arrangements made was essential to their effectuation, was not a
party to the agreement.
Where the provisions of a labor contract provided that in the event that a
trucker absorbed the business of another private contractor or common carrier, or was
a party to a merger of lines, the seniority of the employees absorbed or affected thereby

should be determined by mutual agreement between the trucker and the unions
involved, it was held in Moore v International Brotherhood of Teamsters, etc. (1962,
Ky) 356 SW2d 241, that the trucker was not required to absorb the affected employees
as well as the business, the court saying that they could find no such meaning in the
above clause, stating that it dealt only with seniority, and not with initial
employment. Unless and until the absorbing company agreed to take the employees of
the company whose business was being absorbed, no seniority problem was created,
said the court, hence the provision of the contract could have no
application. Furthermore, said the court, it did not require that the absorbing company
take these employees, but only that if it did take them the question of seniority between
the old and new employees would be worked out by agreement or else be submitted to
the grievance procedure.[31] (Emphasis ours.)

Indeed, from the tenor of local and foreign authorities, in voluntary mergers, absorption of the
dissolved corporations employees or the recognition of the absorbed employees service with their
previous employer may be demanded from the surviving corporation if required by provision of law or
contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and conditions
of employment of the absorbed employees in the case of a corporate merger or consolidation which
will, in effect, take away from corporate management the prerogative to make purely business decisions
on the hiring of employees or will give it an excuse not to apply the CBA in force to the prejudice of its
own employees and their recognized collective bargaining agent. In this regard, we disagree with Justice
Brion.
Justice Brion takes the position that because the surviving corporation continues the personality of the
dissolved corporation and acquires all the latters rights and obligations, it is duty-bound to absorb the
dissolved corporations employees, even in the absence of a stipulation in the plan of merger. He
proposes that this interpretation would provide the necessary protection to labor as it spares workers
from being left in legal limbo.
However, there are instances where an employer can validly discontinue or terminate the employment
of an employee without violating his right to security of tenure. Among others, in case of redundancy,
for example, superfluous employees may be terminated and such termination would be authorized
under Article 283 of the Labor Code.[32]
Moreover, assuming for the sake of argument that there is an obligation to hire or absorb all employees
of the non-surviving corporation, there is still no basis to conclude that the terms and conditions of
employment under a valid collective bargaining agreement in force in the surviving corporation should
not be made to apply to the absorbed employees.
The Corporation Code and the Subject Merger Agreement are
Silent on Efficacy, Terms and Conditions of Employment
Contracts

The lack of a provision in the plan of merger regarding the transfer of employment contracts to the
surviving corporation could have very well been deliberate on the part of the parties to the merger, in
order to grant the surviving corporation the freedom to choose who among the dissolved corporations

employees to retain, in accordance with the surviving corporations business needs. If terminations, for
instance due to redundancy or labor-saving devices or to prevent losses, are done in good faith, they
would be valid. The surviving corporation too is duty-bound to protect the rights of its own employees
who may be affected by the merger in terms of seniority and other conditions of their employment due
to the merger. Thus, we are not convinced that in the absence of a stipulation in the merger plan the
surviving corporation was compelled, or may be judicially compelled, to absorb all employees under the
same terms and conditions obtaining in the dissolved corporation as the surviving corporation should
also take into consideration the state of its business and its obligations to its own employees, and to
their certified collective bargaining agent or labor union.
Even assuming we accept Justice Brions theory that in a merger situation the surviving corporation
should be compelled to absorb the dissolved corporations employees as a legal consequence of the
merger and as a social justice consideration, it bears to emphasize his dissent also recognizes that the
employee may choose to end his employment at any time by voluntarily resigning. For the employee to
be absorbed by BPI, it requires the employees implied or express consent. It is because of this human
element in employment contracts and the personal, consensual nature thereof that we cannot agree
that, in a merger situation, employment contracts are automatically transferable from one entity to
another in the same manner that a contract pertaining to purely proprietary rights such as a promissory
note or a deed of sale of property is perfectly and automatically transferable to the surviving
corporation.
That BPI is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to
adjudicate rights and obligations between and among the merged corporations and the persons that
deal with them. Although in a merger it is as if there is no change in the personality of the employer,
there is in reality a change in the situation of the employee. Once an FEBTC employee is absorbed, there
are presumably changes in his condition of employment even if his previous tenure and salary rate is
recognized by BPI. It is reasonable to assume that BPI would have different rules and regulations and
company practices than FEBTC and it is incumbent upon the former FEBTC employees to obey these new
rules and adapt to their new environment. Not the least of the changes in employment condition that
the absorbed FEBTC employees must face is the fact that prior to the merger they were employees of an
unorganized establishment and after the merger they became employees of a unionized company that
had an existing collective bargaining agreement with the certified union. This presupposes that the
union who is party to the collective bargaining agreement is the certified union that has, in the
appropriate certification election, been shown to represent a majority of the members of the bargaining
unit.
Likewise, with respect to FEBTC employees that BPI chose to employ and who also chose to be
absorbed, then due to BPIs blanket assumption of liabilities and obligations under the articles of merger,
BPI was bound to respect the years of service of these FEBTC employees and to pay the same, or
commensurate salaries and other benefits that these employees previously enjoyed with FEBTC.
As the Union likewise pointed out in its pleadings, there were benefits under the CBA that the former
FEBTC employees did not enjoy with their previous employer. As BPI employees, they will enjoy all
these CBA benefits upon their absorption. Thus, although in a sense BPI is continuing FEBTCs
employment of these absorbed employees, BPIs employment of these absorbed employees was not
under exactly the same terms and conditions as stated in the latters employment contracts with
FEBTC. This further strengthens the view that BPI and the former FEBTC employees voluntarily
contracted with each other for their employment in the surviving corporation.

Proper Appreciation of the Term New Employees Under the

CBA
In any event, it is of no moment that the former FEBTC employees retained the regular status
that they possessed while working for their former employer upon their absorption by petitioner. This
fact would not remove them from the scope of the phrase new employees as contemplated in the Union
Shop Clause of the CBA, contrary to petitioners insistence that the term new employees only refers to
those who are initially hired as non-regular employees for possible regular employment.
The Union Shop Clause in the CBA simply states that new employees who during the effectivity
of the CBA may be regularly employed by the Bank must join the union within thirty (30) days from their
regularization. There is nothing in the said clause that limits its application to only new employees who
possess non-regular status, meaning probationary status, at the start of their employment. Petitioner
likewise failed to point to any provision in the CBA expressly excluding from the Union Shop Clause new
employees who are absorbed as regular employees from the beginning of their employment. What is
indubitable from the Union Shop Clause is that upon the effectivity of the CBA, petitioners new regular
employees (regardless of the manner by which they became employees of BPI) are required to join the
Union as a condition of their continued employment.
The dissenting opinion of Justice Brion dovetails with Justice Carpios view only in their restrictive
interpretation of who are new employees under the CBA. To our dissenting colleagues, the phrase new
employees (who are covered by the union shop clause) should only include new employees who were
hired as probationary during the life of the CBA and were later granted regular status. They propose that
the former FEBTC employees who were deemed regular employees from the beginning of their
employment with BPI should be treated as a special class of employees and be excluded from the union
shop clause.
Justice Brion himself points out that there is no clear, categorical definition of new employee in the
CBA. In other words, the term new employee as used in the union shop clause is used broadly without
any qualification or distinction. However, the Court should not uphold an interpretation of the term new
employee based on the general and extraneous provisions of the Corporation Code on merger that
would defeat, rather than fulfill, the purpose of the union shop clause. To reiterate, the provision of the
Article 248(e) of the Labor Code in point mandates that nothing in the said Code or any other law
should stop the parties from requiring membership in a recognized collective bargaining agent as a
condition of employment.
Significantly, petitioner BPI never stretches its arguments so far as to state that the absorbed
employees should be deemed old employees who are not covered by the Union Shop Clause. This is not
surprising.
By law and jurisprudence, a merger only becomes effective upon approval by the Securities and
Exchange Commission (SEC) of the articles of merger. In Associated Bank v. Court of Appeals,[33] we held:
The procedure to be followed is prescribed under the Corporation Code. Section 79 of
said Code requires the approval by the Securities and Exchange Commission (SEC) of the
articles of merger which, in turn, must have been duly approved by a majority of the
respective stockholders of the constituent corporations. The same provision further
states that the merger shall be effective only upon the issuance by the SEC of a

certificate of merger. The effectivity date of the merger is crucial for determining when
the merged or absorbed corporation ceases to exist; and when its rights, privileges,
properties as well as liabilities pass on to the surviving corporation. (Emphasis ours.)

In other words, even though BPI steps into the shoes of FEBTC as the surviving corporation, BPI
does so at a particular point in time, i.e., the effectivity of the merger upon the SECs issuance of a
certificate of merger. In fact, the articles of merger themselves provided that both BPI and FEBTC will
continue their respective business operations until the SEC issues the certificate of merger and in the
event SEC does not issue such a certificate, they agree to hold each other blameless for the nonconsummation of the merger.
Considering the foregoing principle, BPI could have only become the employer of the FEBTC
employees it absorbed after the approval by the SEC of the merger. If the SEC did not approve the
merger, BPI would not be in the position to absorb the employees of FEBTC at all. Indeed, there is
evidence on record that BPI made the assignments of its absorbed employees in BPI effective April 10,
2000, or after the SECs approval of the merger.[34] In other words, BPI became the employer of the
absorbed employees only at some point after the effectivity of the merger, notwithstanding the fact
that the absorbed employees years of service with FEBTC were voluntarily recognized by BPI.
Even assuming for the sake of argument that we consider the absorbed FEBTC employees as old
employees of BPI who are not members of any union (i.e., it is their date of hiring by FEBTC and not the
date of their absorption that is considered), this does not necessarily exclude them from the union
security clause in the CBA. The CBA subject of this case was effective from April 1, 1996 until March 31,
2001. Based on the allegations of the former FEBTC employees themselves, there were former FEBTC
employees who were hired by FEBTC after April 1, 1996 and if their date of hiring by FEBTC is
considered as their date of hiring by BPI, they would undeniably be considered new employees of BPI
within the contemplation of the Union Shop Clause of the said CBA. Otherwise, it would lead to the
absurd situation that we would discriminate not only between new BPI employees (hired during the life
of the CBA) and former FEBTC employees (absorbed during the life of the CBA) but also among the
former FEBTC employees themselves. In other words, we would be treating employees who are exactly
similarly situated (i.e., the group of absorbed FEBTC employees) differently. This hardly satisfies the
demands of equality and justice.
Petitioner limited itself to the argument that its absorbed employees do not fall within the term
new employees contemplated under the Union Shop Clause with the apparent objective of excluding all,
and not just some, of the former FEBTC employees from the application of the Union Shop Clause.
However, in law or even under the express terms of the CBA, there is no special class of employees
called absorbed employees. In order for the Court to apply or not apply the Union Shop Clause, we can
only classify the former FEBTC employees as either old or new. If they are not old employees, they are
necessarily new employees. If they are new employees, the Union Shop Clause did not distinguish
between new employees who are non-regular at their hiring but who subsequently become regular and
new employees who are absorbed as regular and permanent from the beginning of their
employment. The Union Shop Clause did not so distinguish, and so neither must we.

No Substantial Distinction Under the CBA Between Regular

Employees Hired After Probationary Status and Regular
Employees Hired After the Merger

Verily, we agree with the Court of Appeals that there are no substantial differences between a
newly hired non-regular employee who was regularized weeks or months after his hiring and a new
employee who was absorbed from another bank as a regular employee pursuant to a merger, for
purposes of applying the Union Shop Clause. Both employees were hired/employed only after the CBA
was signed. At the time they are being required to join the Union, they are both already regular rank and
file employees of BPI. They belong to the same bargaining unit being represented by the Union. They
both enjoy benefits that the Union was able to secure for them under the CBA. When they both entered
the employ of BPI, the CBA and the Union Shop Clause therein were already in effect and neither of
them had the opportunity to express their preference for unionism or not. We see no cogent reason
why the Union Shop Clause should not be applied equally to these two types of new employees, for they
are undeniably similarly situated.
The effect or consequence of BPIs so-called absorption of former FEBTC employees should be limited to
what they actually agreed to, i.e. recognition of the FEBTC employees years of service, salary rate and
other benefits with their previous employer. The effect should not be stretched so far as
to exempt former FEBTC employees from the existing CBA terms, company policies and rules which
apply to employees similarly situated. If the Union Shop Clause is valid as to other new regular BPI
employees, there is no reason why the same clause would be a violation of the absorbed employees
freedom of association.
Non-Application of Union Shop Clause Contrary to the Policy of
the Labor Code and Inimical to Industrial Peace

It is but fair that similarly situated employees who enjoy the same privileges of a CBA should be
likewise subject to the same obligations the CBA imposes upon them. A contrary interpretation of the
Union Shop Clause will be inimical to industrial peace and workers solidarity. This unfavorable situation
will not be sufficiently addressed by asking the former FEBTC employees to simply pay agency fees to
the Union in lieu of union membership, as the dissent of Justice Carpio suggests. The fact remains that
other new regular employees, to whom the absorbed employees should be compared, do not have the
option to simply pay the agency fees and they must join the Union or face termination.
Petitioners restrictive reading of the Union Shop Clause could also inadvertently open an
avenue, which an employer could readily use, in order to dilute the membership base of the certified
union in the collective bargaining unit (CBU). By entering into a voluntary merger with a non-unionized
company that employs more workers, an employer could get rid of its existing union by the simple
expedient of arguing that the absorbed employees are not new employees, as are commonly
understood to be covered by a CBAs union security clause. This could then lead to a new majority within
the CBU that could potentially threaten the majority status of the existing union and, ultimately, spell its
demise as the CBUs bargaining representative. Such a dreaded but not entirely far-fetched scenario is no
different from the ingenious and creative union-busting schemes that corporations have fomented
throughout the years, which this Court has foiled time and again in order to preserve and protect the
valued place of labor in this jurisdiction consistent with the Constitutions mandate of insuring social
justice.

There is nothing in the Labor Code and other applicable laws or the CBA provision at issue that
requires that a new employee has to be of probationary or non-regular status at the beginning of the
employment relationship. An employer may confer upon a new employee the status of regular
employment even at the onset of his engagement. Moreover, no law prohibits an employer from
voluntarily recognizing the length of service of a new employee with a previous employer in relation to
computation of benefits or seniority but it should not unduly be interpreted to exclude them from the
coverage of the CBA which is a binding contractual obligation of the employer and employees.
Indeed, a union security clause in a CBA should be interpreted to give meaning and effect to its
purpose, which is to afford protection to the certified bargaining agent and ensure that the employer is
dealing with a union that represents the interests of the legally mandated percentage of the members
of the bargaining unit.
The union shop clause offers protection to the certified bargaining agent by ensuring that future
regular employees who (a) enter the employ of the company during the life of the CBA; (b) are deemed
part of the collective bargaining unit; and (c) whose number will affect the number of members of the
collective bargaining unit will be compelled to join the union. Such compulsion has legal effect, precisely
because the employer by voluntarily entering in to a union shop clause in a CBA with the certified
bargaining agent takes on the responsibility of dismissing the new regular employee who does not join
the union.
Without the union shop clause or with the restrictive interpretation thereof as proposed in the
dissenting opinions, the company can jeopardize the majority status of the certified union by excluding
from union membership all new regular employees whom the Company will absorb in future mergers
and all new regular employees whom the Company hires as regular from the beginning of their
employment without undergoing a probationary period. In this manner, the Company can increase the
number of members of the collective bargaining unit and if this increase is not accompanied by a
corresponding increase in union membership, the certified union may lose its majority status and render
it vulnerable to attack by another union who wishes to represent the same bargaining unit.[35]
Or worse, a certified union whose membership falls below twenty percent (20%) of the total members
of the collective bargaining unit may lose its status as a legitimate labor organization altogether, even in
a situation where there is no competing union.[36] In such a case, an interested party may file for the
cancellation of the unions certificate of registration with the Bureau of Labor Relations.[37]
Plainly, the restrictive interpretation of the union shop clause would place the certified unions very
existence at the mercy and control of the employer. Relevantly, only BPI, the employer appears to be
interested in pursuing this case. The former FEBTC employees have not joined BPI in this appeal.
For the foregoing reasons, Justice Carpios proposal to simply require the former FEBTC to pay agency
fees is wholly inadequate to compensate the certified union for the loss of additional membership
supposedly guaranteed by compliance with the union shop clause. This is apart from the fact that
treating these absorbed employees as a special class of new employees does not encourage worker
solidarity in the company since another class of new employees (i.e. those whose were hired as
probationary and later regularized during the life of the CBA) would not have the option of substituting
union membership with payment of agency fees.

Justice Brion, on the other hand, appears to recognize the inherent unfairness of perpetually excluding
the absorbed employees from the ambit of the union shop clause. He proposes that this matter be left
to negotiation by the parties in the next CBA. To our mind, however, this proposal does not sufficiently
address the issue. With BPI already taking the position that employees absorbed pursuant to its
voluntary mergers with other banks are exempt from the union shop clause, the chances of the said
bank ever agreeing to the inclusion of such employees in a future CBA is next to nil more so, if BPIs
narrow interpretation of the union shop clause is sustained by this Court.
Right of an Employee not to Join a Union is not Absolute and
Must Give Way to the Collective Good of All Members of the
Bargaining Unit
The dissenting opinions place a premium on the fact that even if the former FEBTC employees
are not old employees, they nonetheless were employed as regular and permanent employees without
a gap in their service. However, an employees permanent and regular employment status in itself does
not necessarily exempt him from the coverage of a union shop clause.
In the past this Court has upheld even the more stringent type of union security clause, i.e., the closed
shop provision, and held that it can be made applicable to old employees who are already regular and
permanent but have chosen not to join a union. In the early case of Juat v. Court of Industrial
Relations,[38] the Court held that an old employee who had no union may be compelled to join the union
even if the collective bargaining agreement (CBA) imposing the closed shop provision was only entered
into seven years after of the hiring of the said employee. To quote from that decision:
A closed-shop agreement has been considered as one form of union security whereby
only union members can be hired and workers must remain union members as a
condition of continued employment. The requirement for employees or workers to
become members of a union as a condition for employment redounds to the benefit
and advantage of said employees because by holding out to loyal members a promise
of employment in the closed-shop the union wields group solidarity. In fact, it is said
that "the closed-shop contract is the most prized achievement of unionism."
xxxx
This Court had categorically held in the case of Freeman Shirt Manufacturing Co., Inc., et
al. vs. Court of Industrial Relations, et al., G.R. No. L-16561, Jan. 28, 1961, that
the closed-shop proviso of a collective bargaining agreement entered into between an
employer and a duly authorized labor union is applicable not only to the employees or
laborers that are employed after the collective bargaining agreement had been
entered into but also to old employees who are not members of any labor union at
the time the said collective bargaining agreement was entered into. In other words, if
an employee or laborer is already a member of a labor union different from the union
that entered into a collective bargaining agreement with the employer providing for a
closed-shop, said employee or worker cannot be obliged to become a member of that
union which had entered into a collective bargaining agreement with the employer as a
condition for his continued employment. (Emphasis and underscoring supplied.)

Although the present case does not involve a closed shop provision that included even old employees,
the Juat example is but one of the cases that laid down the doctrine that the right not to join a union is
not absolute. Theoretically, there is nothing in law or jurisprudence to prevent an employer and a union
from stipulating that existing employees (who already attained regular and permanent status but who
are not members of any union) are to be included in the coverage of a union security clause. Even Article
248(e) of the Labor Code only expressly exemptsold employees who already have a union from
inclusion in a union security clause.[39]
Contrary to the assertion in the dissent of Justice Carpio, Juat has not been overturned by Victoriano
v. Elizalde Rope Workers Union[40] nor by Reyes v. Trajano.[41] The factual milieus of these three cases are
vastly different.
In Victoriano, the issue that confronted the Court was whether or not employees who were members of
the Iglesia ni Kristo (INK) sect could be compelled to join the union under a closed shop provision,
despite the fact that their religious beliefs prohibited them from joining a union. In that case, the Court
was asked to balance the constitutional right to religious freedom against a host of other constitutional
provisions including the freedom of association, the non-establishment clause, the non-impairment of
contracts clause, the equal protection clause, and the social justice provision. In the end, the Court held
that religious freedom, although not unlimited, is a fundamental personal right and liberty, and has a
preferred position in the hierarchy of values.[42]
However, Victoriano is consistent with Juat since they both affirm that the right to refrain from joining a
union is not absolute. The relevant portion of Victoriano is quoted below:
The right to refrain from joining labor organizations recognized by Section 3 of the
Industrial Peace Act is, however, limited. The legal protection granted to such right to
refrain from joining is withdrawn by operation of law, where a labor union and an
employer have agreed on a closed shop, by virtue of which the employer may employ
only member of the collective bargaining union, and the employees must continue to
be members of the union for the duration of the contract in order to keep their
jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by
Republic Act No. 3350, provides that although it would be an unfair labor practice for
an employer "to discriminate in regard to hire or tenure of employment or any term
or condition of employment to encourage or discourage membership in any labor
organization" the employer is, however, not precluded "from making an agreement
with a labor organization to require as a condition of employment membership
therein, if such labor organization is the representative of the employees." By virtue,
therefore, of a closed shop agreement, before the enactment of Republic Act No. 3350,
if any person, regardless of his religious beliefs, wishes to be employed or to keep his
employment, he must become a member of the collective bargaining union. Hence, the
right of said employee not to join the labor union is curtailed and
withdrawn.[43] (Emphases supplied.)

If Juat exemplified an exception to the rule that a person has the right not to join a
union, Victoriano merely created an exception to the exception on the ground of religious freedom.

Reyes, on the other hand, did not involve the interpretation of any union security clause. In that case,
there was no certified bargaining agent yet since the controversy arose during a certification
election. In Reyes, the Court highlighted the idea that the freedom of association included the right not
to associate or join a union in resolving the issue whether or not the votes of members of the INK sect
who were part of the bargaining unit could be excluded in the results of a certification election, simply
because they were not members of the two contesting unions and were expected to have voted for NO
UNION in view of their religious affiliation. The Court upheld the inclusion of the votes of the INK
members since in the previous case ofVictoriano we held that INK members may not be compelled to
join a union on the ground of religious freedom and even without Victoriano every employee has the
right to vote no union in a certification election as part of his freedom of association. However, Reyes is
not authority for Justice Carpios proposition that an employee who is not a member of any union may
claim an exemption from an existing union security clause because he already has regular and
permanent status but simply prefers not to join a union.
The other cases cited in Justice Carpios dissent on this point are likewise inapplicable. Basa v. Federacion
Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas,[44]Anucension v. National Labor
Union,[45] and Gonzales v. Central Azucarera de Tarlac Labor Union[46] all involved members of the INK. In
line with Victoriano, these cases upheld the INK members claimed exemption from the union security
clause on religious grounds. In the present case, the former FEBTC employees never claimed any
religious grounds for their exemption from the Union Shop Clause. As for Philips Industrial Development,
Inc. v. National Labor Relations Corporation[47] and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,[48]the
employees who were exempted from joining the respondent union or who were excluded from
participating in the certification election were found to be not members of the bargaining unit
represented by respondent union and were free to form/join their own union. In the case at bar, it is
undisputed that the former FEBTC employees were part of the bargaining unit that the Union
represented. Thus, the rulings in Philips and Knitjoy have no relevance to the issues at hand.
Time and again, this Court has ruled that the individual employees right not to join a union may
be validly restricted by a union security clause in a CBA[49] and such union security clause is not a
violation of the employees constitutional right to freedom of association.[50]
It is unsurprising that significant provisions on labor protection of the 1987 Constitution are found in
Article XIII on Social Justice. The constitutional guarantee given the right to form unions[51] and the State
policy to promote unionism[52] have social justice considerations. In Peoples Industrial and Commercial
Employees and Workers Organization v. Peoples Industrial and Commercial Corporation,[53] we
recognized that [l]abor, being the weaker in economic power and resources than capital, deserve
protection that is actually substantial and material.
The rationale for upholding the validity of union shop clauses in a CBA, even if they impinge
upon the individual employees right or freedom of association, is not to protect the union for the unions
sake. Laws and jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union presumably benefits all
employees in the bargaining unit since such a union would be in a better position to demand improved
benefits and conditions of work from the employer. This is the rationale behind the State policy to
promote unionism declared in the Constitution, which was elucidated in the above-cited case of Liberty
Flour Mills Employees v. Liberty Flour Mills, Inc.[54]

In the case at bar, since the former FEBTC employees are deemed covered by the Union Shop Clause,
they are required to join the certified bargaining agent, which supposedly has gathered the support of
the majority of workers within the bargaining unit in the appropriate certification proceeding. Their
joining the certified union would, in fact, be in the best interests of the former FEBTC employees for it
unites their interests with the majority of employees in the bargaining unit. It encourages employee
solidarity and affords sufficient protection to the majority status of the union during the life of the CBA
which are the precisely the objectives of union security clauses, such as the Union Shop Clause involved
herein. We are indeed not being called to balance the interests of individual employees as against the
State policy of promoting unionism, since the employees, who were parties in the court below, no
longer contested the adverse Court of Appeals decision. Nonetheless, settled jurisprudence has already
swung the balance in favor of unionism, in recognition that ultimately the individual employee will be
benefited by that policy. In the hierarchy of constitutional values, this Court has repeatedly held that the
right to abstain from joining a labor organization is subordinate to the policy of encouraging unionism as
an instrument of social justice.

Also in the dissenting opinion of Justice Carpio, he maintains that one of the dire consequences to the
former FEBTC employees who refuse to join the union is the forfeiture of their retirement benefits. This
is clearly not the case precisely because BPI expressly recognized under the merger the length of service
of the absorbed employees with FEBTC. Should some refuse to become members of the union, they may
still opt to retire if they are qualified under the law, the applicable retirement plan, or the CBA, based on
their combined length of service with FEBTC and BPI. Certainly, there is nothing in the union shop clause
that should be read as to curtail an employees eligibility to apply for retirement if qualified under the
law, the existing retirement plan, or the CBA as the case may be.
In sum, this Court finds it reasonable and just to conclude that the Union Shop Clause of the CBA
covers the former FEBTC employees who were hired/employed by BPI during the effectivity of the CBA
in a manner which petitioner describes as absorption. A contrary appreciation of the facts of this case
would, undoubtedly, lead to an inequitable and very volatile labor situation which this Court has
consistently ruled against.
In the case of former FEBTC employees who initially joined the union but later withdrew their
membership, there is even greater reason for the union to request their dismissal from the employer
since the CBA also contained a Maintenance of Membership Clause.
A final point in relation to procedural due process, the Court is not unmindful that the former
FEBTC employees refusal to join the union and BPIs refusal to enforce the Union Shop Clause in this
instance may have been based on the honest belief that the former FEBTC employees were not covered
by said clause. In the interest of fairness, we believe the former FEBTC employees should be given a
fresh thirty (30) days from notice of finality of this decision to join the union before the union demands
BPI to terminate their employment under the Union Shop Clause, assuming said clause has been carried
over in the present CBA and there has been no material change in the situation of the parties.
WHEREFORE, the petition is hereby DENIED, and the Decision dated September 30, 2003 of the
Court of Appeals is AFFIRMED, subject to the thirty (30) day notice requirement imposed herein. Former
FEBTC employees who opt not to become union members but who qualify for retirement shall receive
their retirement benefits in accordance with law, the applicable retirement plan, or the CBA, as the case
may be.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

Pryce Corp. v. Chinabank, G.R. No. 172302, February 18, 2014

G.R. No. 172302

February 18, 2014

PRYCE
vs.
CHINA BANKING CORPORATION, Respondent.

CORPORATION, Petitioner,

RESOLUTION
LEONEN, J.:
This case resolves conflicting decisions between two divisions. Only one may serve as res judicata or a
bar for the other to proceed. This case also settles the doctrine as to whether a hearing is needed prior
to the issuance of a stay order in corporate rehabilitation proceedings.
The present case originated from a petition for corporate rehabilitation filed by petitioner Pryce
Corporation on July 9, 2004 with the Regional Trial Court of Makati, Branch 138.1
The rehabilitation court found the petition sufficient in form and substance and issued a stay order on
July 13, 2004 appointing Gener T. Mendoza as rehabilitation receiver.2
On September 13, 2004, the rehabilitation court gave due course to the petition and directed the
rehabilitation receiver to evaluate and give recommendations on petitioner Pryce Corporations
proposed rehabilitation plan attached to its petition.3
The rehabilitation receiver did not approve this plan and submitted instead an amended rehabilitation
plan, which the rehabilitation court approved by order dated January 17, 2005.4 In its disposition, the
court found petitioner Pryce Corporation "eligible to be placed in a state of corporate
rehabilitation."5 The disposition likewise identified the assets to be held and disposed of by petitioner
Pryce Corporation and the manner by which its liabilities shall be paid and liquidated.6

On February 23, 2005, respondent China Banking Corporation elevated the case to the Court of Appeals.
Its petition questioned the January 17, 2005 order that included the following terms:
1. The indebtedness to China Banking Corporation and Bank of the Philippine Islands as well as
the long term commercial papers will be paid through a dacion en pago of developed real estate
assets of the petitioner.
xxxx
4. All accrued penalties are waived[.]
5. Interests shall accrue only up to July 13, 2004, the date of issuance of the stay order[.]
6. No interest will accrue during the pendency of petitioners corporate rehabilitation[.]
7. Dollar-denominated loans will be converted to Philippine Pesos on the date of the issuance of
this Order using the reference rate of the Philippine Dealing System as of this date.7
Respondent China Banking Corporation contended that the rehabilitation plans approval impaired the
obligations of contracts. It argued that neither the provisions of Presidential Decree No. 902-A nor the
Interim Rules of Procedure on Corporate Rehabilitation (Interim Rules) empowered commercial courts
"to render without force and effect valid contractual stipulations."8 Moreover, the plans approval
authorizing dacion en pago of petitioner Pryce Corporations properties without respondent China
Banking Corporations consent not only violated "mutuality of contract and due process, but [was] also
antithetical to the avowed policies of the state to maintain a competitive financial system."9
The Bank of the Philippine Islands (BPI), another creditor of petitioner Pryce Corporation, filed a
separate petition with the Court of Appeals assailing the same order by the rehabilitation court. BPI
called the attention of the court "to the non-impairment clause and the mutuality of contracts
purportedly ran roughshod by the [approved rehabilitation plan]."10
On July 28, 2005, the Court of Appeals Seventh (7th) Division11 granted respondent China Banking
Corporation's petition, and reversed and set aside the rehabilitation courts: (1) July 13, 2004 stay order
that also appointed Gener T. Mendoza as rehabilitation receiver; (2) September 13, 2004 order giving
due course to the petition and directing the rehabilitation receiver to evaluate and give
recommendations on petitioner Pryce Corporations proposed rehabilitation plan; and (3) January 17,
2005 order finding petitioner Pryce Corporation eligible to be placed in a state of corporate
rehabilitation, identifying assets to be disposed of, and determining the manner of liquidation to pay the
liabilities.12
With respect to BPIs separate appeal, the Court of Appeals First (1st) Division13 granted its petition
initially and set aside the January 17, 2005 order of the rehabilitation court in its decision dated May 3,
2006.14 On reconsideration, the court issued a resolution dated May 23, 2007 setting aside its original
decision and dismissing the petition.15 BPI elevated the case to this court, docketed as G.R. No. 180316.
By resolution dated January 30, 2008, the First (1st) Division of this court denied the petition.16 By
resolution dated April 28, 2008, this court denied reconsideration with finality.17

Meanwhile, petitioner Pryce Corporation also appealed to this court assailing the July 28, 2005 decision
of the Court of Appeals Seventh (7th) Division granting respondent China Banking Corporations petition
as well as the resolution denying its motion for reconsideration.
In the decision dated February 4, 2008,18 the First (1st) Division of this court denied its petition with the
dispositive portion as follows:
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
88479 is AFFIRMED with the modification discussed above. Let the records of this case be REMANDED to
the RTC, Branch 138, Makati City, sitting as Commercial Court, for further proceedings with dispatch to
determine the merits of the petition for rehabilitation. No costs.19
Petitioner Pryce Corporation filed an omnibus motion for (1) reconsideration or (2) partial
reconsideration and (3) referral to the court En Banc dated February 29, 2008. Respondent China
Banking Corporation also filed a motion for reconsideration on even date, praying that the February 4,
2008 decision be set aside and reconsidered only insofar as it ordered the remand of the case for further
proceedings "to determine whether petitioner's financial condition is serious and whether there is clear
and imminent danger that it will lose its corporate assets."20
By resolution dated June 16, 2008, this court denied with finality the separate motions for
reconsideration filed by the parties.
On September 10, 2008, petitioner Pryce Corporation filed a second motion for reconsideration praying
that the Court of Appeals decision dated February 4, 2008 be set aside.
The First Division of this court referred this case to the En Banc en consulta by resolution dated June 22,
2009.21The court En Banc, in its resolution dated April 13, 2010, resolved to accept this case.22
On July 30, 2013, petitioner Pryce Corporation and respondent China Banking Corporation, through their
respective counsel, filed a joint manifestation and motion to suspend proceedings. The parties
requested this court to defer its ruling on petitioner Pryce Corporations second motion for
reconsideration "so as to enable the parties to work out a mutually acceptable arrangement."23
By resolution dated August 6, 2013, this court granted the motion but only for two (2) months. The
registry receipts showed that counsel for respondent China Banking Corporation and counsel for
petitioner Pryce Corporation received their copies of this resolution on September 5, 2013.24
More than two months had lapsed since September 5, 2013, but no agreement was filed by the parties.
Thus, we proceed to rule on petitioner Pryce Corporations second motion for reconsideration.
This motion raises two grounds.
First, petitioner Pryce Corporation argues that the issue on the validity of the rehabilitation court orders
is now res judicata. Petitioner Pryce Corporation submits that the ruling in BPI v. Pryce Corporation
docketed as G.R. No. 180316 contradicts the present case, and it has rendered the issue on the validity
and regularity of the rehabilitation court orders as res judicata.25

Second, petitioner Pryce Corporation contends that Rule 4, Section 6 of the Interim Rules of Procedure
on Corporate Rehabilitation26 does not require the rehabilitation court to hold a hearing before issuing a
stay order. Considering that the Interim Rules was promulgated later than Rizal Commercial Banking
Corp. v. IAC27 that enunciated the "serious situations" test,28 petitioner Pryce Corporation argues that
the test has effectively been abandoned by the "sufficiency in form and substance test" under the
Interim Rules.29
The present second motion for reconsideration involves the following issues:
I. WHETHER THE ISSUE ON THE VALIDITY OF THE REHABILITATION ORDER DATED JANUARY 17,
2005 IS NOW RES JUDICATA IN LIGHT OF BPI V. PRYCE CORPORATION DOCKETED AS G.R. NO.
180316;
II. WHETHER THE REHABILITATION COURT IS REQUIRED TO HOLD A HEARING TO COMPLY WITH
THE "SERIOUS SITUATIONS" TEST LAID DOWN IN THE CASE OF RIZAL COMMERCIAL BANKING
CORP. V. IAC BEFORE ISSUING A STAY ORDER.
We proceed to discuss the first issue.
BPI v. Pryce Corporation docketed as G.R. No. 180316 rendered the issue on the validity of the
rehabilitation courts January 17, 2005 order approving the amended rehabilitation plan as res judicata.
In BPI v. Pryce Corporation, the Court of Appeals set aside initially the January 17, 2005 order of the
rehabilitation court.30 On reconsideration, the court set aside its original decision and dismissed the
petition.31 On appeal, this court denied the petition filed by BPI with finality. An entry of judgment was
made for BPI v. Pryce Corporation on June 2, 2008.32 In effect, this court upheld the January 17, 2005
order of the rehabilitation court.
According to the doctrine of res judicata, "a final judgment or decree on the merits by a court of
competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on all
points and matters determined in the former suit."33
The elements for res judicata to apply are as follows: (a) the former judgment was final; (b) the court
that rendered it had jurisdiction over the subject matter and the parties; (c) the judgment was based on
the merits; and (d) between the first and the second actions, there was an identity of parties, subject
matters, and causes of action.34
Res judicata embraces two concepts: (1) bar by prior judgment35 and (2) conclusiveness of judgment.36
Bar by prior judgment exists "when, as between the first case where the judgment was rendered and
the second case that is sought to be barred, there is identity of parties, subject matter, and causes of
action."37
On the other hand, the concept of conclusiveness of judgment finds application "when a fact or question
has been squarely put in issue, judicially passed upon, and adjudged in a former suit by a court of
competent jurisdiction."38This principle only needs identity of parties and issues to apply.39

The elements of res judicata through bar by prior judgment are present in this case.
On the element of identity of parties, res judicata does not require absolute identity of parties as
substantial identity is enough.40 Substantial identity of parties exists "when there is a community of
interest between a party in the first case and a party in the second case, even if the latter was not
impleaded in the first case."41 Parties that represent the same interests in two petitions are, thus,
considered substantial identity of parties for purposes of res judicata.42 Definitely, one test to determine
substantial identity of interest would be to see whether the success or failure of one party materially
affects the other.
In the present case, respondent China Banking Corporation and BPI are creditors of petitioner Pryce
Corporation and are both questioning the rehabilitation courts approval of the amended rehabilitation
plan. Thus, there is substantial identity of parties since they are litigating for the same matter and in the
same capacity as creditors of petitioner Pryce Corporation.
There is no question that both cases deal with the subject matter of petitioner Pryce Corporations
rehabilitation. The element of identity of causes of action also exists.
In separate appeals, respondent China Banking Corporation and BPI questioned the same January 17,
2005 order of the rehabilitation court before the Court of Appeals.
Since the January 17, 2005 order approving the amended rehabilitation plan was affirmed and made
final in G.R. No. 180316, this plan binds all creditors, including respondent China Banking Corporation.
In any case, the Interim Rules or the rules in effect at the time the petition for corporate rehabilitation
was filed in 2004 adopts the cram-down principle which "consists of two things: (i) approval despite
opposition and (ii) binding effect of the approved plan x x x."43
First, the Interim Rules allows the rehabilitation court44 to "approve a rehabilitation plan even over the
opposition of creditors holding a majority of the total liabilities of the debtor if, in its judgment, the
rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable."45
Second, it also provides that upon approval by the court, the rehabilitation plan and its provisions "shall
be binding upon the debtor and all persons who may be affected by it, including the creditors, whether
or not such persons have participated in the proceedings or opposed the plan or whether or not their
claims have been scheduled."46
Thus, the January 17, 2005 order approving the amended rehabilitation plan, now final and executory
resulting from the resolution of BPI v. Pryce Corporation docketed as G.R. No. 180316, binds all creditors
including respondent China Banking Corporation.
This judgment in BPI v. Pryce Corporation covers necessarily the rehabilitation courts September 13,
2004 order giving due course to the petition. The general rule precluding relitigation of issues extends to
questions implied necessarily in the final judgment, viz:
The general rule precluding the relitigation of material facts or questions which were in issue and
adjudicated in former action are commonly applied to all matters essentially connected with the subject

matter of the litigation. Thus, it extends to questions necessarily implied in the final judgment, although
no specific finding may have been made in reference thereto and although such matters were directly
referred to in the pleadings and were not actually or formally presented. x x x.47
The dispositive portion of the Court of Appeals decision in BPI v. Pryce Corporation, reversed on
reconsideration, only mentioned the January 17, 2005 order of the rehabilitation court approving the
amended rehabilitation plan. Nevertheless, the affirmation of its validity necessarily included the
September 13, 2004 order as this earlier order gave due course to the petition and directed the
rehabilitation receiver to evaluate and give recommendations on the rehabilitation plan proposed by
petitioner.48
In res judicata, the primacy given to the first case is related to the principle of immutability of final
judgments essential to an effective and efficient administration of justice, viz:
x x x [W]ell-settled is the principle that a decision that has acquired finality becomes immutable and
unalterable and may no longer be modified in any respect even if the modification is meant to correct
erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the
highest court of the land.
The reason for this is that litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a judgment has become final,
the winning party be not deprived of the fruits of the verdict. Courts must guard against any scheme
calculated to bring about that result and must frown upon any attempt to prolong the controversies.
The only exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc
entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire
after the finality of the decision rendering its execution unjust and inequitable.49 (Emphasis provided)
Generally, the later case is the one abated applying the maxim qui prior est tempore, potior est jure (he
who is before in time is the better in right; priority in time gives preference in law).50 However, there are
limitations to this rule as discussed in Victronics Computers, Inc. v. Regional Trial Court, Branch 63,
Makati:51
In our jurisdiction, the law itself does not specifically require that the pending action which would hold
in abatement the other must be a pending prior action. Thus, in Teodoro vs. Mirasol, this Court
observed:
It is to be noted that the Rules do not require as a ground for dismissal of a complaint that there is a
prior pending action. They provide that there is a pending action, not a pending prior action. The fact
that the unlawful detainer suit was of a later date is no bar to the dismissal of the present action. We
find, therefore, no error in the ruling of the court a quo that plaintiff's action should be dismissed on the
ground of the pendency of another more appropriate action between the same parties and for the same
cause.
In Roa-Magsaysay vs. Magsaysay, wherein it was the first case which was abated, this Court ruled:

In any event, since We are not really dealing with jurisdiction but mainly with venue, considering both
courts concerned do have jurisdiction over the causes of action of the parties herein against each other,
the better rule in the event of conflict between two courts of concurrent jurisdiction as in the present
case, is to allow the litigation to be tried and decided by the court which, under the circumstances
obtaining in the controversy, would, in the mind of this Court, be in a better position to serve the
interests of justice, considering the nature of the controversy, the comparative accessibility of the court
to the parties, having in view their peculiar positions and capabilities, and other similar factors. Without
in any manner casting doubt as to the capacity of the Court of First Instance of Zambales to adjudicate
properly cases involving domestic relations, it is easy to see that the Juvenile and Domestic Relations
Court of Quezon City which was created in order to give specialized attention to family problems, armed
as it is with adequate and corresponding facilities not available to ordinary courts of first instance, would
be able to attend to the matters here in dispute with a little more degree of expertise and experience,
resulting in better service to the interests of justice. A reading of the causes of action alleged by the
contending spouses and a consideration of their nature, cannot but convince Us that, since anyway,
there is an available Domestic Court that can legally take cognizance of such family issues, it is better
that said Domestic Court be the one chosen to settle the same as the facts and the law may warrant.
We made the same pronouncement in Ramos vs. Peralta:
Finally, the rule on litis pendentia does not require that the later case should yield to the earlier case.
What is required merely is that there be another pending action, not a prior pending action. Considering
the broader scope of inquiry involved in Civil Case No. 4102 and the location of the property involved,
no error was committed by the lower court in deferring to the Bataan court's jurisdiction.
An analysis of these cases unravels the ratio for the rejection of the priority-in-time rule and establishes
the criteria to determine which action should be upheld and which is to be abated. In Teodoro, this
Court used the criterion of the more appropriate action. We ruled therein that the unlawful detainer
case, which was filed later, was the more appropriate action because the earlier case for specific
performance or declaratory relief filed by the lessee (Teodoro) in the Court of First Instance (CFI) to
seek the extension of the lease for another two (2) years or the fixing of a longer term for it, was
"prompted by a desire on plaintiff's part to anticipate the action for unlawful detainer, the probability of
which was apparent from the letter of the defendant to the plaintiff advising the latter that the contract
of lease expired on October 1, 1954." The real issue between the parties therein was whether or not the
lessee should be allowed to continue occupying the leased premises under a contract the terms of
which were also the subject matter of the unlawful detainer case. Consonant with the doctrine laid
down in Pue vs. Gonzales and Lim Si vs. Lim, the right of the lessee to occupy the land leased against the
lessor should be decided under Rule 70 of the Rules of Court; the fact that the unlawful detainer case
was filed later then of no moment. Thus, the latter was the more appropriate action.
xxxx
In Roa-Magsaysay[,] the criterion used was the consideration of the interest of justice. In applying this
standard, what was asked was which court would be "in a better position to serve the interests of
justice," taking into account (a) the nature of the controversy, (b) the comparative accessibility of the
court to the parties and (c) other similar factors. While such a test was enunciated therein, this Court
relied on its constitutional authority to change venue to avoid a miscarriage of justice.

It is interesting to note that in common law, as earlier adverted to, and pursuant to the Teodoro vs.
Mirasol case, the bona fides or good faith of the parties is a crucial element. In the former, the second
case shall not be abated if not brought to harass or vex; in the latter, the first case shall be abated if it is
merely an anticipatory action or, more appropriately, an anticipatory defense against an expected suit
a clever move to steal the march from the aggrieved party.52 (Emphasis provided and citations
omitted)
None of these situations are present in the facts of this instant suit. In any case, it is the better part of
wisdom in protecting the creditors if the corporation is rehabilitated.
We now proceed to the second issue on whether the rehabilitation court is required to hold a hearing to
comply with the "serious situations" test laid down in Rizal Commercial Banking Corp. v. IAC before
issuing a stay order.
The rehabilitation court complied with the Interim Rules in its order dated July 13, 2004 on the issuance
of a stay order and appointment of Gener T. Mendoza as rehabilitation receiver.53
The 1999 Rizal Commercial Banking Corp. v. IAC54 case provides for the "serious situations" test in that
the suspension of claims is counted only upon the appointment of a rehabilitation receiver,55 and certain
situations serious in nature must be shown to exist before one is appointed, viz:
Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does not
always result in the appointment of a receiver or the creation of a management committee. The SEC has
to initially determine whether such appointment is appropriate and necessary under the circumstances.
Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to
exist before a management committee may be created or appointed, such as:
1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other
properties; or
2. when there is paralization of business operations of such corporations or entities which may
be prejudicial to the interest of minority stockholders, parties-litigants or to the general public.
On the other hand, receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties-litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6 [c], P.D. 902-A.)
These situations are rather serious in nature, requiring the appointment of a management committee or
a receiver to preserve the existing assets and property of the corporation in order to protect the
interests of its investors and creditors. Thus, in such situations, suspension of actions for claims against a
corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is necessary, and
here we borrow the words of the late Justice Medialdea, "so as not to render the SEC management
Committee irrelevant and inutile and to give it unhampered rescue efforts over the distressed firm"
(Rollo, p. 265)."

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger
of losing the corporate assets, a management committee or rehabilitation receiver need not be
appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC does not
deem it necessary to appoint a receiver or to create a management committee, it may be assumed, that
there are sufficient assets to sustain the rehabilitation plan, and that the creditors and investors are
amply protected.56
However, this case had been promulgated prior to the effectivity of the Interim Rules that took effect on
December 15, 2000.
Section 6 of the Interim Rules states explicitly that "[i]f the court finds the petition to be sufficient in
form and substance, it shall, not later than five (5) days from the filing of the petition, issue an Order (a)
appointing a Rehabilitation Receiver and fixing his bond; (b) staying enforcement of all claims x x x."57
Compliant with the rules, the July 13, 2004 stay order was issued not later than five (5) days from the
filing of the petition on July 9, 2004 after the rehabilitation court found the petition sufficient in form
and substance.
We agree that when a petition filed by a debtor "alleges all the material facts and includes all the
documents required by Rule 4-2 [of the Interim Rules],"58 it is sufficient in form and substance.
Nowhere in the Interim Rules does it require a comprehensive discussion in the stay order on the courts
findings of sufficiency in form and substance.
The stay order and appointment of a rehabilitation receiver dated July 13, 2004 is an "extraordinary,
preliminary, ex parte remed[y]."59 The effectivity period of a stay order is only "from the date of its
issuance until dismissal of the petition or termination of the rehabilitation proceedings."60 It is not a final
disposition of the case. It is an interlocutory order defined as one that "does not finally dispose of the
case, and does not end the Courts task of adjudicating the parties contentions and determining their
rights and liabilities as regards each other, but obviously indicates that other things remain to be done
by the Court."61
Thus, it is not covered by the requirement under the Constitution that a decision must include a
discussion of the facts and laws on which it is based.62
Neither does the Interim Rules require a hearing before the issuance of a stay order. What it requires is
an initial hearing before it can give due course to63 or dismiss64 a petition.
Nevertheless, while the Interim Rules does not require the holding of a hearing before the issuance of a
stay order, neither does it prohibit the holding of one. Thus, the trial court has ample discretion to call a
hearing when it is not confident that the allegations in the petition are sufficient in form and substance,
for so long as this hearing is held within the five (5)-day period from the filing of the petition the
period within which a stay order may issue as provided in the Interim Rules.
One of the important objectives of the Interim Rules is "to promote a speedy disposition of corporate
rehabilitation cases[,] x x x apparent from the strict time frames, the non-adversarial nature of the
proceedings, and the prohibition of certain kinds of pleadings."65 It is in light of this objective that a

court with basis to issue a stay order must do so not later than five (5) days from the date the petition
was filed.66
Moreover, according to the November 17, 2000 memorandum submitted by the Supreme Court
Committee on the Interim Rules of Procedure on Corporate Rehabilitation:
The Proposed Rules remove the concept of the Interim Receiver and replace it with a rehabilitation
receiver. This is to justify the immediate issuance of the stay order because under Presidential Decree
No. 902-A, as amended, the suspension of actions takes effect only upon appointment of the
rehabilitation receiver.67 (Emphasis provided)
Even without this court going into the procedural issues, addressing the substantive merits of the case
will yield the same result.
Respondent China Banking Corporation mainly argues the violation of the constitutional proscription
against impairment of contractual obligations68 in that neither the provisions of Pres. Dec. No. 902-A as
amended nor the Interim Rules empower commercial courts "to render without force and effect valid
contractual stipulations."69
The non-impairment clause first appeared in the United States Constitution as a safeguard against the
issuance of worthless paper money that disturbed economic stability after the American
Revolution.70 This constitutional provision was designed to promote commercial stability.71 At its core is
"a prohibition of state interference with debtor-creditor relationships."72
This clause first became operative in the Philippines through the Philippine Bill of 1902, the fifth
paragraph of Section 5 which states "[t]hat no law impairing the obligation of contracts shall be
enacted." It was consistently adopted in subsequent Philippine fundamental laws, namely, the Jones
Law of 1916,73 the 1935 Constitution,74the 1973 Constitution,75 and the present Constitution.76
Nevertheless, this court has brushed aside invocations of the non-impairment clause to give way to a
valid exercise of police power77 and afford protection to labor.78
In Pacific Wide Realty and Development Corporation v. Puerto Azul Land, Inc.79 which similarly involved
corporate rehabilitation, this court found no merit in Pacific Wides invocation of the non-impairment
clause, explaining as follows:
We also find no merit in PWRDCs contention that there is a violation of the impairment clause. Section
10, Article III of the Constitution mandates that no law impairing the obligations of contract shall be
passed. This case does not involve a law or an executive issuance declaring the modification of the
contract among debtor PALI, its creditors and its accommodation mortgagors. Thus, the non-impairment
clause may not be invoked. Furthermore, as held in Oposa v. Factoran, Jr. even assuming that the same
may be invoked, the non-impairment clause must yield to the police power of the State. Property rights
and contractual rights are not absolute. The constitutional guaranty of non-impairment of obligations is
limited by the exercise of the police power of the State for the common good of the general public.
Successful rehabilitation of a distressed corporation will benefit its debtors, creditors, employees, and
the economy in general. The court may approve a rehabilitation plan even over the opposition of

creditors holding a majority of the total liabilities of the debtor if, in its judgment, the rehabilitation of
the debtor is feasible and the opposition of the creditors is manifestly unreasonable. The rehabilitation
plan, once approved, is binding upon the debtor and all persons who may be affected by it, including the
creditors, whether or not such persons have participated in the proceedings or have opposed the plan
or whether or not their claims have been scheduled.80
Corporate rehabilitation is one of many statutorily provided remedies for businesses that experience a
downturn. Rather than leave the various creditors unprotected, legislation now provides for an orderly
procedure of equitably and fairly addressing their concerns. Corporate rehabilitation allows a courtsupervised process to rejuvenate a corporation. Its twin, insolvency, provides for a system of liquidation
and a procedure of equitably settling various debts owed by an individual or a business. It provides a
corporations owners a sound chance to re-engage the market, hopefully with more vigor and
enlightened services, having learned from a painful experience.
Necessarily, a business in the red and about to incur tremendous losses may not be able to pay all its
creditors. Rather than leave it to the strongest or most resourceful amongst all of them, the state steps
in to equitably distribute the corporations limited resources.
The cram-down principle adopted by the Interim Rules does, in effect, dilute contracts. When it permits
the approval of a rehabilitation plan even over the opposition of creditors,81 or when it imposes a
binding effect of the approved plan on all parties including those who did not participate in the
proceedings,82 the burden of loss is shifted to the creditors to allow the corporation to rehabilitate itself
from insolvency.
Rather than let struggling corporations slip and vanish, the better option is to allow commercial courts
to come in and apply the process for corporate rehabilitation.
This option is preferred so as to avoid what Garrett Hardin called the Tragedy of Commons. Here, Hardin
submits that "coercive government regulation is necessary to prevent the degradation of common-pool
resources [since] individual resource appropriators receive the full benefit of their use and bear only a
share of their cost."83 By analogy to the game theory, this is the prisoners dilemma: "Since no individual
has the right to control or exclude others, each appropriator has a very high discount rate [with] little
incentive to efficiently manage the resource in order to guarantee future use."84 Thus, the cure is an
exogenous policy to equitably distribute scarce resources. This will incentivize future creditors to
continue lending, resulting in something productive rather than resulting in nothing.
In fact, these corporations exist within a market. The General Theory of Second Best holds that
"correction for one market imperfection will not necessarily be efficiency-enhancing unless [there is
also] simultaneous [correction] for all other market imperfections."85 The correction of one market
imperfection may adversely affect market efficiency elsewhere, for instance, "a contract rule that
corrects for an imperfection in the market for consensual agreements may [at the same time] induce
welfare losses elsewhere."86 This theory is one justification for the passing of corporate rehabilitation
laws allowing the suspension of payments so that corporations can get back on their feet.
As in all markets, the environment is never guaranteed. There are always risks.1avvphi1 Contracts are
indeed sacred as the law between the parties. However, these contracts exist within a society where
nothing is risk-free, and the government is constantly being called to attend to the realities of the times.

Corporate rehabilitation is preferred for addressing social costs.1wphi1 Allowing the corporation room
to get back on its feet will retain if not increase employment opportunities for the market as a whole.
Indirectly, the services offered by the corporation will also benefit the market as "[t]he fundamental
impulse that sets and keeps the capitalist engine in motion comes from [the constant entry of] new
consumers goods, the new methods of production or transportation, the new markets, [and] the new
forms of industrial organization that capitalist enterprise creates."87
As a final note, this is not the first time this court was made to review two separate petitions appealed
from two conflicting decisions, rendered by two divisions of the Court of Appeals, and originating from
the same case. In Serrano v. Ambassador Hotel, Inc.,88 we ordered the Court of Appeals to adopt
immediately a more efficient system in its Internal Rules to avoid situations as this.
In this instance, it is fortunate that this court had the opportunity to correct the situation and prevent
conflicting judgments from reaching impending finality with the referral to the En Banc.
We reiterate the need for our courts to be "constantly vigilant in extending their judicial gaze to cases
related to the matters submitted for their resolution"89 as to "ensure against judicial confusion and [any]
seeming conflict in the judiciarys decisions."90
WHEREFORE, petitioner Pryce Corporation's motion is GRANTED. This court's February 4, 2008 decision
is RECONSIDERED and SET ASIDE.
SO ORDERED.
MARVIC MARIO VICTOR F. LEONEN
Associate Justice

Abella v. NLRC, G.R. No. 71813, July 20, 1987

G.R. No. 71813

July 20, 1987

ROSALINA
PEREZ
ABELLA/HDA.
DANAO-RAMONA, petitioners,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and RICARDO
DIONELE, SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor and
Employment affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor of granting
separation pay to private respondents.

On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde, Negros
Occidental, known as Hacienda Danao-Ramona, for a period of ten (10) years, renewable, at her option,
for another ten (10) years (Rollo, pp. 16-20).
On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private respondents. Private respondent
Ricardo Dionele, Sr. has been a regular farm worker since 1949 and he was promoted to Cabo in 1963.
On the other hand, private respondent Romeo Quitco started as a regular employee in 1968 and was
promoted to Cabo in November of the same year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents and turned over
the hacienda to the owners thereof on October 5, 1981, who continued the management, cultivation
and operation of the farm (Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner at the Ministry of
Labor and Employment, Bacolod City District Office, for overtime pay, illegal dismissal and reinstatement
with backwages. After the parties had presented their respective evidence, Labor Arbiter Manuel M.
Lucas, Jr., in a Decision dated July 16, 1982 (Ibid, pp. 29-31), ruled that the dismissal is warranted by the
cessation of business, but granted the private respondents separation pay. Pertinent portion of the
dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by reason of business
reverses or losses. Accordingly, the award of termination pay in complainants' favor is
warranted.
WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay at the
rate of half-month salary for every year of service, a fraction of six (6) months being considered
one (1) year. (Rollo pp. 29-30)
On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution dated April 8,
1985 (Ibid, pp. 3940), affirmed the decision and dismissed the appeal for lack of merit.
On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same was
denied in a Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).
The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require the
respondents to comment (Ibid, p. 58). In compliance therewith, private respondents filed their
Comment on October 23, 1985 (Ibid, pp. 53-55); and the Solicitor General on December 17, 1985 (Ibid,
pp. 71-73-B).
On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and public
respondents (Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due course to the
petition; and to require the parties to submit simultaneous memoranda (Ibid., p. 83). In compliance

therewith, the Solicitor General filed his Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner
on July 23, 1986 (Ibid, pp. 96-194).
The petition is devoid of merit.
The sole issue in this case is
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.
Petitioner claims that since her lease agreement had already expired, she is not liable for payment of
separation pay. Neither could she reinstate the complainants in the farm as this is a complete cessation
or closure of a business operation, a just cause for employment termination under Article 272 of the
Labor Code.
On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the private
respondents is Batas Pambansa Blg. 130, amending the Labor Code, Section 15 of which, specifically
provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows:
xxx

xxx

xxx

Art. 284. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establisment or undertaking unless the closing is for the purpose of circumventing the
provisions of this title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor-saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole year.1avvphi1
There is no question that Article 284 of the Labor Code as amended by BP 130 is the law applicable in
this case.
Article 272 of the same Code invoked by the petitioner pertains to the just causes of termination. The
Labor Arbiter does not argue the justification of the termination of employment but applied Article 284
as amended, which provides for the rights of the employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the constitutional guarantee against
impairment of obligations and contracts, because when she leased Hacienda Danao-Ramona on June 27,
1960, neither she nor the lessor contemplated the creation of the obligation to pay separation pay to
workers at the end of the lease.

Such contention is untenable.

This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369
[1977]) where the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to impair the obligation of contracts
is not absolute and unqualified. The prohibition is general, affording a broad outline and
requiring construction to fill in the details. The prohibition is not to read with literal exactness
like a mathematical formula for it prohibits unreasonable impairment only. In spite of the
constitutional prohibition the State continues to possess authority to safeguard the vital
interests of its people. Legislation appropriate to safeguard said interest may modify or abrogate
contracts already in effect. For not only are existing laws read into contracts in order to fix the
obligations as between the parties but the reservation of essential attributes of sovereign power
is also read into contracts as a postulate of the legal order. All contracts made with reference to
any matter that is subject to regulation under the police power must be understood as made in
reference to the possible exercise of that power. Otherwise, important and valuable reforms
may be precluded by the simple device of entering into contracts for the purpose of doing that
which otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally impairs contract of obligations, no
unchanging yardstick, applicable at all times and under all circumstances, by which the validity
of each statute may be measured or determined, has been fashioned, but every case must be
determined upon its own circumstances. Legislation impairing the obligation of contracts can be
sustained when it is enacted for the promotion of the general good of the people, and when the
means adopted must be legitimate, i.e. within the scope of the reserved power of the state
construed in harmony with the constitutional limitation of that power. (Citing Basa vs.
Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L27113], November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose employment is
terminated because of the closure of establishment and reduction of personnel. Without said law,
employees like private respondents in the case at bar will lose the benefits to which they are entitled
for the thirty three years of service in the case of Dionele and fourteen years in the case of Quitco.
Although they were absorbed by the new management of the hacienda, in the absence of any showing
that the latter has assumed the responsibilities of the former employer, they will be considered as new
employees and the years of service behind them would amount to nothing.
Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of
the parties with reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment benefits to
farm hands who were not parties to petitioner's lease contract with the owner of Hacienda DanaoRamona. That contract cannot have the effect of annulling subsequent legislation designed to protect
the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the workingman's welfare should be the primordial and

paramount consideration. (Volshel Labor Union v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is
the kind of interpretation which gives meaning and substance to the liberal and compassionate spirit of
the law as provided for in Article 4 of the New Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of this Code including its implementing rules and
regulations shall be resolved in favor of labor." The policy is to extend the applicability of the decree to a
greater number of employees who can avail of the benefits under the law, which is in consonance with
the avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v. Employees
Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees Compensation
Commission, 103 SCRA 329; Acosta v. Employees Compensation Commission, 109 SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982 Decision of the
Labor Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and Employment are hereby
AFFIRMED.
SO ORDERED.
Teehankee, C.J., Yap, Fernando, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

Goya v. Goya Employees, G.R. No. 170054, January 21, 2013

G.R. No. 170054

January 21, 2013

GOYA, INC., Petitioner,

vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and
set aside the June 16, 2005 Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in CAG.R. SP No. 87335, which sustained the October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E.
Laguesma, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor
practice in engaging the services of PESO.
The company is, however, directed to observe and comply with its commitment as it pertains to the
hiring of casual employees when necessitated by business circumstances.4

The facts are simple and appear to be undisputed.

Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food products, hired contractual employees
from PESO Resources Development Corporation (PESO) to perform temporary and occasional services in
its factory in Parang, Marikina City. This prompted respondent Goya, Inc. Employees UnionFFW (Union)
to request for a grievance conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining Agreement (CBA).5 When the
matter remained unresolved, the grievance was referred to the National Conciliation and Mediation
Board (NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator
(VA) Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to
submit for resolution the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in
engaging the services of PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence."6 Both parties thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a management
prerogative and in gross violation of the CBA tantamount to unfair labor practice (ULP). It noted that the
contractual workers engaged have been assigned to work in positions previously handled by regular
workers and Union members, in effect violating Section 4, Article I of the CBA, which provides for three
categories of employees in the Company, to wit:
Section 4. Categories of Employees. The parties agree on the following categories of employees:
(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company and is
serving a probationary period. If the probationary employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be required to undergo a probationary period of six (6)
months, which period, in the sole judgment of management, may be shortened if the employee has
already acquired the knowledge or skills required of the job. If the employee is hired from the casual
pool and has worked in the same position at any time during the past two (2) years, the probationary
period shall be three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his probationary period and
automatically granted regular employment status in the Company.
(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly
connected with the regular operations of the Company, or one hired for specific projects of limited
duration not connected directly with the regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA since the 1970s and that due
to this provision, a pool of casual employees had been maintained by the Company from which it hired
workers who then became regular workers when urgently necessary to employ them for more than a
year. Likewise, the Company sometimes hired probationary employees who also later became regular
workers after passing the probationary period. With the hiring of contractual employees, the Union
contended that it would no longer have probationary and casual employees from which it could obtain

additional Union members; thus, rendering inutile Section 1, Article III (Union Security) of the CBA,
which states:
Section 1. Condition of Employment. As a condition of continued employment in the Company, all
regular rank-and-file employees shall remain members of the Union in good standing and that new
employees covered by the appropriate bargaining unit shall automatically become regular employees of
the Company and shall remain members of the Union in good standing as a condition of continued
employment.
The Union moreover advanced that sustaining the Companys position would easily weaken and
ultimately destroy the former with the latters resort to retrenchment and/or retirement of employees
and not filling up the vacant regular positions through the hiring of contractual workers from PESO, and
that a possible scenario could also be created by the Company wherein it could "import" workers from
PESO during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law expressly allows contracting
and subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 1802; (b) the engagement of contractual employees did not, in any way, prejudice the Union, since not a
single employee was terminated and neither did it result in a reduction of working hours nor a reduction
or splitting of the bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a limitation on the Companys right to
engage the services of job contractors or its management prerogative to address temporary/occasional
needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative
and for lacking in factual basis, but the Company was directed to observe and comply with its
commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and
indeed the agreement prescribes three (3) categories of employees in the Company and provides for the
definition, functions and duties of each. Material to the case at hand is the definition as regards the
functions of a casual employee described as follows:
Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly
connected with the regular operations of the COMPANY, or one hired for specific projects of limited
duration not connected directly with the regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate managements prerogative of
outsourcing parts of its operations, it serves as a limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted agreement. It is clear that the parties agreed that in
the event that the Company needs to engage the services of additional workers who will perform
"occasional or seasonal work directly connected with the regular operations of the COMPANY," or
"specific projects of limited duration not connected directly with the regular operations of the
COMPANY", the Company can hire casual employees which is akin to contractual employees. If we note
the Companys own declaration that PESO was engaged to perform "temporary or occasional services"
(See the Companys Position Paper, at p. 1), then it should have directly hired the services of casual
employees rather than do it through PESO.

It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the
CBA provision in question. It must, however, be stressed that the right of management to outsource
parts of its operations is not totally eliminated but is merely limited by the CBA. Given the foregoing, the
Companys engagement of PESO for the given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision,8 the Company immediately filed a
petition for review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil
Procedure to set aside the directive to observe and comply with the CBA commitment pertaining to the
hiring of casual employees when necessitated by business circumstances. Professing that such order was
not covered by the sole issue submitted for voluntary arbitration, the Company assigned the following
errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS EXPRESSLY GRANTED
AND LIMITED BY BOTH PARTIES IN RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH
THE INTENT AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE ERROR IN
DECLARING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE
CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it
held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is
interrelated and intertwined with the sole issue to be resolved that is, "Whether or not the Company is
guilty of unfair labor practice in engaging the services of PESO, a third party service provider, under
existing CBA, laws, and jurisprudence." Both issues concern the engagement of PESO by the Company
which is perceived as a violation of the CBA and which constitutes as unfair labor practice on the part of
the Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not characterized under the law as a gross violation of the CBA.
Violations of a CBA, except those which are gross in character, shall no longer be treated as unfair labor
practice. Gross violations of a CBA means flagrant and/or malicious refusal to comply with the economic
provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in
declaring that the engagement of PESO is not in keeping with the intent and spirit of the CBA. The
Company justified its engagement of contractual employees through PESO as a management
prerogative, which is not prohibited by law. Also, it further alleged that no provision under the CBA
limits or prohibits its right to contract out certain services in the exercise of management prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to the categories
of the employees:
xxxx

A careful reading of the above-enumerated categories of employees reveals that the PESO contractual
employees do not fall within the enumerated categories of employees stated in the CBA of the parties.
Following the said categories, the Company should have observed and complied with the provision of
their CBA. Since the Company had admitted that it engaged the services of PESO to perform temporary
or occasional services which is akin to those performed by casual employees, the Company should have
tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It
bears stressing that a management prerogative refers to the right of the employer to regulate all aspects
of employment, such as the freedom to prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of their work, lay-off and discipline,
and dismissal and recall of work, presupposing the existence of employer-employee relationship. On the
basis of the foregoing definition, the Companys engagement of PESO was indeed a management
prerogative. This is in consonance with the pronouncement of the Supreme Court in the case of Manila
Electric Company vs. Quisumbing where it ruled that contracting out of services is an exercise of
business judgment or management prerogative.
This management prerogative of contracting out services, however, is not without limitation. In
contracting out services, the management must be motivated by good faith and the contracting out
should not be resorted to circumvent the law or must not have been the result of malicious arbitrary
actions. In the case at bench, the CBA of the parties has already provided for the categories of the
employees in the Companysestablishment. These categories of employees particularly with respect to
casual employees serve as limitation to the Companys prerogative to outsource parts of its operations
especially when hiring contractual employees. As stated earlier, the work to be performed by PESO was
similar to that of the casual employees. With the provision on casual employees, the hiring of PESO
contractual employees, therefore, is not in keeping with the spirit and intent of their CBA. (Citations
omitted)12
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court that its
stockholders and directors unanimously voted to shorten the Companys corporate existence only until
June 30, 2006, and that the three-year period allowed by law for liquidation of the Companys affairs
already expired on June 30, 2009. Referring to Gelano v. Court of Appeals,16 Public Interest Center, Inc.
v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still resolve the case for future guidance of
the bench and the bar as the issue raised herein allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on a matter not covered by the issue submitted for
arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that renders this
case moot and academic19 due to the permanent cessation of the Companys business operation on
June 30, 2009, the arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary
arbitration. Resultantly, the CA did not commit serious error when it sustained the ruling that the hiring
of contractual employees from PESO was not in keeping with the intent and spirit of the CBA. Indeed,
the opinion of the VA is germane to, or, in the words of the CA, "interrelated and intertwined with," the
sole issue submitted for resolution by the parties. This being said, the Companys invocation of Sections

4 and 5, Rule IV20 and Section 5, Rule VI21of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido. 22 In
Ludo, the company was engaged in the manufacture of coconut oil, corn starch, glucose and related
products. In the course of its business operations, it engaged the arrastre services of CLAS for the
loading and unloading of its finished products at the wharf. The arrastre workers deployed by CLAS to
perform the services needed were subsequently hired, on different dates, as Ludos regular rank-and-file
employees. Thereafter, said employees joined LEU, which acted as the exclusive bargaining agent of the
rank-and-file employees. When LEU entered into a CBA with Ludo, providing for certain benefits to the
employees (the amount of which vary according to the length of service rendered), it requested to
include in its members period of service the time during which they rendered arrastre services so that
they could get higher benefits. The matter was submitted for voluntary arbitration when Ludo failed to
act. Per submission agreement executed by both parties, the sole issue for resolution was the date of
regularization of the workers. The VA Decision ruled that: (1) the subject employees were engaged in
activities necessary and desirable to the business of Ludo, and (2) CLAS is a labor-only contractor of
Ludo. It then disposed as follows: (a) the complainants were considered regular employees six months
from the first day of service at CLAS; (b) the complainants, being entitled to the CBA benefits during the
regular employment, were awarded sick leave, vacation leave, and annual wage and salary increases
during such period; (c) respondents shall pay attorneys fees of 10% of the total award; and (d) an
interest of 12% per annum or 1% per month shall be imposed on the award from the date of
promulgation until fully paid. The VA added that all separation and/or retirement benefits shall be
construed from the date of regularization subject only to the appropriate government laws and other
social legislation. Ludo filed a motion for reconsideration, but the VA denied it. On appeal, the CA
affirmed in toto the assailed decision; hence, a petition was brought before this Court raising the issue,
among others, of whether a voluntary arbitrator can award benefits not claimed in the submission
agreement. In denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power to
make a final settlement since arbitration is the final resort for the adjudication of disputes. The succinct
reasoning enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly stated and limited in the
submission agreement. However, since arbitration is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate and to determine the scope of his own authority
subject only, in a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as already
indicated, viewed his authority as embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the affirmative case, the amount
thereof.

By the same token, the issue of regularization should be viewed as two-tiered issue. While the
submission agreement mentioned only the determination of the date or regularization, law and
jurisprudence give the voluntary arbitrator enough leeway of authority as well as adequate prerogative
to accomplish the reason for which the law on voluntary arbitration was created speedy labor justice.
It bears stressing that the underlying reason why this case arose is to settle, once and for all, the
ultimate question of whether respondent employees are entitled to higher benefits. To require them to
file another action for payment of such benefits would certainly undermine labor proceedings and
contravene the constitutional mandate providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case
reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject to judicial review, the leeway of authority as well
as adequate prerogative is aimed at accomplishing the rationale of the law on voluntary arbitration
speedy labor justice. In this case, a complete and final adjudication of the dispute between the parties
necessarily called for the resolution of the related and incidental issue of whether the Company still
violated the CBA but without being guilty of ULP as, needless to state, ULP is committed only if there is
gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Companys act of contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously,
this is due to the recognition that the CBA provisions agreed upon by the Company and the Union
delimit the free exercise of management prerogative pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the management to outsource parts of its operations is not
totally eliminated but is merely limited by the CBA," while the CA held that "this management
prerogative of contracting out services, however, is not without limitation. x x x These categories of
employees particularly with respect to casual employees serve as limitation to the Companys
prerogative to outsource parts of its operations especially when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.1wphi1 As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. x x x.24

In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the
Union must be read in conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not susceptible to any other
interpretation. Hence, the literal meaning should prevail. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject to the limitations found in law, collective
bargaining agreement or the general principles of fair play and justice25 Evidently, this case has one of
the restrictions- the presence of specific CBA provisions-unlike in San Miguel Corporation Employees
Union-PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and Serrano v.
NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct between the parties and
compliance therewith is mandated by the express policy of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12,
2005 Resolution of the Court of Appeals, which sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

Imbong v. Ochoa, G.R. No. 204819, April 8, 2014

G.R. No. 204819

April 8, 2014

JAMES M. IMBONG and LOVELY-ANN C. IMBONG, for themselves and in behalf of their minor children,
LUCIA CARLOS IMBONG and BERNADETTE CARLOS IMBONG and MAGNIFICAT CHILD DEVELOPMENT
CENTER,
INC., Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department
of Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN
A. LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 204934
ALLIANCE FOR THE FAMILY FOUNDATION PHILIPPINES, INC. [ALFI], represented by its President, Maria
Concepcion S. Noche, Spouses Reynaldo S. Luistro & Rosie B . Luistro, Jose S. Sandejas & Elenita S.A.
Sandejas, Arturo M. Gorrez & Marietta C. Gorrez, Salvador S. Mante, Jr. & Hazeleen L. Mante, Rolando
M. Bautista & Maria Felisa S. Bautista, Desiderio Racho & Traquilina Racho, F emand Antonio A.

Tansingco & Carol Anne C. Tansingco for themselves and on behalf of their minor children, Therese
Antonette C. Tansingco, Lorenzo Jose C. Tansingco, Miguel F emando C. Tangsingco, Carlo Josemaria C.
Tansingco & Juan Paolo C. Tansingco, Spouses Mariano V. Araneta & Eileen Z. Araneta for themselves
and on behalf of their minor children, Ramon Carlos Z. Araneta & Maya Angelica Z. Araneta, Spouses
Renato C. Castor & Mildred C. Castor for themselves and on behalf of their minor children, Renz
Jeffrey C. Castor, Joseph Ramil C. Castor, John Paul C. Castor & Raphael C. Castor, Spouses Alexander
R. Racho & Zara Z. Racho for themselves and on behalf of their minor children Margarita Racho,
Mikaela Racho, Martin Racho, Mari Racho & Manolo Racho, Spouses Alfred R. Racho & Francine V.
Racho for themselves and on behalf of their minor children Michael Racho, Mariana Racho, Rafael
Racho, Maxi Racho, Chessie Racho & Laura Racho, Spouses David R. Racho & Armilyn A. Racho for
themselves and on behalf of their minor child Gabriel Racho, Mindy M. Juatas and on behalf of her
minor children Elijah Gerald Juatas and Elian Gabriel Juatas, Salvacion M. Monteiro, Emily R. Laws,
Joseph
R
.
Laws
&
Katrina
R.
Laws, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary, Department of
Health, HON. ARMIN A. LUISTRO, Secretary, Department of Education, Culture and Sports, HON.
CORAZON SOLIMAN, Secretary, Department of Social Welfare and Development, HON. MANUELA.
ROXAS II, Secretary, Department of Interior and Local Government, HON. FLORENCIO B. ABAD,
Secretary, Department of Budget and Management, HON. ARSENIO M. BALISACAN, Socio-Economic
Planning Secretary and NEDA Director-General, THE PHILIPPINE COMMISSION ON WOMEN,
represented by its Chairperson, Remedios lgnacio-Rikken, THE PHILIPPINE HEALTH INSURANCE
CORPORATION, represented by its President Eduardo Banzon, THE LEAGUE OF PROVINCES OF THE
PHILIPPINES, represented by its President Alfonso Umali, THE LEAGUE OF CITIES OF THE PHILIPPINES,
represented by its President Oscar Rodriguez, and THE LEAGUE OF MUNICIPALITIES OF THE
PHILIPPINES, represented by its President Donato Marcos, Respondents.
x---------------------------------x
G.R. No. 204957
TASK FORCE FOR FAMILY AND LIFE VISAYAS, INC. and VALERIANO S. AVILA, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary, Department
of Budget and Management; HON. ENRIQUE T. ONA, Secretary, Department of Education; and HON.
MANUELA. ROXAS II, Secretary, Department of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 204988
SERVE LIFE CAGAYAN DE ORO CITY, INC., represented by Dr. Nestor B. Lumicao, M.D., as President and
in his personal capacity, ROSEVALE FOUNDATION INC., represented by Dr. Rodrigo M. Alenton, M.D.,
as member of the school board and in his personal capacity, ROSEMARIE R. ALENTON, IMELDA G.
IBARRA, CPA, LOVENIAP. NACES, Phd., ANTHONY G. NAGAC, EARL ANTHONY C. GAMBE and MARLON
I.
YAP,Petitioners,
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON.
PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of

Budget and Management; HON. ENRIQUE T. ONA, Secretary, Department of Health; HON. ARMIN A.
LUISTRO, Secretary, Department of Education and HON. MANUELA. ROXAS II, Secretary, Department
of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 205003
EXPEDITO
A.
BUGARIN,
JR., Petitioner,
vs.
OFFICE OF THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, HON. SENATE PRESIDENT, HON.
SPEAKER OF THE HOUSE OF REPRESENTATIVES and HON. SOLICITOR GENERAL, Respondents.
x---------------------------------x
G.R. No. 205043
EDUARDO B. OLAGUER and THE CATHOLIC XYBRSPACE APOSTOLATE OF THE PHILIPPINES, Petitioners,
vs.
DOH SECRETARY ENRIQUE T. ONA, FDA DIRECTOR SUZETTE H. LAZO, DBM SECRETARY FLORENCIO B.
ABAD, DILG SECRETARY MANUELA. ROXAS II, DECS SECRETARY ARMIN A. LUISTRO, Respondents.
x---------------------------------x
G.R. No. 205138
PHILIPPINE ALLIANCE OF XSEMINARIANS, INC. (PAX), herein represented by its National President,
Atty. Ricardo M . Ribo, and in his own behalf, Atty. Lino E.A. Dumas, Romeo B. Almonte, Osmundo C.
Orlanes, Arsenio Z. Menor, Samuel J. Yap, Jaime F. Mateo, Rolly Siguan, Dante E. Magdangal, Michael
Eugenio O. Plana, Bienvenido C. Miguel, Jr., Landrito M. Diokno and Baldomero Falcone, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department
of Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN
A. LUISTRO, Secretary, Department of Education, HON. MANUELA. ROXAS II, Secretary, Department of
Interior and Local Government, HON. CORAZON J. SOLIMAN, Secretary, Department of Social Welfare
and Development, HON. ARSENIO BALISACAN, Director-General, National Economic and Development
Authority, HON. SUZETTE H. LAZO, Director-General, Food and Drugs Administration, THE BOARD OF
DIRECTORS, Philippine Health Insurance Corporation, and THE BOARD OF COMMISSIONERS, Philippine
Commission on Women, Respondents.
x---------------------------------x
G.R. No. 205478
REYNALDO J. ECHAVEZ, M.D., JACQUELINE H. KING, M.D., CYNTHIA T. DOMINGO, M.D., AND
JOSEPHINE MILLADO-LUMITAO, M.D., collectively known as Doctors For Life, and ANTHONY PEREZ,
MICHAEL ANTHONY G. MAPA, CARLOS ANTONIO PALAD, WILFREDO JOSE, CLAIRE NAVARRO, ANNA

COSIO, and GABRIEL DY LIACCO collectively known as Filipinos For Life, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary; HON. FLORENCIO B. ABAD, Secretary of the
Department of Budget and Management; HON. ENRIQUE T. ONA, Secretary of the Department of
Health; HON. ARMIN A. LUISTRO, Secretary of the Department of Education; and HON. MANUELA.
ROXAS II, Secretary of the Department of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 205491
SPOUSES FRANCISCO S. TATAD AND MARIA FENNY C. TATAD & ALA F. PAGUIA, for themselves, their
Posterity,
and
the
rest
of
Filipino
posterity, Petitioners,
vs.
OFFICE OF THE PRESIDENT of the Republic of the Philippines, Respondent.
x---------------------------------x
G.R. No. 205720
PRO-LIFE PHILIPPINES FOUNDATION, Inc., represented by Loma Melegrito, as Executive Director, and
in her personal capacity, JOSELYN B. BASILIO, ROBERT Z. CORTES, ARIEL A. CRISOSTOMO, JEREMY I.
GATDULA, CRISTINA A. MONTES, RAUL ANTONIO A. NIDOY, WINSTON CONRAD B. PADOJINOG,
RUFINO
L.
POLICARPIO
III, Petitioners,
vs.
OFFICE OF THE PRESIDENT, SENATE OF THE PHILIPPINES, HOUSE OF REPRESENTATIVES, HON.
PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education and HON. MANUEL A. ROXAS II, Secretary, Department
of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 206355
MILLENNIUM SAINT FOUNDATION, INC., ATTY. RAMON PEDROSA, ATTY. CITA BORROMEO-GARCIA,
STELLAACEDERA,
ATTY.
BERTENI
CATALUNA
CAUSING, Petitioners,
vs.
OFFICE OF THE PRESIDENT, OFFICE OF THE EXECUTIVE SECRETARY, DEPARTMENT OF HEALTH,
DEPARTMENT OF EDUCATION, Respondents.
x---------------------------------x
G.R. No. 207111
JOHN WALTER B. JUAT, MARY M. IMBONG, ANTHONY VICTORIO B. LUMICAO, JOSEPH MARTIN Q.
VERDEJO,
ANTONIA
EMMA
R.
ROXAS
and
LOTA
LAT-GUERRERO, Petitioners,

vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO ABAD, Secretary, Department of
Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN A.
LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUEL A. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 207172
COUPLES FOR CHRIST FOUNDATION, INC., SPOUSES JUAN CARLOS ARTADI SARMIENTO AND
FRANCESCA ISABELLE BESINGA-SARMIENTO, AND SPOUSES LUIS FRANCIS A. RODRIGO, JR. and
DEBORAH
MARIE
VERONICA
N.
RODRIGO, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. FLORENCIO B. ABAD, Secretary, Department
of Budget and Management, HON. ENRIQUE T. ONA, Secretary, Department of Health, HON. ARMIN
A. LUISTRO, Secretary, Department of Education, Culture and Sports and HON. MANUELA. ROXAS II,
Secretary, Department of Interior and Local Government, Respondents.
x---------------------------------x
G.R. No. 207563
ALMARIM
CENTI
TILLAH
and
ABDULHUSSEIN
M.
KASHIM, Petitioners,
vs.
HON. PAQUITO N. OCHOA, JR., Executive Secretary, HON. ENRIQUE T. ONA, Secretary of the
Department of Health, and HON. ARMIN A. LUISTRO,Secretary of the Department of Budget and
Management,Respondents.
DECISION
MENDOZA, J.:
Freedom of religion was accorded preferred status by the framers of our fundamental law. And this
Court has consistently affirmed this preferred status, well aware that it is "designed to protect the
broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to
profess his beliefs , and to live as he believes he ought to live, consistent with the liberty of others and
with the common good."1
To this day, poverty is still a major stumbling block to the nation's emergence as a developed country,
leaving our people beleaguered in a state of hunger, illiteracy and unemployment. While governmental
policies have been geared towards the revitalization of the economy, the bludgeoning dearth in social
services remains to be a problem that concerns not only the poor, but every member of society. The
government continues to tread on a trying path to the realization of its very purpose, that is, the general
welfare of the Filipino people and the development of the country as a whole. The legislative branch, as
the main facet of a representative government, endeavors to enact laws and policies that aim to remedy
looming societal woes, while the executive is closed set to fully implement these measures and bring

concrete and substantial solutions within the reach of Juan dela Cruz. Seemingly distant is the judicial
branch, oftentimes regarded as an inert governmental body that merely casts its watchful eyes on
clashing stakeholders until it is called upon to adjudicate. Passive, yet reflexive when called into action,
the Judiciary then willingly embarks on its solemn duty to interpret legislation vis-a-vis the most vital
and enduring principle that holds Philippine society together - the supremacy of the Philippine
Constitution.
Nothing has polarized the nation more in recent years than the issues of population growth control,
abortion and contraception. As in every democratic society, diametrically opposed views on the subjects
and their perceived consequences freely circulate in various media. From television debates2 to sticker
campaigns,3 from rallies by socio-political activists to mass gatherings organized by members of the
clergy4 - the clash between the seemingly antithetical ideologies of the religious conservatives and
progressive liberals has caused a deep division in every level of the society. Despite calls to withhold
support thereto, however, Republic Act (R.A.) No. 10354, otherwise known as the Responsible
Parenthood and Reproductive Health Act of 2012 (RH Law), was enacted by Congress on December 21,
2012.
Shortly after the President placed his imprimatur on the said law, challengers from various sectors of
society came knocking on the doors of the Court, beckoning it to wield the sword that strikes down
constitutional disobedience. Aware of the profound and lasting impact that its decision may produce,
the Court now faces the iuris controversy, as presented in fourteen (14) petitions and two (2) petitionsin-intervention, to wit:
(1) Petition for Certiorari and Prohibition,5 filed by spouses Attys. James M. Imbong and Lovely
Ann C. Imbong, in their personal capacities as citizens, lawyers and taxpayers and on behalf of
their minor children; and the Magnificat Child Leaming Center, Inc., a domestic, privately-owned
educational institution (Jmbong);
(2) Petition for Prohibition,6 filed by the Alliance for the Family Foundation Philippines, Inc.,
through its president, Atty. Maria Concepcion S. Noche7 and several others8 in their personal
capacities as citizens and on behalf of the generations unborn (ALFI);
(3) Petition for Certiorari,9 filed by the Task Force for Family and Life Visayas, Inc., and Valeriano
S. Avila, in their capacities as citizens and taxpayers (Task Force Family);
(4) Petition for Certiorari and Prohibition,10 filed by Serve Life Cagayan De Oro City,
Inc.,11 Rosevale Foundation, Inc.,12 a domestic, privately-owned educational institution, and
several others,13 in their capacities as citizens (Serve Life);
(5) Petition,14 filed by Expedito A. Bugarin, Jr. in his capacity as a citizen (Bugarin);
(6) Petition for Certiorari and Prohibition,15 filed by Eduardo Olaguer and the Catholic Xybrspace
Apostolate of the Philippines,16 in their capacities as a citizens and taxpayers (Olaguer);
(7) Petition for Certiorari and Prohibition,17 filed by the Philippine Alliance of Xseminarians
Inc.,18 and several others19 in their capacities as citizens and taxpayers (PAX);

(8) Petition,20 filed by Reynaldo J. Echavez, M.D. and several others,21 in their capacities as
citizens and taxpayers (Echavez);
(9) Petition for Certiorari and Prohibition,22 filed by spouses Francisco and Maria Fenny C. Tatad
and Atty. Alan F. Paguia, in their capacities as citizens, taxpayers and on behalf of those yet
unborn. Atty. Alan F. Paguia is also proceeding in his capacity as a member of the Bar (Tatad);
(10) Petition for Certiorari and Prohibition,23 filed by Pro-Life Philippines Foundation Inc.24 and
several others,25 in their capacities as citizens and taxpayers and on behalf of its associates who
are members of the Bar (Pro-Life);
(11) Petition for Prohibition,26 filed by Millennium Saint Foundation, Inc.,27 Attys. Ramon
Pedrosa, Cita Borromeo-Garcia, Stella Acedera, and Berteni Catalufia Causing, in their capacities
as citizens, taxpayers and members of the Bar (MSF);
(12) Petition for Certiorari and Prohibition,28 filed by John Walter B. Juat and several others,29 in
their capacities as citizens (Juat) ;
(13) Petition for Certiorari and Prohibition,30 filed by Couples for Christ Foundation, Inc. and
several others,31 in their capacities as citizens (CFC);
(14) Petition for Prohibition32 filed by Almarim Centi Tillah and Abdulhussein M. Kashim in their
capacities as citizens and taxpayers (Tillah); and
(15) Petition-In-Intervention,33 filed by Atty. Samson S. Alcantara in his capacity as a citizen and a
taxpayer (Alcantara); and
(16) Petition-In-Intervention,34 filed by Buhay Hayaang Yumabong (B UHAY) , an accredited
political party.
A perusal of the foregoing petitions shows that the petitioners are assailing the constitutionality of RH
Law on the following GROUNDS:
The RH Law violates the right to life of the unborn. According to the petitioners,
notwithstanding its declared policy against abortion, the implementation of the RH Law would
authorize the purchase of hormonal contraceptives, intra-uterine devices and injectables which
are abortives, in violation of Section 12, Article II of the Constitution which guarantees
protection of both the life of the mother and the life of the unborn from conception.35
The RH Law violates the right to health and the right to protection against hazardous products.
The petitioners posit that the RH Law provides universal access to contraceptives which are
hazardous to one's health, as it causes cancer and other health problems.36
The RH Law violates the right to religious freedom. The petitioners contend that the RH Law
violates the constitutional guarantee respecting religion as it authorizes the use of public funds
for the procurement of contraceptives. For the petitioners, the use of public funds for purposes

that are believed to be contrary to their beliefs is included in the constitutional mandate
ensuring religious freedom.37
It is also contended that the RH Law threatens conscientious objectors of criminal prosecution,
imprisonment and other forms of punishment, as it compels medical practitioners 1] to refer patients
who seek advice on reproductive health programs to other doctors; and 2] to provide full and correct
information on reproductive health programs and service, although it is against their religious beliefs
and convictions.38
In this connection, Section 5 .23 of the Implementing Rules and Regulations of the RH Law (RHIRR),39 provides that skilled health professionals who are public officers such as, but not limited to,
Provincial, City, or Municipal Health Officers, medical officers, medical specialists, rural health
physicians, hospital staff nurses, public health nurses, or rural health midwives, who are specifically
charged with the duty to implement these Rules, cannot be considered as conscientious objectors.40
It is also argued that the RH Law providing for the formulation of mandatory sex education in schools
should not be allowed as it is an affront to their religious beliefs.41
While the petit10ners recognize that the guarantee of religious freedom is not absolute, they argue that
the RH Law fails to satisfy the "clear and present danger test" and the "compelling state interest test" to
justify the regulation of the right to free exercise of religion and the right to free speech.42
The RH Law violates the constitutional provision on involuntary servitude. According to the
petitioners, the RH Law subjects medical practitioners to involuntary servitude because, to be
accredited under the PhilHealth program, they are compelled to provide forty-eight (48) hours
of pro bona services for indigent women, under threat of criminal prosecution, imprisonment
and other forms of punishment.43
The petitioners explain that since a majority of patients are covered by PhilHealth, a medical practitioner
would effectively be forced to render reproductive health services since the lack of PhilHealth
accreditation would mean that the majority of the public would no longer be able to avail of the
practitioners services.44
The RH Law violates the right to equal protection of the law. It is claimed that the RH Law
discriminates against the poor as it makes them the primary target of the government program
that promotes contraceptive use. The petitioners argue that, rather than promoting
reproductive health among the poor, the RH Law seeks to introduce contraceptives that would
effectively reduce the number of the poor.45
The RH Law is "void-for-vagueness" in violation of the due process clause of the Constitution.
In imposing the penalty of imprisonment and/or fine for "any violation," it is vague because it
does not define the type of conduct to be treated as "violation" of the RH Law.46
In this connection, it is claimed that "Section 7 of the RH Law violates the right to due process by
removing from them (the people) the right to manage their own affairs and to decide what kind of
health facility they shall be and what kind of services they shall offer."47 It ignores the management

prerogative inherent in corporations for employers to conduct their affairs in accordance with their own
discretion and judgment.
The RH Law violates the right to free speech. To compel a person to explain a full range of
family planning methods is plainly to curtail his right to expound only his own preferred way of
family planning. The petitioners note that although exemption is granted to institutions owned
and operated by religious groups, they are still forced to refer their patients to another
healthcare facility willing to perform the service or procedure.48
The RH Law intrudes into the zone of privacy of one's family protected by the Constitution. It is
contended that the RH Law providing for mandatory reproductive health education intrudes
upon their constitutional right to raise their children in accordance with their beliefs.49
It is claimed that, by giving absolute authority to the person who will undergo reproductive health
procedure, the RH Law forsakes any real dialogue between the spouses and impedes the right of
spouses to mutually decide on matters pertaining to the overall well-being of their family. In the same
breath, it is also claimed that the parents of a child who has suffered a miscarriage are deprived of
parental authority to determine whether their child should use contraceptives.50
The RH Law violates the constitutional principle of non-delegation of legislative authority. The
petitioners question the delegation by Congress to the FDA of the power to determine whether
a product is non-abortifacient and to be included in the Emergency Drugs List (EDL).51
The RH Law violates the one subject/one bill rule provision under Section 26( 1 ), Article VI of
the Constitution.52
The RH Law violates Natural Law.53
The RH Law violates the principle of Autonomy of Local Government Units (LGUs) and the
Autonomous Region of Muslim Mindanao {ARMM). It is contended that the RH Law, providing
for reproductive health measures at the local government level and the ARMM, infringes upon
the powers devolved to LGUs and the ARMM under the Local Government Code and R.A . No.
9054.54
Various parties also sought and were granted leave to file their respective comments-in-intervention in
defense of the constitutionality of the RH Law. Aside from the Office of the Solicitor General (OSG)
which commented on the petitions in behalf of the respondents,55 Congressman Edcel C.
Lagman,56 former officials of the Department of Health Dr. Esperanza I. Cabral, Jamie Galvez-Tan, and
Dr. Alberto G. Romualdez,57 the Filipino Catholic Voices for Reproductive Health (C4RH),58 Ana Theresa
"Risa" Hontiveros,59 and Atty. Joan De Venecia60 also filed their respective Comments-in-Intervention in
conjunction with several others. On June 4, 2013, Senator Pia Juliana S. Cayetano was also granted leave
to intervene.61
The respondents, aside from traversing the substantive arguments of the petitioners, pray for the
dismissal of the petitions for the principal reasons that 1] there is no actual case or controversy and,
therefore, the issues are not yet ripe for judicial determination.; 2] some petitioners lack standing to

question the RH Law; and 3] the petitions are essentially petitions for declaratory relief over which the
Court has no original jurisdiction.
Meanwhile, on March 15, 2013, the RH-IRR for the enforcement of the assailed legislation took effect.
On March 19, 2013, after considering the issues and arguments raised, the Court issued the Status Quo
Ante Order (SQAO), enjoining the effects and implementation of the assailed legislation for a period of
one hundred and twenty (120) days, or until July 17, 2013.62
On May 30, 2013, the Court held a preliminary conference with the counsels of the parties to determine
and/or identify the pertinent issues raised by the parties and the sequence by which these issues were
to be discussed in the oral arguments. On July 9 and 23, 2013, and on August 6, 13, and 27, 2013, the
cases were heard on oral argument. On July 16, 2013, the SQAO was ordered extended until further
orders of the Court.63
Thereafter, the Court directed the parties to submit their respective memoranda within sixty (60) days
and, at the same time posed several questions for their clarification on some contentions of the
parties.64
The Status Quo Ante
(Population, Contraceptive and Reproductive Health Laws
Prior to the RH Law
Long before the incipience of the RH Law, the country has allowed the sale, dispensation and
distribution of contraceptive drugs and devices. As far back as June 18, 1966, the country enacted R.A.
No. 4729 entitled "An Act to Regu,late the Sale, Dispensation, and/or Distribution of Contraceptive
Drugs and Devices." Although contraceptive drugs and devices were allowed, they could not be sold,
dispensed or distributed "unless such sale, dispensation and distribution is by a duly licensed drug store
or pharmaceutical company and with the prescription of a qualified medical practitioner."65
In addition, R.A. No. 5921,66 approved on June 21, 1969, contained provisions relative to "dispensing of
abortifacients or anti-conceptional substances and devices." Under Section 37 thereof, it was provided
that "no drug or chemical product or device capable of provoking abortion or preventing conception as
classified by the Food and Drug Administration shall be delivered or sold to any person without a proper
prescription by a duly licensed physician."
On December 11, 1967, the Philippines, adhering to the UN Declaration on Population, which recognized
that the population problem should be considered as the principal element for long-term economic
development, enacted measures that promoted male vasectomy and tubal ligation to mitigate
population growth.67 Among these measures included R.A. No. 6365, approved on August 16, 1971,
entitled "An Act Establishing a National Policy on Population, Creating the Commission on Population
and for Other Purposes. " The law envisioned that "family planning will be made part of a broad
educational program; safe and effective means will be provided to couples desiring to space or limit
family size; mortality and morbidity rates will be further reduced."

To further strengthen R.A. No. 6365, then President Ferdinand E . Marcos issued Presidential Decree.
(P.D.) No. 79,68 dated December 8, 1972, which, among others, made "family planning a part of a broad
educational program," provided "family planning services as a part of over-all health care," and made
"available all acceptable methods of contraception, except abortion, to all Filipino citizens desirous of
spacing, limiting or preventing pregnancies."
Through the years, however, the use of contraceptives and family planning methods evolved from being
a component of demographic management, to one centered on the promotion of public health,
particularly, reproductive health.69 Under that policy, the country gave priority to one's right to freely
choose the method of family planning to be adopted, in conformity with its adherence to the
commitments made in the International Conference on Population and Development.70 Thus, on August
14, 2009, the country enacted R.A. No. 9710 or "The Magna Carta for Women, " which, among others,
mandated the State to provide for comprehensive health services and programs for women, including
family planning and sex education.71
The RH Law
Despite the foregoing legislative measures, the population of the country kept on galloping at an
uncontrollable pace. From a paltry number of just over 27 million Filipinos in 1960, the population of the
country reached over 76 million in the year 2000 and over 92 million in 2010.72 The executive and the
legislative, thus, felt that the measures were still not adequate. To rein in the problem, the RH Law was
enacted to provide Filipinos, especially the poor and the marginalized, access and information to the full
range of modem family planning methods, and to ensure that its objective to provide for the peoples'
right to reproductive health be achieved. To make it more effective, the RH Law made it mandatory for
health providers to provide information on the full range of modem family planning methods, supplies
and services, and for schools to provide reproductive health education. To put teeth to it, the RH Law
criminalizes certain acts of refusals to carry out its mandates.
Stated differently, the RH Law is an enhancement measure to fortify and make effective the current laws
on contraception, women's health and population control.
Prayer of the Petitioners - Maintain the Status Quo
The petitioners are one in praying that the entire RH Law be declared unconstitutional. Petitioner ALFI,
in particular, argues that the government sponsored contraception program, the very essence of the RH
Law, violates the right to health of women and the sanctity of life, which the State is mandated to
protect and promote. Thus, ALFI prays that "the status quo ante - the situation prior to the passage of
the RH Law - must be maintained."73 It explains:
x x x. The instant Petition does not question contraception and contraceptives per se. As provided under
Republic Act No. 5921 and Republic Act No. 4729, the sale and distribution of contraceptives are
prohibited unless dispensed by a prescription duly licensed by a physician. What the Petitioners find
deplorable and repugnant under the RH Law is the role that the State and its agencies - the entire
bureaucracy, from the cabinet secretaries down to the barangay officials in the remotest areas of the
country - is made to play in the implementation of the contraception program to the fullest extent
possible using taxpayers' money. The State then will be the funder and provider of all forms of family

planning methods and the implementer of the program by ensuring the widespread dissemination of,
and universal access to, a full range of family planning methods, devices and supplies.74
ISSUES
After a scrutiny of the various arguments and contentions of the parties, the Court has synthesized and
refined them to the following principal issues:
I. PROCEDURAL: Whether the Court may exercise its power of judicial review over the controversy.
1] Power of Judicial Review
2] Actual Case or Controversy
3] Facial Challenge
4] Locus Standi
5] Declaratory Relief
6] One Subject/One Title Rule
II. SUBSTANTIVE: Whether the RH law is unconstitutional:
1] Right to Life
2] Right to Health
3] Freedom of Religion and the Right to Free Speech
4] The Family
5] Freedom of Expression and Academic Freedom
6] Due Process
7] Equal Protection
8] Involuntary Servitude
9] Delegation of Authority to the FDA
10] Autonomy of Local Govemments/ARMM
DISCUSSION

Before delving into the constitutionality of the RH Law and its implementing rules, it behooves the Court
to resolve some procedural impediments.
I. PROCEDURAL ISSUE: Whether the Court can exercise its power of judicial review over the controversy.
The Power of Judicial Review
In its attempt to persuade the Court to stay its judicial hand, the OSG asserts that it should submit to the
legislative and political wisdom of Congress and respect the compromises made in the crafting of the RH
Law, it being "a product of a majoritarian democratic process"75 and "characterized by an inordinate
amount of transparency."76The OSG posits that the authority of the Court to review social legislation like
the RH Law by certiorari is "weak," since the Constitution vests the discretion to implement the
constitutional policies and positive norms with the political departments, in particular, with
Congress.77 It further asserts that in view of the Court's ruling in Southern Hemisphere v. Anti-Terrorism
Council,78 the remedies of certiorari and prohibition utilized by the petitioners are improper to assail the
validity of the acts of the legislature.79
Moreover, the OSG submits that as an "as applied challenge," it cannot prosper considering that the
assailed law has yet to be enforced and applied to the petitioners, and that the government has yet to
distribute reproductive health devices that are abortive. It claims that the RH Law cannot be challenged
"on its face" as it is not a speech-regulating measure.80
In many cases involving the determination of the constitutionality of the actions of the Executive and
the Legislature, it is often sought that the Court temper its exercise of judicial power and accord due
respect to the wisdom of its co-equal branch on the basis of the principle of separation of powers. To be
clear, the separation of powers is a fundamental principle in our system of government, which obtains
not through express provision but by actual division in our Constitution. Each department of the
government has exclusive cognizance of matters within its jurisdiction and is supreme within its own
sphere.81
Thus, the 1987 Constitution provides that: (a) the legislative power shall be vested in the Congress of the
Philippines;82 (b) the executive power shall be vested in the President of the Philippines;83 and (c) the
judicial power shall be vested in one Supreme Court and in such lower courts as may be established by
law.84 The Constitution has truly blocked out with deft strokes and in bold lines, the allotment of powers
among the three branches of government.85
In its relationship with its co-equals, the Judiciary recognizes the doctrine of separation of powers which
imposes upon the courts proper restraint, born of the nature of their functions and of their respect for
the other branches of government, in striking down the acts of the Executive or the Legislature as
unconstitutional. Verily, the policy is a harmonious blend of courtesy and caution.86
It has also long been observed, however, that in times of social disquietude or political instability, the
great landmarks of the Constitution are apt to be forgotten or marred, if not entirely obliterated.87 In
order to address this, the Constitution impresses upon the Court to respect the acts performed by a coequal branch done within its sphere of competence and authority, but at the same time, allows it to
cross the line of separation - but only at a very limited and specific point - to determine whether the acts
of the executive and the legislative branches are null because they were undertaken with grave abuse of

discretion.88 Thus, while the Court may not pass upon questions of wisdom, justice or expediency of the
RH Law, it may do so where an attendant unconstitutionality or grave abuse of discretion results.89 The
Court must demonstrate its unflinching commitment to protect those cherished rights and principles
embodied in the Constitution.
In this connection, it bears adding that while the scope of judicial power of review may be limited, the
Constitution makes no distinction as to the kind of legislation that may be subject to judicial scrutiny, be
it in the form of social legislation or otherwise. The reason is simple and goes back to the earlier point.
The Court may pass upon the constitutionality of acts of the legislative and the executive branches, since
its duty is not to review their collective wisdom but, rather, to make sure that they have acted in
consonance with their respective authorities and rights as mandated of them by the Constitution. If
after said review, the Court finds no constitutional violations of any sort, then, it has no more authority
of proscribing the actions under review.90 This is in line with Article VIII, Section 1 of the Constitution
which expressly provides:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. [Emphases supplied]
As far back as Tanada v. Angara,91 the Court has unequivocally declared that certiorari, prohibition and
mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify,
when proper, acts of legislative and executive officials, as there is no other plain, speedy or adequate
remedy in the ordinary course of law. This ruling was later on applied in Macalintal v.
COMELEC,92 Aldaba v. COMELEC,93Magallona v. Ermita,94 and countless others. In Tanada, the Court
wrote:
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution,
the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is
seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of
the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The duty (to
adjudicate) remains to assure that the supremacy of the Constitution is upheld. " Once a "controversy as
to the application or interpretation of constitutional provision is raised before this Court (as in the
instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide.
[Emphasis supplied]
In the scholarly estimation of former Supreme Court Justice Florentino Feliciano, "judicial review is
essential for the maintenance and enforcement of the separation of powers and the balancing of
powers among the three great departments of government through the definition and maintenance of
the boundaries of authority and control between them. To him, judicial review is the chief, indeed the
only, medium of participation - or instrument of intervention - of the judiciary in that balancing
operation.95

Lest it be misunderstood, it bears emphasizing that the Court does not have the unbridled authority to
rule on just any and every claim of constitutional violation. Jurisprudence is replete with the rule that
the power of judicial review is limited by four exacting requisites, viz : (a) there must be an actual case
or controversy; (b) the petitioners must possess locus standi; (c) the question of constitutionality must
be raised at the earliest opportunity; and (d) the issue of constitutionality must be the lis mota of the
case.96
Actual Case or Controversy
Proponents of the RH Law submit that the subj ect petitions do not present any actual case or
controversy because the RH Law has yet to be implemented.97 They claim that the questions raised by
the petitions are not yet concrete and ripe for adjudication since no one has been charged with violating
any of its provisions and that there is no showing that any of the petitioners' rights has been adversely
affected by its operation.98 In short, it is contended that judicial review of the RH Law is premature.
An actual case or controversy means an existing case or controversy that is appropriate or ripe for
determination, not conjectural or anticipatory, lest the decision of the court would amount to an
advisory opinion.99 The rule is that courts do not sit to adjudicate mere academic questions to satisfy
scholarly interest, however intellectually challenging. The controversy must be justiciable-definite and
concrete, touching on the legal relations of parties having adverse legal interests. In other words, the
pleadings must show an active antagonistic assertion of a legal right, on the one hand, and a denial
thereof, on the other; that is, it must concern a real, tangible and not merely a theoretical question or
issue. There ought to be an actual and substantial controversy admitting of specific relief through a
decree conclusive in nature, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.100
Corollary to the requirement of an actual case or controversy is the requirement of ripeness.101 A
question is ripe for adjudication when the act being challenged has had a direct adverse effect on the
individual challenging it. For a case to be considered ripe for adjudication, it is a prerequisite that
something has then been accomplished or performed by either branch before a court may come into
the picture, and the petitioner must allege the existence of an immediate or threatened injury to himself
as a result of the challenged action. He must show that he has sustained or is immediately in danger of
sustaining some direct injury as a result of the act complained of102
In The Province of North Cotabato v. The Government of the Republic of the Philippines,103 where the
constitutionality of an unimplemented Memorandum of Agreement on the Ancestral Domain (MOA-AD)
was put in question, it was argued that the Court has no authority to pass upon the issues raised as
there was yet no concrete act performed that could possibly violate the petitioners' and the intervenors'
rights. Citing precedents, the Court ruled that the fact of the law or act in question being not yet
effective does not negate ripeness. Concrete acts under a law are not necessary to render the
controversy ripe. Even a singular violation of the Constitution and/or the law is enough to awaken
judicial duty.
In this case, the Court is of the view that an actual case or controversy exists and that the same is ripe
for judicial determination. Considering that the RH Law and its implementing rules have already taken
effect and that budgetary measures to carry out the law have already been passed, it is evident that the
subject petitions present a justiciable controversy. As stated earlier, when an action of the legislative

branch is seriously alleged to have infringed the Constitution, it not only becomes a right, but also a duty
of the Judiciary to settle the dispute.104
Moreover, the petitioners have shown that the case is so because medical practitioners or medical
providers are in danger of being criminally prosecuted under the RH Law for vague violations thereof,
particularly public health officers who are threatened to be dismissed from the service with forfeiture of
retirement and other benefits. They must, at least, be heard on the matter NOW.
Facial Challenge
The OSG also assails the propriety of the facial challenge lodged by the subject petitions, contending
that the RH Law cannot be challenged "on its face" as it is not a speech regulating measure.105
The Court is not persuaded.
In United States (US) constitutional law, a facial challenge, also known as a First Amendment Challenge,
is one that is launched to assail the validity of statutes concerning not only protected speech, but also all
other rights in the First Amendment.106 These include religious freedom, freedom of the press, and the
right of the people to peaceably assemble, and to petition the Government for a redress of
grievances.107 After all, the fundamental right to religious freedom, freedom of the press and peaceful
assembly are but component rights of the right to one's freedom of expression, as they are modes which
one's thoughts are externalized.
In this jurisdiction, the application of doctrines originating from the U.S. has been generally maintained,
albeit with some modifications. While this Court has withheld the application of facial challenges to
strictly penal statues,108 it has expanded its scope to cover statutes not only regulating free speech, but
also those involving religious freedom, and other fundamental rights.109 The underlying reason for this
modification is simple. For unlike its counterpart in the U.S., this Court, under its expanded jurisdiction,
is mandated by the Fundamental Law not only to settle actual controversies involving rights which are
legally demandable and enforceable, but also to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.110 Verily, the framers of Our Constitution envisioned a proactive
Judiciary, ever vigilant with its duty to maintain the supremacy of the Constitution.
Consequently, considering that the foregoing petitions have seriously alleged that the constitutional
human rights to life, speech and religion and other fundamental rights mentioned above have been
violated by the assailed legislation, the Court has authority to take cognizance of these kindred petitions
and to determine if the RH Law can indeed pass constitutional scrutiny. To dismiss these petitions on the
simple expedient that there exist no actual case or controversy, would diminish this Court as a reactive
branch of government, acting only when the Fundamental Law has been transgressed, to the detriment
of the Filipino people.
Locus Standi
The OSG also attacks the legal personality of the petitioners to file their respective petitions. It contends
that the "as applied challenge" lodged by the petitioners cannot prosper as the assailed law has yet to

be enforced and applied against them,111 and the government has yet to distribute reproductive health
devices that are abortive.112
The petitioners, for their part, invariably invoke the "transcendental importance" doctrine and their
status as citizens and taxpayers in establishing the requisite locus standi.
Locus standi or legal standing is defined as a personal and substantial interest in a case such that the
party has sustained or will sustain direct injury as a result of the challenged governmental act.113 It
requires a personal stake in the outcome of the controversy as to assure the concrete adverseness
which sharpens the presentation of issues upon which the court so largely depends for illumination of
difficult constitutional questions.114
In relation to locus standi, the "as applied challenge" embodies the rule that one can challenge the
constitutionality of a statute only if he asserts a violation of his own rights. The rule prohibits one from
challenging the constitutionality of the statute grounded on a violation of the rights of third persons not
before the court. This rule is also known as the prohibition against third-party standing.115
Transcendental Importance
Notwithstanding, the Court leans on the doctrine that "the rule on standing is a matter of procedure,
hence, can be relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers, and legislators when
the public interest so requires, such as when the matter is of transcendental importance, of
overreaching significance to society, or of paramount public interest."116
In Coconut Oil Refiners Association, Inc. v. Torres,117 the Court held that in cases of paramount
importance where serious constitutional questions are involved, the standing requirement may be
relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming
the right of judicial review. In the first Emergency Powers Cases,118 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders although they had only an indirect
and general interest shared in common with the public.
With these said, even if the constitutionality of the RH Law may not be assailed through an "as-applied
challenge, still, the Court has time and again acted liberally on the locus s tandi requirement. It has
accorded certain individuals standing to sue, not otherwise directly injured or with material interest
affected by a Government act, provided a constitutional issue of transcendental importance is invoked.
The rule on locus standi is, after all, a procedural technicality which the Court has, on more than one
occasion, waived or relaxed, thus allowing non-traditional plaintiffs, such as concerned citizens,
taxpayers, voters or legislators, to sue in the public interest, albeit they may not have been directly
injured by the operation of a law or any other government act. As held in Jaworski v. PAGCOR:119
Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the
transcendental importance of the issues involved in this case warrants that we set aside the technical
defects and take primary jurisdiction over the petition at bar. One cannot deny that the issues raised
herein have potentially pervasive influence on the social and moral well being of this nation, specially
the youth; hence, their proper and just determination is an imperative need. This is in accordance with
the well-entrenched principle that rules of procedure are not inflexible tools designed to hinder or
delay, but to facilitate and promote the administration of justice. Their strict and rigid application, which

would result in technicalities that tend to frustrate, rather than promote substantial justice, must always
be eschewed. (Emphasis supplied)
In view of the seriousness, novelty and weight as precedents, not only to the public, but also to the
bench and bar, the issues raised must be resolved for the guidance of all. After all, the RH Law drastically
affects the constitutional provisions on the right to life and health, the freedom of religion and
expression and other constitutional rights. Mindful of all these and the fact that the issues of
contraception and reproductive health have already caused deep division among a broad spectrum of
society, the Court entertains no doubt that the petitions raise issues of transcendental importance
warranting immediate court adjudication. More importantly, considering that it is the right to life of the
mother and the unborn which is primarily at issue, the Court need not wait for a life to be taken away
before taking action.
The Court cannot, and should not, exercise judicial restraint at this time when rights enshrined in the
Constitution are being imperilled to be violated. To do so, when the life of either the mother or her child
is at stake, would lead to irreparable consequences.
Declaratory Relief
The respondents also assail the petitions because they are essentially petitions for declaratory relief
over which the Court has no original jurisdiction.120 Suffice it to state that most of the petitions are
praying for injunctive reliefs and so the Court would just consider them as petitions for prohibition
under Rule 65, over which it has original jurisdiction. Where the case has far-reaching implications and
prays for injunctive reliefs, the Court may consider them as petitions for prohibition under Rule 65.121
One Subject-One Title
The petitioners also question the constitutionality of the RH Law, claiming that it violates Section 26(1 ),
Article VI of the Constitution,122 prescribing the one subject-one title rule. According to them, being one
for reproductive health with responsible parenthood, the assailed legislation violates the constitutional
standards of due process by concealing its true intent - to act as a population control measure.123
To belittle the challenge, the respondents insist that the RH Law is not a birth or population control
measure,124and that the concepts of "responsible parenthood" and "reproductive health" are both
interrelated as they are inseparable.125
Despite efforts to push the RH Law as a reproductive health law, the Court sees it as principally a
population control measure. The corpus of the RH Law is geared towards the reduction of the country's
population. While it claims to save lives and keep our women and children healthy, it also promotes
pregnancy-preventing products. As stated earlier, the RH Law emphasizes the need to provide Filipinos,
especially the poor and the marginalized, with access to information on the full range of modem family
planning products and methods. These family planning methods, natural or modem, however, are
clearly geared towards the prevention of pregnancy.
For said reason, the manifest underlying objective of the RH Law is to reduce the number of births in the
country.

It cannot be denied that the measure also seeks to provide pre-natal and post-natal care as well. A large
portion of the law, however, covers the dissemination of information and provisions on access to
medically-safe, non-abortifacient, effective, legal, affordable, and quality reproductive health care
services, methods, devices, and supplies, which are all intended to prevent pregnancy.
The Court, thus, agrees with the petitioners' contention that the whole idea of contraception pervades
the entire RH Law. It is, in fact, the central idea of the RH Law.126 Indeed, remove the provisions that
refer to contraception or are related to it and the RH Law loses its very foundation.127 As earlier
explained, "the other positive provisions such as skilled birth attendance, maternal care including preand post-natal services, prevention and management of reproductive tract infections including HIV/AIDS
are already provided for in the Magna Carta for Women."128
Be that as it may, the RH Law does not violate the one subject/one bill rule. In Benjamin E. Cawaling, Jr.
v. The Commission on Elections and Rep. Francis Joseph G Escudero, it was written:
It is well-settled that the "one title-one subject" rule does not require the Congress to employ in the title
of the enactment language of such precision as to mirror, fully index or catalogue all the contents and
the minute details therein. The rule is sufficiently complied with if the title is comprehensive enough as
to include the general object which the statute seeks to effect, and where, as here, the persons
interested are informed of the nature, scope and consequences of the proposed law and its operation.
Moreover, this Court has invariably adopted a liberal rather than technical construction of the rule "so
as not to cripple or impede legislation." [Emphases supplied]
In this case, a textual analysis of the various provisions of the law shows that both "reproductive health"
and "responsible parenthood" are interrelated and germane to the overriding objective to control the
population growth. As expressed in the first paragraph of Section 2 of the RH Law:
SEC. 2. Declaration of Policy. - The State recognizes and guarantees the human rights of all persons
including their right to equality and nondiscrimination of these rights, the right to sustainable human
development, the right to health which includes reproductive health, the right to education and
information, and the right to choose and make decisions for themselves in accordance with their
religious convictions, ethics, cultural beliefs, and the demands of responsible parenthood.
The one subject/one title rule expresses the principle that the title of a law must not be "so uncertain
that the average person reading it would not be informed of the purpose of the enactment or put on
inquiry as to its contents, or which is misleading, either in referring to or indicating one subject where
another or different one is really embraced in the act, or in omitting any expression or indication of the
real subject or scope of the act."129
Considering the close intimacy between "reproductive health" and "responsible parenthood" which
bears to the attainment of the goal of achieving "sustainable human development" as stated under its
terms, the Court finds no reason to believe that Congress intentionally sought to deceive the public as to
the contents of the assailed legislation.
II - SUBSTANTIVE ISSUES:

1-The
Position of the Petitioners

Right

to

Life

The petitioners assail the RH Law because it violates the right to life and health of the unborn child
under Section 12, Article II of the Constitution. The assailed legislation allowing access to
abortifacients/abortives effectively sanctions abortion.130
According to the petitioners, despite its express terms prohibiting abortion, Section 4(a) of the RH Law
considers contraceptives that prevent the fertilized ovum to reach and be implanted in the mother's
womb as an abortifacient; thus, sanctioning contraceptives that take effect after fertilization and prior
to implantation, contrary to the intent of the Framers of the Constitution to afford protection to the
fertilized ovum which already has life.
They argue that even if Section 9 of the RH Law allows only "non-abortifacient" hormonal
contraceptives, intrauterine devices, injectables and other safe, legal, non-abortifacient and effective
family planning products and supplies, medical research shows that contraceptives use results in
abortion as they operate to kill the fertilized ovum which already has life.131
As it opposes the initiation of life, which is a fundamental human good, the petitioners assert that the
State sanction of contraceptive use contravenes natural law and is an affront to the dignity of man.132
Finally, it is contended that since Section 9 of the RH Law requires the Food and Drug Administration
(FDA) to certify that the product or supply is not to be used as an abortifacient, the assailed legislation
effectively confirms that abortifacients are not prohibited. Also considering that the FDA is not the
agency that will actually supervise or administer the use of these products and supplies to prospective
patients, there is no way it can truthfully make a certification that it shall not be used for abortifacient
purposes.133
Position of the Respondents
For their part, the defenders of the RH Law point out that the intent of the Framers of the Constitution
was simply the prohibition of abortion. They contend that the RH Law does not violate the Constitution
since the said law emphasizes that only "non-abortifacient" reproductive health care services, methods,
devices products and supplies shall be made accessible to the public.134
According to the OSG, Congress has made a legislative determination that contraceptives are not
abortifacients by enacting the RH Law. As the RH Law was enacted with due consideration to various
studies and consultations with the World Health Organization (WHO) and other experts in the medical
field, it is asserted that the Court afford deference and respect to such a determination and pass
judgment only when a particular drug or device is later on determined as an abortive.135
For his part, respondent Lagman argues that the constitutional protection of one's right to life is not
violated considering that various studies of the WHO show that life begins from the implantation of the
fertilized ovum. Consequently, he argues that the RH Law is constitutional since the law specifically
provides that only contraceptives that do not prevent the implantation of the fertilized ovum are
allowed.136

The Court's Position

It is a universally accepted principle that every human being enjoys the right to life.137
Even if not formally established, the right to life, being grounded on natural law, is inherent and,
therefore, not a creation of, or dependent upon a particular law, custom, or belief. It precedes and
transcends any authority or the laws of men.
In this jurisdiction, the right to life is given more than ample protection. Section 1, Article III of the
Constitution provides:
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.
As expounded earlier, the use of contraceptives and family planning methods in the Philippines is not of
recent vintage. From the enactment of R.A. No. 4729, entitled "An Act To Regulate The Sale,
Dispensation, and/or Distribution of Contraceptive Drugs and Devices "on June 18, 1966, prescribing
rules on contraceptive drugs and devices which prevent fertilization,138 to the promotion of male
vasectomy and tubal ligation,139 and the ratification of numerous international agreements, the country
has long recognized the need to promote population control through the use of contraceptives in order
to achieve long-term economic development. Through the years, however, the use of contraceptives
and other family planning methods evolved from being a component of demographic management, to
one centered on the promotion of public health, particularly, reproductive health.140
This has resulted in the enactment of various measures promoting women's rights and health and the
overall promotion of the family's well-being. Thus, aside from R.A. No. 4729, R.A. No. 6365 or "The
Population Act of the Philippines" and R.A. No. 9710, otherwise known as the "The Magna Carta of
Women" were legislated. Notwithstanding this paradigm shift, the Philippine national population
program has always been grounded two cornerstone principles: "principle of no-abortion" and the
"principle of non-coercion."141 As will be discussed later, these principles are not merely grounded on
administrative policy, but rather, originates from the constitutional protection expressly provided to
afford protection to life and guarantee religious freedom.
When Life Begins*
Majority of the Members of the Court are of the position that the question of when life begins is a
scientific and medical issue that should not be decided, at this stage, without proper hearing and
evidence. During the deliberation, however, it was agreed upon that the individual members of the
Court could express their own views on this matter.
In this regard, the ponente, is of the strong view that life begins at fertilization.
In answering the question of when life begins, focus should be made on the particular phrase of Section
12 which reads:
Section 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as
a basic autonomous social institution. It shall equally protect the life of the mother and the life of the

unborn from conception. The natural and primary right and duty of parents in the rearing of the youth
for civic efficiency and the development of moral character shall receive the support of the Government.
Textually, the Constitution affords protection to the unborn from conception. This is undisputable
because before conception, there is no unborn to speak of. For said reason, it is no surprise that the
Constitution is mute as to any proscription prior to conception or when life begins. The problem has
arisen because, amazingly, there are quarters who have conveniently disregarded the scientific fact that
conception is reckoned from fertilization. They are waving the view that life begins at implantation.
Hence, the issue of when life begins.
In a nutshell, those opposing the RH Law contend that conception is synonymous with "fertilization" of
the female ovum by the male sperm.142 On the other side of the spectrum are those who assert that
conception refers to the "implantation" of the fertilized ovum in the uterus.143
Plain and Legal Meaning
It is a canon in statutory construction that the words of the Constitution should be interpreted in their
plain and ordinary meaning. As held in the recent case of Chavez v. Judicial Bar Council:144
One of the primary and basic rules in statutory construction is that where the words of a statute are
clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. It is a well-settled principle of constitutional construction that the language employed in
the Constitution must be given their ordinary meaning except where technical terms are employed. As
much as possible, the words of the Constitution should be understood in the sense they have in
common use. What it says according to the text of the provision to be construed compels acceptance
and negates the power of the courts to alter it, based on the postulate that the framers and the people
mean what they say. Verba legis non est recedendum - from the words of a statute there should be no
departure.
The raison d' etre for the rule is essentially two-fold: First, because it is assumed that the words in which
constitutional provisions are couched express the objective sought to be attained; and second, because
the Constitution is not primarily a lawyer's document but essentially that of the people, in whose
consciousness it should ever be present as an important condition for the rule of law to prevail.
In conformity with the above principle, the traditional meaning of the word "conception" which, as
described and defined by all reliable and reputable sources, means that life begins at fertilization.
Webster's Third New International Dictionary describes it as the act of becoming pregnant, formation of
a viable zygote; the fertilization that results in a new entity capable of developing into a being like its
parents.145
Black's Law Dictionary gives legal meaning to the term "conception" as the fecundation of the female
ovum by the male spermatozoon resulting in human life capable of survival and maturation under
normal conditions.146
Even in jurisprudence, an unborn child has already a legal personality. In Continental Steel
Manufacturing Corporation v. Hon. Accredited Voluntary Arbitrator Allan S. Montano,147 it was written:

Life is not synonymous with civil personality. One need not acquire civil personality first before he/she
could die. Even a child inside the womb already has life. No less than the Constitution recognizes the life
of the unborn from conception, that the State must protect equally with the life of the mother. If the
unborn already has life, then the cessation thereof even prior to the child being delivered, qualifies as
death. [Emphases in the original]
In Gonzales v. Carhart,148 Justice Anthony Kennedy, writing for the US Supreme Court, said that the State
"has respect for human life at all stages in the pregnancy" and "a legitimate and substantial interest in
preserving and promoting fetal life." Invariably, in the decision, the fetus was referred to, or cited, as a
baby or a child.149
Intent of the Framers
Records of the Constitutional Convention also shed light on the intention of the Framers regarding the
term "conception" used in Section 12, Article II of the Constitution. From their deliberations, it clearly
refers to the moment of "fertilization." The records reflect the following:
Rev. Rigos: In Section 9, page 3, there is a sentence which reads:
"The State shall equally protect the life of the mother and the life of the unborn from the moment of
conception."
When is the moment of conception?
xxx
Mr. Villegas: As I explained in the sponsorship speech, it is when the ovum is fertilized by the sperm that
there is human life. x x x.150
xxx
As to why conception is reckoned from fertilization and, as such, the beginning of human life, it was
explained:
Mr. Villegas: I propose to review this issue in a biological manner. The first question that needs to be
answered is: Is the fertilized ovum alive? Biologically categorically says yes, the fertilized ovum is alive.
First of all, like all living organisms, it takes in nutrients which it processes by itself. It begins doing this
upon fertilization. Secondly, as it takes in these nutrients, it grows from within. Thirdly, it multiplies itself
at a geometric rate in the continuous process of cell division. All these processes are vital signs of life.
Therefore, there is no question that biologically the fertilized ovum has life.
The second question: Is it human? Genetics gives an equally categorical "yes." At the moment of
conception, the nuclei of the ovum and the sperm rupture. As this happens 23 chromosomes from the
ovum combine with 23 chromosomes of the sperm to form a total of 46 chromosomes. A chromosome
count of 46 is found only - and I repeat, only in human cells. Therefore, the fertilized ovum is human.

Since these questions have been answered affirmatively, we must conclude that if the fertilized ovum is
both alive and human, then, as night follows day, it must be human life. Its nature is human.151
Why the Constitution used the phrase "from the moment of conception" and not "from the moment of
fertilization" was not because of doubt when human life begins, but rather, because:
Mr. Tingson: x x x x the phrase from the moment of conception" was described by us here before with
the scientific phrase "fertilized ovum" may be beyond the comprehension of some people; we want to
use the simpler phrase "from the moment of conception."152
Thus, in order to ensure that the fertilized ovum is given ample protection under the Constitution, it was
discussed:
Rev. Rigos: Yes, we think that the word "unborn" is sufficient for the purpose of writing a Constitution,
without specifying "from the moment of conception."
Mr. Davide: I would not subscribe to that particular view because according to the Commissioner's own
admission, he would leave it to Congress to define when life begins. So, Congress can define life to begin
from six months after fertilization; and that would really be very, very, dangerous. It is now determined
by science that life begins from the moment of conception. There can be no doubt about it. So we
should not give any doubt to Congress, too.153
Upon further inquiry, it was asked:
Mr. Gascon: Mr. Presiding Officer, I would like to ask a question on that point. Actually, that is one of the
questions I was going to raise during the period of interpellations but it has been expressed already. The
provision, as proposed right now states:
The State shall equally protect the life of the mother and the life of the unborn from the moment of
conception.
When it speaks of "from the moment of conception," does this mean when the egg meets the sperm?
Mr. Villegas: Yes, the ovum is fertilized by the sperm.
Mr. Gascon: Therefore that does not leave to Congress the right to determine whether certain
contraceptives that we know today are abortifacient or not because it is a fact that some of the socalled contraceptives deter the rooting of the ovum in the uterus. If fertilization has already occurred,
the next process is for the fertilized ovum to travel towards the uterus and to take root. What happens
with some contraceptives is that they stop the opportunity for the fertilized ovum to reach the uterus.
Therefore, if we take the provision as it is proposed, these so called contraceptives should be banned.
Mr. Villegas: Yes, if that physical fact is established, then that is what is called abortifacient and,
therefore, would be unconstitutional and should be banned under this provision.

Mr. Gascon: Yes. So my point is that I do not think it is up to Congress to state whether or not these
certain contraceptives are abortifacient. Scientifically and based on the provision as it is now proposed,
they are already considered abortifacient.154
From the deliberations above-quoted, it is apparent that the Framers of the Constitution emphasized
that the State shall provide equal protection to both the mother and the unborn child from the earliest
opportunity of life, that is, upon fertilization or upon the union of the male sperm and the female ovum.
It is also apparent is that the Framers of the Constitution intended that to prohibit Congress from
enacting measures that would allow it determine when life begins.
Equally apparent, however, is that the Framers of the Constitution did not intend to ban all
contraceptives for being unconstitutional. In fact, Commissioner Bernardo Villegas, spearheading the
need to have a constitutional provision on the right to life, recognized that the determination of
whether a contraceptive device is an abortifacient is a question of fact which should be left to the courts
to decide on based on established evidence.155
From the discussions above, contraceptives that kill or destroy the fertilized ovum should be deemed an
abortive and thus prohibited. Conversely, contraceptives that actually prevent the union of the male
sperm and the female ovum, and those that similarly take action prior to fertilization should be deemed
non-abortive, and thus, constitutionally permissible.
As emphasized by the Framers of the Constitution:
xxx

xxx

xxx

Mr. Gascon: xx xx. As I mentioned in my speech on the US bases, I am pro-life, to the point that I would
like not only to protect the life of the unborn, but also the lives of the millions of people in the world by
fighting for a nuclear-free world. I would just like to be assured of the legal and pragmatic implications
of the term "protection of the life of the unborn from the moment of conception." I raised some of
these implications this afternoon when I interjected in the interpellation of Commissioner Regalado. I
would like to ask that question again for a categorical answer.
I mentioned that if we institutionalize the term "the life of the unborn from the moment of conception"
we are also actually saying "no," not "maybe," to certain contraceptives which are already being
encouraged at this point in time. Is that the sense of the committee or does it disagree with me?
Mr. Azcuna: No, Mr. Presiding Officer, because contraceptives would be preventive. There is no unborn
yet. That is yet unshaped.
Mr. Gascon: Yes, Mr. Presiding Officer, but I was speaking more about some contraceptives, such as the
intra-uterine device which actually stops the egg which has already been fertilized from taking route to
the uterus. So if we say "from the moment of conception," what really occurs is that some of these
contraceptives will have to be unconstitutionalized.
Mr. Azcuna: Yes, to the extent that it is after the fertilization.
Mr. Gascon: Thank you, Mr. Presiding Officer.156

The fact that not all contraceptives are prohibited by the 1987 Constitution is even admitted by
petitioners during the oral arguments. There it was conceded that tubal ligation, vasectomy, even
condoms are not classified as abortifacients.157
Atty. Noche:
Before the union of the eggs, egg and the sperm, there is no life yet.
Justice Bersamin:
There is no life.
Atty. Noche:
So, there is no life to be protected.
Justice Bersamin:
To be protected.
Atty. Noche:
Under Section 12, yes.
Justice Bersamin:
So you have no objection to condoms?
Atty. Noche:
Not under Section 12, Article II.
Justice Bersamin:
Even if there is already information that condoms sometimes have porosity?
Atty. Noche:
Well, yes, Your Honor, there are scientific findings to that effect, Your Honor, but I am discussing here
Section 12, Article II, Your Honor, yes.
Justice Bersamin:
Alright.
Atty. Noche:

And it's not, I have to admit it's not an abortifacient, Your Honor.158
Medical Meaning
That conception begins at fertilization is not bereft of medical foundation. Mosby s Medical, Nursing,
and Allied Health Dictionary defines conception as "the beginning of pregnancy usually taken to be the
instant a spermatozoon enters an ovum and forms a viable zygote."159
It describes fertilization as "the union of male and female gametes to form a zygote from which the
embryo develops."160
The Textbook of Obstetrics (Physiological & Pathological Obstetrics),161 used by medical schools in the
Philippines, also concludes that human life (human person) begins at the moment of fertilization with
the union of the egg and the sperm resulting in the formation of a new individual, with a unique genetic
composition that dictates all developmental stages that ensue.
Similarly, recent medical research on the matter also reveals that: "Human development begins after
the union of male and female gametes or germ cells during a process known as fertilization
(conception). Fertilization is a sequence of events that begins with the contact of a sperm
(spermatozoon) with a secondary oocyte (ovum) and ends with the fusion of their pronuclei (the haploid
nuclei of the sperm and ovum) and the mingling of their chromosomes to form a new cell. This fertilized
ovum, known as a zygote, is a large diploid cell that is the beginning, or primordium, of a human
being."162
The authors of Human Embryology & Teratology163 mirror the same position. They wrote: "Although life
is a continuous process, fertilization is a critical landmark because, under ordinary circumstances, a new,
genetically distinct human organism is thereby formed.... The combination of 23 chromosomes present
in each pronucleus results in 46 chromosomes in the zygote. Thus the diploid number is restored and
the embryonic genome is formed. The embryo now exists as a genetic unity."
In support of the RH Bill, The Philippine Medical Association came out with a "Paper on the Reproductive
Health Bill (Responsible Parenthood Bill)" and therein concluded that:
CONCLUSION
The PMA throws its full weight in supporting the RH Bill at the same time that PMA maintains its strong
position that fertilization is sacred because it is at this stage that conception, and thus human life,
begins. Human lives are sacred from the moment of conception, and that destroying those new lives is
never licit, no matter what the purported good outcome would be. In terms of biology and human
embryology, a human being begins immediately at fertilization and after that, there is no point along the
continuous line of human embryogenesis where only a "potential" human being can be posited. Any
philosophical, legal, or political conclusion cannot escape this objective scientific fact.
The scientific evidence supports the conclusion that a zygote is a human organism and that the life of a
new human being commences at a scientifically well defined "moment of conception." This conclusion is
objective, consistent with the factual evidence, and independent of any specific ethical, moral, political,
or religious view of human life or of human embryos.164

Conclusion:
Fertilization

The

Moment

of

Conception

is

Reckoned

from

In all, whether it be taken from a plain meaning, or understood under medical parlance, and more
importantly, following the intention of the Framers of the Constitution, the undeniable conclusion is
that a zygote is a human organism and that the life of a new human being commences at a scientifically
well-defined moment of conception, that is, upon fertilization.
For the above reasons, the Court cannot subscribe to the theory advocated by Hon. Lagman that life
begins at implantation.165 According to him, "fertilization and conception are two distinct and successive
stages in the reproductive process. They are not identical and synonymous."166 Citing a letter of the
WHO, he wrote that "medical authorities confirm that the implantation of the fertilized ovum is the
commencement of conception and it is only after implantation that pregnancy can be medically
detected."167
This theory of implantation as the beginning of life is devoid of any legal or scientific mooring. It does
not pertain to the beginning of life but to the viability of the fetus. The fertilized ovum/zygote is not an
inanimate object - it is a living human being complete with DNA and 46 chromosomes.168 Implantation
has been conceptualized only for convenience by those who had population control in mind. To adopt it
would constitute textual infidelity not only to the RH Law but also to the Constitution.
Not surprisingly, even the OSG does not support this position.
If such theory would be accepted, it would unnervingly legitimize the utilization of any drug or device
that would prevent the implantation of the fetus at the uterine wall. It would be provocative and further
aggravate religious-based divisiveness.
It would legally permit what the Constitution proscribes - abortion and abortifacients.
The RH Law and Abortion
The clear and unequivocal intent of the Framers of the 1987 Constitution in protecting the life of the
unborn from conception was to prevent the Legislature from enacting a measure legalizing abortion. It
was so clear that even the Court cannot interpret it otherwise. This intent of the Framers was captured
in the record of the proceedings of the 1986 Constitutional Commission. Commissioner Bernardo
Villegas, the principal proponent of the protection of the unborn from conception, explained:
The intention .. .is to make sure that there would be no pro-abortion laws ever passed by Congress or
any pro-abortion decision passed by the Supreme Court.169
A reading of the RH Law would show that it is in line with this intent and actually proscribes abortion.
While the Court has opted not to make any determination, at this stage, when life begins, it finds that
the RH Law itself clearly mandates that protection be afforded from the moment of fertilization. As
pointed out by Justice Carpio, the RH Law is replete with provisions that embody the policy of the law to
protect to the fertilized ovum and that it should be afforded safe travel to the uterus for implantation.170

Moreover, the RH Law recognizes that abortion is a crime under Article 256 of the Revised Penal Code,
which penalizes the destruction or expulsion of the fertilized ovum. Thus:
1] xx x.
Section 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as
follows:
xxx.
(q) Reproductive health care refers to the access to a full range of methods, facilities, services and
supplies that contribute to reproductive health and well-being by addressing reproductive healthrelated problems. It also includes sexual health, the purpose of which is the enhancement of life and
personal relations. The elements of reproductive health care include the following:
xxx.
(3) Proscription of abortion and management of abortion complications;
xxx.
2] xx x.
Section 4. x x x.
(s) Reproductive health rights refers to the rights of individuals and couples, to decide freely and
responsibly whether or not to have children; the number, spacing and timing of their children; to make
other decisions concerning reproduction, free of discrimination, coercion and violence; to have the
information and means to do so; and to attain the highest standard of sexual health and reproductive
health: Provided, however, That reproductive health rights do not include abortion, and access to
abortifacients.
3] xx x.
SEC. 29. Repealing Clause. - Except for prevailing laws against abortion, any law, presidential decree or
issuance, executive order, letter of instruction, administrative order, rule or regulation contrary to or is
inconsistent with the provisions of this Act including Republic Act No. 7392, otherwise known as the
Midwifery Act, is hereby repealed, modified or amended accordingly.
The RH Law and Abortifacients
In carrying out its declared policy, the RH Law is consistent in prohibiting abortifacients. To be clear,
Section 4(a) of the RH Law defines an abortifacient as:
Section 4. Definition of Terms - x x x x

(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside
the mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's
womb upon determination of the FDA.
As stated above, the RH Law mandates that protection must be afforded from the moment of
fertilization. By using the word " or," the RH Law prohibits not only drugs or devices that prevent
implantation, but also those that induce abortion and those that induce the destruction of a fetus inside
the mother's womb. Thus, an abortifacient is any drug or device that either:
(a) Induces abortion; or
(b) Induces the destruction of a fetus inside the mother's womb; or
(c) Prevents the fertilized ovum to reach and be implanted in the mother's womb, upon
determination of the FDA.
Contrary to the assertions made by the petitioners, the Court finds that the RH Law, consistent with the
Constitution, recognizes that the fertilized ovum already has life and that the State has a bounden duty
to protect it. The conclusion becomes clear because the RH Law, first, prohibits any drug or device that
induces abortion (first kind), which, as discussed exhaustively above, refers to that which induces the
killing or the destruction of the fertilized ovum, and, second, prohibits any drug or device the fertilized
ovum to reach and be implanted in the mother's womb (third kind).
By expressly declaring that any drug or device that prevents the fertilized ovum to reach and be
implanted in the mother's womb is an abortifacient (third kind), the RH Law does not intend to mean at
all that life only begins only at implantation, as Hon. Lagman suggests. It also does not declare either
that protection will only be given upon implantation, as the petitioners likewise suggest. Rather, it
recognizes that: one, there is a need to protect the fertilized ovum which already has life, and two, the
fertilized ovum must be protected the moment it becomes existent - all the way until it reaches and
implants in the mother's womb. After all, if life is only recognized and afforded protection from the
moment the fertilized ovum implants - there is nothing to prevent any drug or device from killing or
destroying the fertilized ovum prior to implantation.
From the foregoing, the Court finds that inasmuch as it affords protection to the fertilized ovum, the RH
Law does not sanction abortion. To repeat, it is the Court's position that life begins at fertilization, not at
implantation. When a fertilized ovum is implanted in the uterine wall , its viability is sustained but that
instance of implantation is not the point of beginning of life. It started earlier. And as defined by the RH
Law, any drug or device that induces abortion, that is, which kills or destroys the fertilized ovum or
prevents the fertilized ovum to reach and be implanted in the mother's womb, is an abortifacient.
Proviso Under Section 9 of the RH Law
This notwithstanding, the Court finds that the proviso under Section 9 of the law that "any product or
supply included or to be included in the EDL must have a certification from the FDA that said product
and supply is made available on the condition that it is not to be used as an abortifacient" as empty as it
is absurd. The FDA, with all its expertise, cannot fully attest that a drug or device will not all be used as

an abortifacient, since the agency cannot be present in every instance when the contraceptive product
or supply will be used.171
Pursuant to its declared policy of providing access only to safe, legal and non-abortifacient
contraceptives, however, the Court finds that the proviso of Section 9, as worded, should bend to the
legislative intent and mean that "any product or supply included or to be included in the EDL must have
a certification from the FDA that said product and supply is made available on the condition that it
cannot be used as abortifacient." Such a construction is consistent with the proviso under the second
paragraph of the same section that provides:
Provided, further, That the foregoing offices shall not purchase or acquire by any means emergency
contraceptive pills, postcoital pills, abortifacients that will be used for such purpose and their other
forms or equivalent.
Abortifacients under the RH-IRR
At this juncture, the Court agrees with ALFI that the authors of the RH-IRR gravely abused their office
when they redefined the meaning of abortifacient. The RH Law defines "abortifacient" as follows:
SEC. 4. Definition of Terms. - For the purpose of this Act, the following terms shall be defined as follows:
(a) Abortifacient refers to any drug or device that induces abortion or the destruction of a fetus inside
the mother's womb or the prevention of the fertilized ovum to reach and be implanted in the mother's
womb upon determination of the FDA.
Section 3.0l (a) of the IRR, however, redefines "abortifacient" as:
Section 3.01 For purposes of these Rules, the terms shall be defined as follows:
a) Abortifacient refers to any drug or device that primarily induces abortion or the destruction of a fetus
inside the mother's womb or the prevention of the fertilized ovum to reach and be implanted in the
mother's womb upon determination of the Food and Drug Administration (FDA). [Emphasis supplied]
Again in Section 3.0lG) of the RH-IRR, "contraceptive," is redefined, viz:
j) Contraceptive refers to any safe, legal, effective and scientifically proven modern family planning
method, device, or health product, whether natural or artificial, that prevents pregnancy but does not
primarily destroy a fertilized ovum or prevent a fertilized ovum from being implanted in the mother's
womb in doses of its approved indication as determined by the Food and Drug Administration (FDA).
The above-mentioned section of the RH-IRR allows "contraceptives" and recognizes as "abortifacient"
only those that primarily induce abortion or the destruction of a fetus inside the mother's womb or the
prevention of the fertilized ovum to reach and be implanted in the mother's womb.172
This cannot be done.

In this regard, the observations of Justice Brion and Justice Del Castillo are well taken. As they pointed
out, with the insertion of the word "primarily," Section 3.0l(a) and G) of the RH-IRR173 must be struck
down for being ultra vires.
Evidently, with the addition of the word "primarily," in Section 3.0l(a) and G) of the RH-IRR is indeed
ultra vires. It contravenes Section 4(a) of the RH Law and should, therefore, be declared invalid. There is
danger that the insertion of the qualifier "primarily" will pave the way for the approval of contraceptives
which may harm or destroy the life of the unborn from conception/fertilization in violation of Article II,
Section 12 of the Constitution. With such qualification in the RH-IRR, it appears to insinuate that a
contraceptive will only be considered as an "abortifacient" if its sole known effect is abortion or, as
pertinent here, the prevention of the implantation of the fertilized ovum.
For the same reason, this definition of "contraceptive" would permit the approval of contraceptives
which are actually abortifacients because of their fail-safe mechanism.174
Also, as discussed earlier, Section 9 calls for the certification by the FDA that these contraceptives
cannot act as abortive. With this, together with the definition of an abortifacient under Section 4 (a) of
the RH Law and its declared policy against abortion, the undeniable conclusion is that contraceptives to
be included in the PNDFS and the EDL will not only be those contraceptives that do not have the primary
action of causing abortion or the destruction of a fetus inside the mother's womb or the prevention of
the fertilized ovum to reach and be implanted in the mother's womb, but also those that do not have
the secondary action of acting the same way.
Indeed, consistent with the constitutional policy prohibiting abortion, and in line with the principle that
laws should be construed in a manner that its constitutionality is sustained, the RH Law and its
implementing rules must be consistent with each other in prohibiting abortion. Thus, the word "
primarily" in Section 3.0l(a) and G) of the RH-IRR should be declared void. To uphold the validity of
Section 3.0l(a) and G) of the RH-IRR and prohibit only those contraceptives that have the primary effect
of being an abortive would effectively "open the floodgates to the approval of contraceptives which may
harm or destroy the life of the unborn from conception/fertilization in violation of Article II, Section 12
of the Constitution."175
To repeat and emphasize, in all cases, the "principle of no abortion" embodied in the constitutional
protection of life must be upheld.
2-The Right to Health
The petitioners claim that the RH Law violates the right to health because it requires the inclusion of
hormonal contraceptives, intrauterine devices, injectables and family products and supplies in the
National Drug Formulary and the inclusion of the same in the regular purchase of essential medicines
and supplies of all national hospitals.176 Citing various studies on the matter, the petitioners posit that
the risk of developing breast and cervical cancer is greatly increased in women who use oral
contraceptives as compared to women who never use them. They point out that the risk is decreased
when the use of contraceptives is discontinued. Further, it is contended that the use of combined oral
contraceptive pills is associated with a threefold increased risk of venous thromboembolism, a twofold
increased risk of ischematic stroke, and an indeterminate effect on risk of myocardial infarction.177 Given
the definition of "reproductive health" and "sexual health" under Sections 4(p)178 and (w)179 of the RH

Law, the petitioners assert that the assailed legislation only seeks to ensure that women have
pleasurable and satisfying sex lives.180
The OSG, however, points out that Section 15, Article II of the Constitution is not self-executory, it being
a mere statement of the administration's principle and policy. Even if it were self-executory, the OSG
posits that medical authorities refute the claim that contraceptive pose a danger to the health of
women.181
The Court's Position
A component to the right to life is the constitutional right to health. In this regard, the Constitution is
replete with provisions protecting and promoting the right to health. Section 15, Article II of the
Constitution provides:
Section 15. The State shall protect and promote the right to health of the people and instill health
consciousness among them.
A portion of Article XIII also specifically provides for the States' duty to provide for the health of the
people, viz:
HEALTH
Section 11. The State shall adopt an integrated and comprehensive approach to health development
which shall endeavor to make essential goods, health and other social services available to all the people
at affordable cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled,
women, and children. The State shall endeavor to provide free medical care to paupers.
Section 12. The State shall establish and maintain an effective food and drug regulatory system and
undertake appropriate health, manpower development, and research, responsive to the country's
health needs and problems.
Section 13. The State shall establish a special agency for disabled person for their rehabilitation, selfdevelopment, and self-reliance, and their integration into the mainstream of society.
Finally, Section 9, Article XVI provides:
Section 9. The State shall protect consumers from trade malpractices and from substandard or
hazardous products.
Contrary to the respondent's notion, however, these provisions are self-executing. Unless the provisions
clearly express the contrary, the provisions of the Constitution should be considered self-executory.
There is no need for legislation to implement these self-executing provisions.182 In Manila Prince Hotel v.
GSIS,183 it was stated:
x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional
mandate, the presumption now is that all provisions of the constitution are self-executing. If the
constitutional provisions are treated as requiring legislation instead of self-executing, the legislature

would have the power to ignore and practically nullify the mandate of the fundamental law. This can be
cataclysmic. That is why the prevailing view is, as it has always been, that
... in case of doubt, the Constitution should be considered self-executing rather than non-self-executing.
. . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered selfexecuting, as a contrary rule would give the legislature discretion to determine when, or whether, they
shall be effective. These provisions would be subordinated to the will of the lawmaking body, which
could make them entirely meaningless by simply refusing to pass the needed implementing statute.
(Emphases supplied)
This notwithstanding, it bears mentioning that the petitioners, particularly ALFI, do not question
contraception and contraceptives per se.184 In fact, ALFI prays that the status quo - under R.A. No. 5921
and R.A. No. 4729, the sale and distribution of contraceptives are not prohibited when they are
dispensed by a prescription of a duly licensed by a physician - be maintained.185
The legislative intent in the enactment of the RH Law in this regard is to leave intact the provisions of
R.A. No. 4729. There is no intention at all to do away with it. It is still a good law and its requirements
are still in to be complied with. Thus, the Court agrees with the observation of respondent Lagman that
the effectivity of the RH Law will not lead to the unmitigated proliferation of contraceptives since the
sale, distribution and dispensation of contraceptive drugs and devices will still require the prescription
of a licensed physician. With R.A. No. 4729 in place, there exists adequate safeguards to ensure the
public that only contraceptives that are safe are made available to the public. As aptly explained by
respondent Lagman:
D.
dispensed
prescription

Contraceptives
and

cannot
used

be
without

108. As an added protection to voluntary users of contraceptives, the same cannot be dispensed and
used without prescription.
109. Republic Act No. 4729 or "An Act to Regulate the Sale, Dispensation, and/ or Distribution of
Contraceptive Drugs and Devices" and Republic Act No. 5921 or "An Act Regulating the Practice of
Pharmacy and Setting Standards of Pharmaceutical Education in the Philippines and for Other Purposes"
are not repealed by the RH Law and the provisions of said Acts are not inconsistent with the RH Law.
110. Consequently, the sale, distribution and dispensation of contraceptive drugs and devices are
particularly governed by RA No. 4729 which provides in full:
"Section 1. It shall be unlawful for any person, partnership, or corporation, to sell, dispense or otherwise
distribute whether for or without consideration, any contraceptive drug or device, unless such sale,
dispensation or distribution is by a duly licensed drug store or pharmaceutical company and with the
prescription of a qualified medical practitioner.
"Sec. 2 . For the purpose of this Act:

"(a) "Contraceptive drug" is any medicine, drug, chemical, or portion which is used exclusively
for the purpose of preventing fertilization of the female ovum: and
"(b) "Contraceptive device" is any instrument, device, material, or agent introduced into the
female reproductive system for the primary purpose of preventing conception.
"Sec. 3 Any person, partnership, or corporation, violating the provisions of this Act shall be punished
with a fine of not more than five hundred pesos or an imprisonment of not less than six months or more
than one year or both in the discretion of the Court.
"This Act shall take effect upon its approval.
"Approved: June 18, 1966"
111. Of the same import, but in a general manner, Section 25 of RA No. 5921 provides:
"Section 25. Sale of medicine, pharmaceuticals, drugs and devices. No medicine, pharmaceutical, or drug
of whatever nature and kind or device shall be compounded, dispensed, sold or resold, or otherwise be
made available to the consuming public except through a prescription drugstore or hospital pharmacy,
duly established in accordance with the provisions of this Act.
112. With all of the foregoing safeguards, as provided for in the RH Law and other relevant statutes, the
pretension of the petitioners that the RH Law will lead to the unmitigated proliferation of
contraceptives, whether harmful or not, is completely unwarranted and baseless.186 [Emphases in the
Original. Underlining supplied.]
In Re: Section 10 of the RH Law:
The foregoing safeguards should be read in connection with Section 10 of the RH Law which provides:
SEC. 10. Procurement and Distribution of Family Planning Supplies. - The DOH shall procure, distribute to
LGUs and monitor the usage of family planning supplies for the whole country. The DOH shall coordinate
with all appropriate local government bodies to plan and implement this procurement and distribution
program. The supply and budget allotments shall be based on, among others, the current levels and
projections of the following:
(a) Number of women of reproductive age and couples who want to space or limit their
children;
(b) Contraceptive prevalence rate, by type of method used; and
(c) Cost of family planning supplies.
Provided, That LGUs may implement its own procurement, distribution and monitoring program
consistent with the overall provisions of this Act and the guidelines of the DOH.

Thus, in the distribution by the DOH of contraceptive drugs and devices, it must consider the provisions
of R.A. No. 4729, which is still in effect, and ensure that the contraceptives that it will procure shall be
from a duly licensed drug store or pharmaceutical company and that the actual dispensation of these
contraceptive drugs and devices will done following a prescription of a qualified medical practitioner.
The distribution of contraceptive drugs and devices must not be indiscriminately done. The public health
must be protected by all possible means. As pointed out by Justice De Castro, a heavy responsibility and
burden are assumed by the government in supplying contraceptive drugs and devices, for it may be held
accountable for any injury, illness or loss of life resulting from or incidental to their use.187
At any rate, it bears pointing out that not a single contraceptive has yet been submitted to the FDA
pursuant to the RH Law. It behooves the Court to await its determination which drugs or devices are
declared by the FDA as safe, it being the agency tasked to ensure that food and medicines available to
the public are safe for public consumption. Consequently, the Court finds that, at this point, the attack
on the RH Law on this ground is premature. Indeed, the various kinds of contraceptives must first be
measured up to the constitutional yardstick as expounded herein, to be determined as the case presents
itself.
At this point, the Court is of the strong view that Congress cannot legislate that hormonal contraceptives
and intra-uterine devices are safe and non-abortifacient. The first sentence of Section 9 that ordains
their inclusion by the National Drug Formulary in the EDL by using the mandatory "shall" is to be
construed as operative only after they have been tested, evaluated, and approved by the FDA. The FDA,
not Congress, has the expertise to determine whether a particular hormonal contraceptive or
intrauterine device is safe and non-abortifacient. The provision of the third sentence concerning the
requirements for the inclusion or removal of a particular family planning supply from the EDL supports
this construction.
Stated differently, the provision in Section 9 covering the inclusion of hormonal contraceptives, intrauterine devices, injectables, and other safe, legal, non-abortifacient and effective family planning
products and supplies by the National Drug Formulary in the EDL is not mandatory. There must first be a
determination by the FDA that they are in fact safe, legal, non-abortifacient and effective family
planning products and supplies. There can be no predetermination by Congress that the gamut of
contraceptives are "safe, legal, non-abortifacient and effective" without the proper scientific
examination.
3
-Freedom
and the Right to Free Speech

of

Religion

Position of the Petitioners:

1. On Contraception
While contraceptives and procedures like vasectomy and tubal ligation are not covered by the
constitutional proscription, there are those who, because of their religious education and background,
sincerely believe that contraceptives, whether abortifacient or not, are evil. Some of these are medical
practitioners who essentially claim that their beliefs prohibit not only the use of contraceptives but also
the willing participation and cooperation in all things dealing with contraceptive use. Petitioner PAX
explained that "contraception is gravely opposed to marital chastity, it is contrary to the good of the

transmission of life, and to the reciprocal self-giving of the spouses; it harms true love and denies the
sovereign rule of God in the transmission of Human life."188
The petitioners question the State-sponsored procurement of contraceptives, arguing that the
expenditure of their taxes on contraceptives violates the guarantee of religious freedom since
contraceptives contravene their religious beliefs.189
2.
On
The Duty to Refer

Religious

Accommodation

and

Petitioners Imbong and Luat note that while the RH Law attempts to address religious sentiments by
making provisions for a conscientious objector, the constitutional guarantee is nonetheless violated
because the law also imposes upon the conscientious objector the duty to refer the patient seeking
reproductive health services to another medical practitioner who would be able to provide for the
patient's needs. For the petitioners, this amounts to requiring the conscientious objector to cooperate
with the very thing he refuses to do without violating his/her religious beliefs.190
They further argue that even if the conscientious objector's duty to refer is recognized, the recognition is
unduly limited, because although it allows a conscientious objector in Section 23 (a)(3) the option to
refer a patient seeking reproductive health services and information - no escape is afforded the
conscientious objector in Section 23 (a)(l) and (2), i.e. against a patient seeking reproductive health
procedures. They claim that the right of other individuals to conscientiously object, such as: a) those
working in public health facilities referred to in Section 7; b) public officers involved in the
implementation of the law referred to in Section 23(b ); and c) teachers in public schools referred to in
Section 14 of the RH Law, are also not recognize.191
Petitioner Echavez and the other medical practitioners meanwhile, contend that the requirement to
refer the matter to another health care service provider is still considered a compulsion on those
objecting healthcare service providers. They add that compelling them to do the act against their will
violates the Doctrine of Benevolent Neutrality. Sections 9, 14 and 1 7 of the law are too secular that they
tend to disregard the religion of Filipinos. Authorizing the use of contraceptives with abortive effects,
mandatory sex education, mandatory pro-bono reproductive health services to indigents encroach upon
the religious freedom of those upon whom they are required.192
Petitioner CFC also argues that the requirement for a conscientious objector to refer the person seeking
reproductive health care services to another provider infringes on one's freedom of religion as it forces
the objector to become an unwilling participant in the commission of a serious sin under Catholic
teachings. While the right to act on one's belief may be regulated by the State, the acts prohibited by
the RH Law are passive acts which produce neither harm nor injury to the public.193
Petitioner CFC adds that the RH Law does not show compelling state interest to justify regulation of
religious freedom because it mentions no emergency, risk or threat that endangers state interests. It
does not explain how the rights of the people (to equality, non-discrimination of rights, sustainable
human development, health, education, information, choice and to make decisions according to
religious convictions, ethics, cultural beliefs and the demands of responsible parenthood) are being
threatened or are not being met as to justify the impairment of religious freedom.194

Finally, the petitioners also question Section 15 of the RH Law requiring would-be couples to attend
family planning and responsible parenthood seminars and to obtain a certificate of compliance. They
claim that the provision forces individuals to participate in the implementation of the RH Law even if it
contravenes their religious beliefs.195 As the assailed law dangles the threat of penalty of fine and/or
imprisonment in case of non-compliance with its provisions, the petitioners claim that the RH Law
forcing them to provide, support and facilitate access and information to contraception against their
beliefs must be struck down as it runs afoul to the constitutional guarantee of religious freedom.
The Respondents' Positions
The respondents, on the other hand, contend that the RH Law does not provide that a specific mode or
type of contraceptives be used, be it natural or artificial. It neither imposes nor sanctions any religion or
belief.196 They point out that the RH Law only seeks to serve the public interest by providing accessible,
effective and quality reproductive health services to ensure maternal and child health, in line with the
State's duty to bring to reality the social justice health guarantees of the Constitution,197 and that what
the law only prohibits are those acts or practices, which deprive others of their right to reproductive
health.198 They assert that the assailed law only seeks to guarantee informed choice, which is an
assurance that no one will be compelled to violate his religion against his free will.199
The respondents add that by asserting that only natural family planning should be allowed, the
petitioners are effectively going against the constitutional right to religious freedom, the same right they
invoked to assail the constitutionality of the RH Law.200 In other words, by seeking the declaration that
the RH Law is unconstitutional, the petitioners are asking that the Court recognize only the Catholic
Church's sanctioned natural family planning methods and impose this on the entire citizenry.201
With respect to the duty to refer, the respondents insist that the same does not violate the
constitutional guarantee of religious freedom, it being a carefully balanced compromise between the
interests of the religious objector, on one hand, who is allowed to keep silent but is required to refer and that of the citizen who needs access to information and who has the right to expect that the health
care professional in front of her will act professionally. For the respondents, the concession given by the
State under Section 7 and 23(a)(3) is sufficient accommodation to the right to freely exercise one's
religion without unnecessarily infringing on the rights of others.202
Whatever burden is placed on the petitioner's religious freedom is minimal as the duty to refer is limited
in duration, location and impact.203
Regarding mandatory family planning seminars under Section 15 , the respondents claim that it is a
reasonable regulation providing an opportunity for would-be couples to have access to information
regarding parenthood, family planning, breastfeeding and infant nutrition. It is argued that those who
object to any information received on account of their attendance in the required seminars are not
compelled to accept information given to them. They are completely free to reject any information they
do not agree with and retain the freedom to decide on matters of family life without intervention of the
State.204
For their part, respondents De Venecia et al., dispute the notion that natural family planning is the only
method acceptable to Catholics and the Catholic hierarchy. Citing various studies and surveys on the
matter, they highlight the changing stand of the Catholic Church on contraception throughout the years

and note the general acceptance of the benefits of contraceptives by its followers in planning their
families.
The Church and The State
At the outset, it cannot be denied that we all live in a heterogeneous society. It is made up of people of
diverse ethnic, cultural and religious beliefs and backgrounds. History has shown us that our
government, in law and in practice, has allowed these various religious, cultural, social and racial groups
to thrive in a single society together. It has embraced minority groups and is tolerant towards all - the
religious people of different sects and the non-believers. The undisputed fact is that our people
generally believe in a deity, whatever they conceived Him to be, and to whom they call for guidance and
enlightenment in crafting our fundamental law. Thus, the preamble of the present Constitution reads:
We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and
humane society, and establish a Government that shall embody our ideals and aspirations, promote the
common good, conserve and develop our patrimony, and secure to ourselves and our posterity, the
blessings of independence and democracy under the rule of law and a regime of truth, justice, freedom,
love, equality, and peace, do ordain and promulgate this Constitution.
The Filipino people in "imploring the aid of Almighty God " manifested their spirituality innate in our
nature and consciousness as a people, shaped by tradition and historical experience. As this is embodied
in the preamble, it means that the State recognizes with respect the influence of religion in so far as it
instills into the mind the purest principles of morality.205 Moreover, in recognition of the contributions of
religion to society, the 1935, 1973 and 1987 constitutions contain benevolent and accommodating
provisions towards religions such as tax exemption of church property, salary of religious officers in
government institutions, and optional religious instructions in public schools.
The Framers, however, felt the need to put up a strong barrier so that the State would not encroach into
the affairs of the church, and vice-versa. The principle of separation of Church and State was, thus,
enshrined in Article II, Section 6 of the 1987 Constitution, viz:
Section 6. The separation of Church and State shall be inviolable.
Verily, the principle of separation of Church and State is based on mutual respect.1wphi1 Generally,
the State cannot meddle in the internal affairs of the church, much less question its faith and dogmas or
dictate upon it. It cannot favor one religion and discriminate against another. On the other hand, the
church cannot impose its beliefs and convictions on the State and the rest of the citizenry. It cannot
demand that the nation follow its beliefs, even if it sincerely believes that they are good for the country.
Consistent with the principle that not any one religion should ever be preferred over another, the
Constitution in the above-cited provision utilizes the term "church" in its generic sense, which refers to a
temple, a mosque, an iglesia, or any other house of God which metaphorically symbolizes a religious
organization. Thus, the "Church" means the religious congregations collectively.
Balancing the benefits that religion affords and the need to provide an ample barrier to protect the
State from the pursuit of its secular objectives, the Constitution lays down the following mandate in
Article III, Section 5 and Article VI, Section 29 (2), of the 1987 Constitution:

Section. 5. No law shall be made respecting an establishment of religion, or prohibiting the free exercise
thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for the exercise of civil or
political rights.
Section 29.
xxx.
No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for
the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of
religion, or of any priest, preacher, minister, other religious teacher, or dignitary as such, except when
such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution,
or government orphanage or leprosarium.
In short, the constitutional assurance of religious freedom provides two guarantees: the Establishment
Clause and the Free Exercise Clause.
The establishment clause "principally prohibits the State from sponsoring any religion or favoring any
religion as against other religions. It mandates a strict neutrality in affairs among religious
groups."206 Essentially, it prohibits the establishment of a state religion and the use of public resources
for the support or prohibition of a religion.
On the other hand, the basis of the free exercise clause is the respect for the inviolability of the human
conscience.207 Under this part of religious freedom guarantee, the State is prohibited from unduly
interfering with the outside manifestations of one's belief and faith.208 Explaining the concept of
religious freedom, the Court, in Victoriano v. Elizalde Rope Workers Union209 wrote:
The constitutional provisions not only prohibits legislation for the support of any religious tenets or the
modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the
practice of any form of worship (U.S. Ballard, 322 U.S. 78, 88 L. ed. 1148, 1153), but also assures the free
exercise of one's chosen form of religion within limits of utmost amplitude. It has been said that the
religion clauses of the Constitution are all designed to protect the broadest possible liberty of
conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as
he believes he ought to live, consistent with the liberty of others and with the common good. Any
legislation whose effect or purpose is to impede the observance of one or all religions, or to discriminate
invidiously between the religions, is invalid, even though the burden may be characterized as being only
indirect. (Sherbert v. Verner, 374 U.S. 398, 10 L.ed.2d 965, 83 S. Ct. 1970) But if the state regulates
conduct by enacting, within its power, a general law which has for its purpose and effect to advance the
state's secular goals, the statute is valid despite its indirect burden on religious observance, unless the
state can accomplish its purpose without imposing such burden. (Braunfeld v. Brown, 366 U.S. 599, 6
Led. 2d. 563, 81 S. Ct. 144; McGowan v. Maryland, 366 U.S. 420, 444-5 and 449).
As expounded in Escritor,
The establishment and free exercise clauses were not designed to serve contradictory purposes. They
have a single goal-to promote freedom of individual religious beliefs and practices. In simplest terms,

the free exercise clause prohibits government from inhibiting religious beliefs with penalties for religious
beliefs and practice, while the establishment clause prohibits government from inhibiting religious belief
with rewards for religious beliefs and practices. In other words, the two religion clauses were intended
to deny government the power to use either the carrot or the stick to influence individual religious
beliefs and practices.210
Corollary to the guarantee of free exercise of one's religion is the principle that the guarantee of
religious freedom is comprised of two parts: the freedom to believe, and the freedom to act on one's
belief. The first part is absolute. As explained in Gerona v. Secretary of Education:211
The realm of belief and creed is infinite and limitless bounded only by one's imagination and thought. So
is the freedom of belief, including religious belief, limitless and without bounds. One may believe in
most anything, however strange, bizarre and unreasonable the same may appear to others, even
heretical when weighed in the scales of orthodoxy or doctrinal standards. But between the freedom of
belief and the exercise of said belief, there is quite a stretch of road to travel.212
The second part however, is limited and subject to the awesome power of the State and can be enjoyed
only with proper regard to the rights of others. It is "subject to regulation where the belief is translated
into external acts that affect the public welfare."213
Legislative Acts and the
Free Exercise Clause
Thus, in case of conflict between the free exercise clause and the State, the Court adheres to the
doctrine of benevolent neutrality. This has been clearly decided by the Court in Estrada v. Escritor,
(Escritor)214 where it was stated "that benevolent neutrality-accommodation, whether mandatory or
permissive, is the spirit, intent and framework underlying the Philippine Constitution."215 In the same
case, it was further explained that"
The benevolent neutrality theory believes that with respect to these governmental actions,
accommodation of religion may be allowed, not to promote the government's favored form of religion,
but to allow individuals and groups to exercise their religion without hindrance. "The purpose of
accommodation is to remove a burden on, or facilitate the exercise of, a person's or institution's
religion."216 "What is sought under the theory of accommodation is not a declaration of
unconstitutionality of a facially neutral law, but an exemption from its application or its 'burdensome
effect,' whether by the legislature or the courts."217
In ascertaining the limits of the exercise of religious freedom, the compelling state interest test is
proper.218Underlying the compelling state interest test is the notion that free exercise is a fundamental
right and that laws burdening it should be subject to strict scrutiny.219 In Escritor, it was written:
Philippine jurisprudence articulates several tests to determine these limits. Beginning with the first case
on the Free Exercise Clause, American Bible Society, the Court mentioned the "clear and present
danger" test but did not employ it. Nevertheless, this test continued to be cited in subsequent cases on
religious liberty. The Gerona case then pronounced that the test of permissibility of religious freedom is
whether it violates the established institutions of society and law. The Victoriano case mentioned the

"immediate and grave danger" test as well as the doctrine that a law of general applicability may burden
religious exercise provided the law is the least restrictive means to accomplish the goal of the law. The
case also used, albeit inappropriately, the "compelling state interest" test. After Victoriano , German
went back to the Gerona rule. Ebralinag then employed the "grave and immediate danger" test and
overruled the Gerona test. The fairly recent case of Iglesia ni Cristo went back to the " clear and present
danger" test in the maiden case of A merican Bible Society. Not surprisingly, all the cases which
employed the "clear and present danger" or "grave and immediate danger" test involved, in one form or
another, religious speech as this test is often used in cases on freedom of expression. On the other
hand, the Gerona and German cases set the rule that religious freedom will not prevail over established
institutions of society and law. Gerona, however, which was the authority cited by German has been
overruled by Ebralinag which employed the "grave and immediate danger" test . Victoriano was the only
case that employed the "compelling state interest" test, but as explained previously, the use of the test
was inappropriate to the facts of the case.
The case at bar does not involve speech as in A merican Bible Society, Ebralinag and Iglesia ni Cristo
where the "clear and present danger" and "grave and immediate danger" tests were appropriate as
speech has easily discernible or immediate effects. The Gerona and German doctrine, aside from having
been overruled, is not congruent with the benevolent neutrality approach, thus not appropriate in this
jurisdiction. Similar to Victoriano, the present case involves purely conduct arising from religious belief.
The "compelling state interest" test is proper where conduct is involved for the whole gamut of human
conduct has different effects on the state's interests: some effects may be immediate and short-term
while others delayed and far-reaching. A test that would protect the interests of the state in preventing
a substantive evil, whether immediate or delayed, is therefore necessary. However, not any interest of
the state would suffice to prevail over the right to religious freedom as this is a fundamental right that
enjoys a preferred position in the hierarchy of rights - "the most inalienable and sacred of all human
rights", in the words of Jefferson. This right is sacred for an invocation of the Free Exercise Clause is an
appeal to a higher sovereignty. The entire constitutional order of limited government is premised upon
an acknowledgment of such higher sovereignty, thus the Filipinos implore the "aid of Almighty God in
order to build a just and humane society and establish a government." As held in Sherbert, only the
gravest abuses, endangering paramount interests can limit this fundamental right. A mere balancing of
interests which balances a right with just a colorable state interest is therefore not appropriate. Instead,
only a compelling interest of the state can prevail over the fundamental right to religious liberty. The
test requires the state to carry a heavy burden, a compelling one, for to do otherwise would allow the
state to batter religion, especially the less powerful ones until they are destroyed. In determining which
shall prevail between the state's interest and religious liberty, reasonableness shall be the guide. The
"compelling state interest" serves the purpose of revering religious liberty while at the same time
affording protection to the paramount interests of the state. This was the test used in Sherbert which
involved conduct, i.e. refusal to work on Saturdays. In the end, the "compelling state interest" test, by
upholding the paramount interests of the state, seeks to protect the very state, without which, religious
liberty will not be preserved. [Emphases in the original. Underlining supplied.]
The Court's Position
In the case at bench, it is not within the province of the Court to determine whether the use of
contraceptives or one's participation in the support of modem reproductive health measures is moral
from a religious standpoint or whether the same is right or wrong according to one's dogma or belief.
For the Court has declared that matters dealing with "faith, practice, doctrine, form of worship,
ecclesiastical law, custom and rule of a church ... are unquestionably ecclesiastical matters which are

outside the province of the civil courts."220 The jurisdiction of the Court extends only to public and
secular morality. Whatever pronouncement the Court makes in the case at bench should be understood
only in this realm where it has authority. Stated otherwise, while the Court stands without authority to
rule on ecclesiastical matters, as vanguard of the Constitution, it does have authority to determine
whether the RH Law contravenes the guarantee of religious freedom.
At first blush, it appears that the RH Law recognizes and respects religion and religious beliefs and
convictions. It is replete with assurances the no one can be compelled to violate the tenets of his
religion or defy his religious convictions against his free will. Provisions in the RH Law respecting
religious freedom are the following:
1. The State recognizes and guarantees the human rights of all persons including their right to equality
and nondiscrimination of these rights, the right to sustainable human development, the right to health
which includes reproductive health, the right to education and information, and the right to choose and
make decisions for themselves in accordance with their religious convictions, ethics, cultural beliefs, and
the demands of responsible parenthood. [Section 2, Declaration of Policy]
2 . The State recognizes marriage as an inviolable social institution and the foundation of the family
which in turn is the foundation of the nation. Pursuant thereto, the State shall defend:
(a) The right of spouses to found a family in accordance with their religious convictions and the demands
of responsible parenthood." [Section 2, Declaration of Policy]
3. The State shall promote and provide information and access, without bias, to all methods of family
planning, including effective natural and modern methods which have been proven medically safe, legal,
non-abortifacient, and effective in accordance with scientific and evidence-based medical research
standards such as those registered and approved by the FDA for the poor and marginalized as identified
through the NHTS-PR and other government measures of identifying marginalization: Provided, That the
State shall also provide funding support to promote modern natural methods of family planning,
especially the Billings Ovulation Method, consistent with the needs of acceptors and their religious
convictions. [Section 3(e), Declaration of Policy]
4. The State shall promote programs that: (1) enable individuals and couples to have the number of
children they desire with due consideration to the health, particularly of women, and the resources
available and affordable to them and in accordance with existing laws, public morals and their religious
convictions. [Section 3CDJ
5. The State shall respect individuals' preferences and choice of family planning methods that are in
accordance with their religious convictions and cultural beliefs, taking into consideration the State's
obligations under various human rights instruments. [Section 3(h)]
6. Active participation by nongovernment organizations (NGOs) , women's and people's organizations,
civil society, faith-based organizations, the religious sector and communities is crucial to ensure that
reproductive health and population and development policies, plans, and programs will address the
priority needs of women, the poor, and the marginalized. [Section 3(i)]

7. Responsible parenthood refers to the will and ability of a parent to respond to the needs and
aspirations of the family and children. It is likewise a shared responsibility between parents to
determine and achieve the desired number of children, spacing and timing of their children according to
their own family life aspirations, taking into account psychological preparedness, health status,
sociocultural and economic concerns consistent with their religious convictions. [Section 4(v)]
(Emphases supplied)
While the Constitution prohibits abortion, laws were enacted allowing the use of contraceptives. To
some medical practitioners, however, the whole idea of using contraceptives is an anathema. Consistent
with the principle of benevolent neutrality, their beliefs should be respected.
The Establishment Clause
and Contraceptives
In the same breath that the establishment clause restricts what the government can do with religion, it
also limits what religious sects can or cannot do with the government. They can neither cause the
government to adopt their particular doctrines as policy for everyone, nor can they not cause the
government to restrict other groups. To do so, in simple terms, would cause the State to adhere to a
particular religion and, thus, establishing a state religion.
Consequently, the petitioners are misguided in their supposition that the State cannot enhance its
population control program through the RH Law simply because the promotion of contraceptive use is
contrary to their religious beliefs. Indeed, the State is not precluded to pursue its legitimate secular
objectives without being dictated upon by the policies of any one religion. One cannot refuse to pay his
taxes simply because it will cloud his conscience. The demarcation line between Church and State
demands that one render unto Caesar the things that are Caesar's and unto God the things that are
God's.221
The Free Exercise Clause and the Duty to Refer
While the RH Law, in espousing state policy to promote reproductive health manifestly respects diverse
religious beliefs in line with the Non-Establishment Clause, the same conclusion cannot be reached with
respect to Sections 7, 23 and 24 thereof. The said provisions commonly mandate that a hospital or a
medical practitioner to immediately refer a person seeking health care and services under the law to
another accessible healthcare provider despite their conscientious objections based on religious or
ethical beliefs.
In a situation where the free exercise of religion is allegedly burdened by government legislation or
practice, the compelling state interest test in line with the Court's espousal of the Doctrine of
Benevolent Neutrality in Escritor, finds application. In this case, the conscientious objector's claim to
religious freedom would warrant an exemption from obligations under the RH Law, unless the
government succeeds in demonstrating a more compelling state interest in the accomplishment of an
important secular objective. Necessarily so, the plea of conscientious objectors for exemption from the
RH Law deserves no less than strict scrutiny.

In applying the test, the first inquiry is whether a conscientious objector's right to religious freedom has
been burdened. As in Escritor, there is no doubt that an intense tug-of-war plagues a conscientious
objector. One side coaxes him into obedience to the law and the abandonment of his religious beliefs,
while the other entices him to a clean conscience yet under the pain of penalty. The scenario is an
illustration of the predicament of medical practitioners whose religious beliefs are incongruent with
what the RH Law promotes.
The Court is of the view that the obligation to refer imposed by the RH Law violates the religious belief
and conviction of a conscientious objector. Once the medical practitioner, against his will, refers a
patient seeking information on modem reproductive health products, services, procedures and
methods, his conscience is immediately burdened as he has been compelled to perform an act against
his beliefs. As Commissioner Joaquin A. Bernas (Commissioner Bernas) has written, "at the basis of the
free exercise clause is the respect for the inviolability of the human conscience.222
Though it has been said that the act of referral is an opt-out clause, it is, however, a false compromise
because it makes pro-life health providers complicit in the performance of an act that they find morally
repugnant or offensive. They cannot, in conscience, do indirectly what they cannot do directly. One may
not be the principal, but he is equally guilty if he abets the offensive act by indirect participation.
Moreover, the guarantee of religious freedom is necessarily intertwined with the right to free speech, it
being an externalization of one's thought and conscience. This in turn includes the right to be silent.
With the constitutional guarantee of religious freedom follows the protection that should be afforded to
individuals in communicating their beliefs to others as well as the protection for simply being silent. The
Bill of Rights guarantees the liberty of the individual to utter what is in his mind and the liberty not to
utter what is not in his mind.223 While the RH Law seeks to provide freedom of choice through informed
consent, freedom of choice guarantees the liberty of the religious conscience and prohibits any degree
of compulsion or burden, whether direct or indirect, in the practice of one's religion.224
In case of conflict between the religious beliefs and moral convictions of individuals, on one hand, and
the interest of the State, on the other, to provide access and information on reproductive health
products, services, procedures and methods to enable the people to determine the timing, number and
spacing of the birth of their children, the Court is of the strong view that the religious freedom of health
providers, whether public or private, should be accorded primacy. Accordingly, a conscientious objector
should be exempt from compliance with the mandates of the RH Law. If he would be compelled to act
contrary to his religious belief and conviction, it would be violative of "the principle of non-coercion"
enshrined in the constitutional right to free exercise of religion.
Interestingly, on April 24, 2013, Scotland's Inner House of the Court of Session, found in the case of
Doogan and Wood v. NHS Greater Glasgow and Clyde Health Board,225 that the midwives claiming to be
conscientious objectors under the provisions of Scotland's Abortion Act of 1967, could not be required
to delegate, supervise or support staff on their labor ward who were involved in abortions.226 The Inner
House stated "that if 'participation' were defined according to whether the person was taking part
'directly' or ' indirectly' this would actually mean more complexity and uncertainty."227
While the said case did not cover the act of referral, the applicable principle was the same - they could
not be forced to assist abortions if it would be against their conscience or will.

Institutional Health Providers

The same holds true with respect to non-maternity specialty hospitals and hospitals owned and
operated by a religious group and health care service providers. Considering that Section 24 of the RH
Law penalizes such institutions should they fail or refuse to comply with their duty to refer under
Section 7 and Section 23(a)(3), the Court deems that it must be struck down for being violative of the
freedom of religion. The same applies to Section 23(a)(l) and (a)(2) in relation to Section 24, considering
that in the dissemination of information regarding programs and services and in the performance of
reproductive health procedures, the religious freedom of health care service providers should be
respected.
In the case of Islamic Da'wah Council of the Philippines, Inc. v. Office of the Executive Secretary 228 it was
stressed:
Freedom of religion was accorded preferred status by the framers of our fundamental law. And this
Court has consistently affirmed this preferred status, well aware that it is "designed to protect the
broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to
profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and
with the common good."10
The Court is not oblivious to the view that penalties provided by law endeavour to ensure compliance.
Without set consequences for either an active violation or mere inaction, a law tends to be toothless
and ineffectual. Nonetheless, when what is bartered for an effective implementation of a law is a
constitutionally-protected right the Court firmly chooses to stamp its disapproval. The punishment of a
healthcare service provider, who fails and/or refuses to refer a patient to another, or who declines to
perform reproductive health procedure on a patient because incompatible religious beliefs, is a clear
inhibition of a constitutional guarantee which the Court cannot allow.
The Implementing Rules and Regulation (RH-IRR)
The last paragraph of Section 5.24 of the RH-IRR reads:
Provided, That skilled health professional such as provincial, city or municipal health officers, chiefs of
hospital, head nurses, supervising midwives, among others, who by virtue of their office are specifically
charged with the duty to implement the provisions of the RPRH Act and these Rules, cannot be
considered as conscientious objectors.
This is discriminatory and violative of the equal protection clause. The conscientious objection clause
should be equally protective of the religious belief of public health officers. There is no perceptible
distinction why they should not be considered exempt from the mandates of the law. The protection
accorded to other conscientious objectors should equally apply to all medical practitioners without
distinction whether they belong to the public or private sector. After all, the freedom to believe is
intrinsic in every individual and the protective robe that guarantees its free exercise is not taken off
even if one acquires employment in the government.
It should be stressed that intellectual liberty occupies a place inferior to none in the hierarchy of human
values. The mind must be free to think what it wills, whether in the secular or religious sphere, to give

expression to its beliefs by oral discourse or through the media and, thus, seek other candid views in
occasions or gatherings or in more permanent aggrupation. Embraced in such concept then are freedom
of religion, freedom of speech, of the press, assembly and petition, and freedom of association.229
The discriminatory provision is void not only because no such exception is stated in the RH Law itself but
also because it is violative of the equal protection clause in the Constitution. Quoting respondent
Lagman, if there is any conflict between the RH-IRR and the RH Law, the law must prevail.
Justice Mendoza:
I'll go to another point. The RH law .. .in your Comment- in-Intervention on page 52, you mentioned RH
Law is replete with provisions in upholding the freedom of religion and respecting religious convictions.
Earlier, you affirmed this with qualifications. Now, you have read, I presumed you have read the IRRImplementing Rules and Regulations of the RH Bill?
Congressman Lagman:
Yes, Your Honor, I have read but I have to admit, it's a long IRR and I have not thoroughly dissected the
nuances of the provisions.
Justice Mendoza:
I will read to you one provision. It's Section 5.24. This I cannot find in the RH Law. But in the IRR it says: "
.... skilled health professionals such as provincial, city or municipal health officers, chief of hospitals,
head nurses, supervising midwives, among others, who by virtue of their office are specifically charged
with the duty to implement the provisions of the RPRH Act and these Rules, cannot be considered as
conscientious objectors." Do you agree with this?
Congressman Lagman:
I will have to go over again the provisions, Your Honor.
Justice Mendoza:
In other words, public health officers in contrast to the private practitioners who can be conscientious
objectors, skilled health professionals cannot be considered conscientious objectors. Do you agree with
this? Is this not against the constitutional right to the religious belief?
Congressman Lagman:
Your Honor, if there is any conflict between the IRR and the law, the law must prevail.230
Compelling State Interest
The foregoing discussion then begets the question on whether the respondents, in defense of the
subject provisions, were able to: 1] demonstrate a more compelling state interest to restrain

conscientious objectors in their choice of services to render; and 2] discharge the burden of proof that
the obligatory character of the law is the least intrusive means to achieve the objectives of the law.
Unfortunately, a deep scrutiny of the respondents' submissions proved to be in vain. The OSG was
curiously silent in the establishment of a more compelling state interest that would rationalize the
curbing of a conscientious objector's right not to adhere to an action contrary to his religious
convictions. During the oral arguments, the OSG maintained the same silence and evasion. The
Transcripts of the Stenographic Notes disclose the following:
Justice De Castro:
Let's go back to the duty of the conscientious objector to refer. ..
Senior State Solicitor Hilbay:
Yes, Justice.
Justice De Castro:
... which you are discussing awhile ago with Justice Abad. What is the compelling State interest in
imposing this duty to refer to a conscientious objector which refuses to do so because of his religious
belief?
Senior State Solicitor Hilbay:
Ahh, Your Honor, ..
Justice De Castro:
What is the compelling State interest to impose this burden?
Senior State Solicitor Hilbay:
In the first place, Your Honor, I don't believe that the standard is a compelling State interest, this is an
ordinary health legislation involving professionals. This is not a free speech matter or a pure free
exercise matter. This is a regulation by the State of the relationship between medical doctors and their
patients.231
Resultantly, the Court finds no compelling state interest which would limit the free exercise clause of the
conscientious objectors, however few in number. Only the prevention of an immediate and grave
danger to the security and welfare of the community can justify the infringement of religious freedom. If
the government fails to show the seriousness and immediacy of the threat, State intrusion is
constitutionally unacceptable.232
Freedom of religion means more than just the freedom to believe. It also means the freedom to act or
not to act according to what one believes. And this freedom is violated when one is compelled to act
against one's belief or is prevented from acting according to one's belief.233

Apparently, in these cases, there is no immediate danger to the life or health of an individual in the
perceived scenario of the subject provisions. After all, a couple who plans the timing, number and
spacing of the birth of their children refers to a future event that is contingent on whether or not the
mother decides to adopt or use the information, product, method or supply given to her or whether she
even decides to become pregnant at all. On the other hand, the burden placed upon those who object
to contraceptive use is immediate and occurs the moment a patient seeks consultation on reproductive
health matters.
Moreover, granting that a compelling interest exists to justify the infringement of the conscientious
objector's religious freedom, the respondents have failed to demonstrate "the gravest abuses,
endangering paramount interests" which could limit or override a person's fundamental right to
religious freedom. Also, the respondents have not presented any government effort exerted to show
that the means it takes to achieve its legitimate state objective is the least intrusive means.234 Other
than the assertion that the act of referring would only be momentary, considering that the act of
referral by a conscientious objector is the very action being contested as violative of religious freedom,
it behooves the respondents to demonstrate that no other means can be undertaken by the State to
achieve its objective without violating the rights of the conscientious objector. The health concerns of
women may still be addressed by other practitioners who may perform reproductive health-related
procedures with open willingness and motivation. Suffice it to say, a person who is forced to perform an
act in utter reluctance deserves the protection of the Court as the last vanguard of constitutional
freedoms.
At any rate, there are other secular steps already taken by the Legislature to ensure that the right to
health is protected. Considering other legislations as they stand now, R.A . No. 4 729 or the
Contraceptive Act, R.A. No. 6365 or "The Population Act of the Philippines" and R.A. No. 9710, otherwise
known as "The Magna Carta of Women," amply cater to the needs of women in relation to health
services and programs. The pertinent provision of Magna Carta on comprehensive health services and
programs for women, in fact, reads:
Section 17. Women's Right to Health. - (a) Comprehensive Health Services. - The State shall, at all times,
provide for a comprehensive, culture-sensitive, and gender-responsive health services and programs
covering all stages of a woman's life cycle and which addresses the major causes of women's mortality
and morbidity: Provided, That in the provision for comprehensive health services, due respect shall be
accorded to women's religious convictions, the rights of the spouses to found a family in accordance
with their religious convictions, and the demands of responsible parenthood, and the right of women to
protection from hazardous drugs, devices, interventions, and substances.
Access to the following services shall be ensured:
(1) Maternal care to include pre- and post-natal services to address pregnancy and
infant health and nutrition;
(2) Promotion of breastfeeding;
(3) Responsible, ethical, legal, safe, and effective methods of family planning;

(4) Family and State collaboration in youth sexuality education and health services
without prejudice to the primary right and duty of parents to educate their children;
(5) Prevention and management of reproductive tract infections, including sexually
transmitted diseases, HIV, and AIDS;
(6) Prevention and management of reproductive tract cancers like breast and cervical
cancers, and other gynecological conditions and disorders;
(7) Prevention of abortion and management of pregnancy-related complications;
(8) In cases of violence against women and children, women and children victims and
survivors shall be provided with comprehensive health services that include
psychosocial, therapeutic, medical, and legal interventions and assistance towards
healing, recovery, and empowerment;
(9) Prevention and management of infertility and sexual dysfunction pursuant to ethical
norms and medical standards;
(10) Care of the elderly women beyond their child-bearing years; and
(11) Management, treatment, and intervention of mental health problems of women
and girls. In addition, healthy lifestyle activities are encouraged and promoted through
programs and projects as strategies in the prevention of diseases.
(b) Comprehensive Health Information and Education. - The State shall provide women in all sectors
with appropriate, timely, complete, and accurate information and education on all the above-stated
aspects of women's health in government education and training programs, with due regard to the
following:
(1) The natural and primary right and duty of parents in the rearing of the youth and the
development of moral character and the right of children to be brought up in an
atmosphere of morality and rectitude for the enrichment and strengthening of
character;
(2) The formation of a person's sexuality that affirms human dignity; and
(3) Ethical, legal, safe, and effective family planning methods including fertility
awareness.
As an afterthought, Asst. Solicitor General Hilbay eventually replied that the compelling state interest
was "Fifteen maternal deaths per day, hundreds of thousands of unintended pregnancies, lives changed,
x x x."235 He, however, failed to substantiate this point by concrete facts and figures from reputable
sources.
The undisputed fact, however, is that the World Health Organization reported that the Filipino maternal
mortality rate dropped to 48 percent from 1990 to 2008, 236 although there was still no RH Law at that

time. Despite such revelation, the proponents still insist that such number of maternal deaths constitute
a compelling state interest.
Granting that there are still deficiencies and flaws in the delivery of social healthcare programs for
Filipino women, they could not be solved by a measure that puts an unwarrantable stranglehold on
religious beliefs in exchange for blind conformity.
Exception: Life Threatening Cases
All this notwithstanding, the Court properly recognizes a valid exception set forth in the law. While
generally healthcare service providers cannot be forced to render reproductive health care procedures if
doing it would contravene their religious beliefs, an exception must be made in life-threatening cases
that require the performance of emergency procedures. In these situations, the right to life of the
mother should be given preference, considering that a referral by a medical practitioner would amount
to a denial of service, resulting to unnecessarily placing the life of a mother in grave danger. Thus, during
the oral arguments, Atty. Liban, representing CFC, manifested: "the forced referral clause that we are
objecting on grounds of violation of freedom of religion does not contemplate an emergency."237
In a conflict situation between the life of the mother and the life of a child, the doctor is morally obliged
always to try to save both lives. If, however, it is impossible, the resulting death to one should not be
deliberate. Atty. Noche explained:
Principle of Double-Effect. - May we please remind the principal author of the RH Bill in the House of
Representatives of the principle of double-effect wherein intentional harm on the life of either the
mother of the child is never justified to bring about a "good" effect. In a conflict situation between the
life of the child and the life of the mother, the doctor is morally obliged always to try to save both lives.
However, he can act in favor of one (not necessarily the mother) when it is medically impossible to save
both, provided that no direct harm is intended to the other. If the above principles are observed, the
loss of the child's life or the mother's life is not intentional and, therefore, unavoidable. Hence, the
doctor would not be guilty of abortion or murder. The mother is never pitted against the child because
both their lives are equally valuable.238
Accordingly, if it is necessary to save the life of a mother, procedures endangering the life of the child
may be resorted to even if is against the religious sentiments of the medical practitioner. As quoted
above, whatever burden imposed upon a medical practitioner in this case would have been more than
justified considering the life he would be able to save.
Family Planning Seminars
Anent the requirement imposed under Section 15239 as a condition for the issuance of a marriage
license, the Court finds the same to be a reasonable exercise of police power by the government. A
cursory reading of the assailed provision bares that the religious freedom of the petitioners is not at all
violated. All the law requires is for would-be spouses to attend a seminar on parenthood, family
planning breastfeeding and infant nutrition. It does not even mandate the type of family planning
methods to be included in the seminar, whether they be natural or artificial. As correctly noted by the
OSG, those who receive any information during their attendance in the required seminars are not
compelled to accept the information given to them, are completely free to reject the information they

find unacceptable, and retain the freedom to decide on matters of family life without the intervention of
the State.
4-The Family and the Right to Privacy
Petitioner CFC assails the RH Law because Section 23(a) (2) (i) thereof violates the provisions of the
Constitution by intruding into marital privacy and autonomy. It argues that it cultivates disunity and
fosters animosity in the family rather than promote its solidarity and total development.240
The Court cannot but agree.
The 1987 Constitution is replete with provisions strengthening the family as it is the basic social
institution. In fact, one article, Article XV, is devoted entirely to the family.
ARTICLE
THE FAMILY

XV

Section 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall
strengthen its solidarity and actively promote its total development.
Section 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be
protected by the State.
Section 3. The State shall defend:
The right of spouses to found a family in accordance with their religious convictions and the demands of
responsible parenthood;
The right of children to assistance, including proper care and nutrition, and special protection from all
forms of neglect, abuse, cruelty, exploitation and other conditions prejudicial to their development;
The right of the family to a family living wage and income; and
The right of families or family assoc1at1ons to participate in the planning and implementation of policies
and programs that affect them.
In this case, the RH Law, in its not-so-hidden desire to control population growth, contains provisions
which tend to wreck the family as a solid social institution. It bars the husband and/or the father from
participating in the decision making process regarding their common future progeny. It likewise deprives
the parents of their authority over their minor daughter simply because she is already a parent or had
suffered a miscarriage.
The Family and Spousal Consent
Section 23(a) (2) (i) of the RH Law states:
The following acts are prohibited:

(a) Any health care service provider, whether public or private, who shall: ...
(2) refuse to perform legal and medically-safe reproductive health procedures on any person of legal age
on the ground of lack of consent or authorization of the following persons in the following instances:
(i) Spousal consent in case of married persons: provided, That in case of disagreement, the decision of
the one undergoing the procedures shall prevail. [Emphasis supplied]
The above provision refers to reproductive health procedures like tubal litigation and vasectomy which,
by their very nature, should require mutual consent and decision between the husband and the wife as
they affect issues intimately related to the founding of a family. Section 3, Art. XV of the Constitution
espouses that the State shall defend the "right of the spouses to found a family." One person cannot
found a family. The right, therefore, is shared by both spouses. In the same Section 3, their right "to
participate in the planning and implementation of policies and programs that affect them " is equally
recognized.
The RH Law cannot be allowed to infringe upon this mutual decision-making. By giving absolute
authority to the spouse who would undergo a procedure, and barring the other spouse from
participating in the decision would drive a wedge between the husband and wife, possibly result in
bitter animosity, and endanger the marriage and the family, all for the sake of reducing the population.
This would be a marked departure from the policy of the State to protect marriage as an inviolable social
institution.241
Decision-making involving a reproductive health procedure is a private matter which belongs to the
couple, not just one of them. Any decision they would reach would affect their future as a family
because the size of the family or the number of their children significantly matters. The decision
whether or not to undergo the procedure belongs exclusively to, and shared by, both spouses as one
cohesive unit as they chart their own destiny. It is a constitutionally guaranteed private right. Unless it
prejudices the State, which has not shown any compelling interest, the State should see to it that they
chart their destiny together as one family.
As highlighted by Justice Leonardo-De Castro, Section 19( c) of R.A. No. 9710, otherwise known as the
"Magna Carta for Women," provides that women shall have equal rights in all matters relating to
marriage and family relations, including the joint decision on the number and spacing of their children.
Indeed, responsible parenthood, as Section 3(v) of the RH Law states, is a shared responsibility between
parents. Section 23(a)(2)(i) of the RH Law should not be allowed to betray the constitutional mandate to
protect and strengthen the family by giving to only one spouse the absolute authority to decide whether
to undergo reproductive health procedure.242
The right to chart their own destiny together falls within the protected zone of marital privacy and such
state intervention would encroach into the zones of spousal privacy guaranteed by the Constitution. In
our jurisdiction, the right to privacy was first recognized in Marje v. Mutuc,243 where the Court, speaking
through Chief Justice Fernando, held that "the right to privacy as such is accorded recognition
independently of its identification with liberty; in itself, it is fully deserving of constitutional
protection."244 Marje adopted the ruling of the US Supreme Court in Griswold v. Connecticut,245 where
Justice William O. Douglas wrote:

We deal with a right of privacy older than the Bill of Rights -older than our political parties, older than
our school system. Marriage is a coming together for better or for worse, hopefully enduring, and
intimate to the degree of being sacred. It is an association that promotes a way of life, not causes; a
harmony in living, not political faiths; a bilateral loyalty, not commercial or social projects. Yet it is an
association for as noble a purpose as any involved in our prior decisions.
Ironically, Griswold invalidated a Connecticut statute which made the use of contraceptives a criminal
offense on the ground of its amounting to an unconstitutional invasion of the right to privacy of married
persons. Nevertheless, it recognized the zone of privacy rightfully enjoyed by couples. Justice Douglas in
Grisworld wrote that "specific guarantees in the Bill of Rights have penumbras, formed by emanations
from those guarantees that help give them life and substance. Various guarantees create zones of
privacy."246
At any rate, in case of conflict between the couple, the courts will decide.
The Family and Parental Consent
Equally deplorable is the debarment of parental consent in cases where the minor, who will be
undergoing a procedure, is already a parent or has had a miscarriage. Section 7 of the RH law provides:
SEC. 7. Access to Family Planning. x x x.
No person shall be denied information and access to family planning services, whether natural or
artificial: Provided, That minors will not be allowed access to modern methods of family planning
without written consent from their parents or guardian/s except when the minor is already a parent or
has had a miscarriage.
There can be no other interpretation of this provision except that when a minor is already a parent or
has had a miscarriage, the parents are excluded from the decision making process of the minor with
regard to family planning. Even if she is not yet emancipated, the parental authority is already cut off
just because there is a need to tame population growth.
It is precisely in such situations when a minor parent needs the comfort, care, advice, and guidance of
her own parents. The State cannot replace her natural mother and father when it comes to providing
her needs and comfort. To say that their consent is no longer relevant is clearly anti-family. It does not
promote unity in the family. It is an affront to the constitutional mandate to protect and strengthen the
family as an inviolable social institution.
More alarmingly, it disregards and disobeys the constitutional mandate that "the natural and primary
right and duty of parents in the rearing of the youth for civic efficiency and the development of moral
character shall receive the support of the Government."247 In this regard, Commissioner Bernas wrote:
The 1987 provision has added the adjective "primary" to modify the right of parents. It imports the
assertion that the right of parents is superior to that of the State.248 [Emphases supplied]
To insist on a rule that interferes with the right of parents to exercise parental control over their minorchild or the right of the spouses to mutually decide on matters which very well affect the very purpose

of marriage, that is, the establishment of conjugal and family life, would result in the violation of one's
privacy with respect to his family. It would be dismissive of the unique and strongly-held Filipino
tradition of maintaining close family ties and violative of the recognition that the State affords couples
entering into the special contract of marriage to as one unit in forming the foundation of the family and
society.
The State cannot, without a compelling state interest, take over the role of parents in the care and
custody of a minor child, whether or not the latter is already a parent or has had a miscarriage. Only a
compelling state interest can justify a state substitution of their parental authority.
First Exception: Access to Information
Whether with respect to the minor referred to under the exception provided in the second paragraph of
Section 7 or with respect to the consenting spouse under Section 23(a)(2)(i), a distinction must be made.
There must be a differentiation between access to information about family planning services, on one
hand, and access to the reproductive health procedures and modern family planning methods
themselves, on the other. Insofar as access to information is concerned, the Court finds no
constitutional objection to the acquisition of information by the minor referred to under the exception
in the second paragraph of Section 7 that would enable her to take proper care of her own body and
that of her unborn child. After all, Section 12, Article II of the Constitution mandates the State to protect
both the life of the mother as that of the unborn child. Considering that information to enable a person
to make informed decisions is essential in the protection and maintenance of ones' health, access to
such information with respect to reproductive health must be allowed. In this situation, the fear that
parents might be deprived of their parental control is unfounded because they are not prohibited to
exercise parental guidance and control over their minor child and assist her in deciding whether to
accept or reject the information received.
Second Exception: Life Threatening Cases
As in the case of the conscientious objector, an exception must be made in life-threatening cases that
require the performance of emergency procedures. In such cases, the life of the minor who has already
suffered a miscarriage and that of the spouse should not be put at grave risk simply for lack of consent.
It should be emphasized that no person should be denied the appropriate medical care urgently needed
to preserve the primordial right, that is, the right to life.
In this connection, the second sentence of Section 23(a)(2)(ii)249 should be struck down. By effectively
limiting the requirement of parental consent to "only in elective surgical procedures," it denies the
parents their right of parental authority in cases where what is involved are "non-surgical procedures."
Save for the two exceptions discussed above, and in the case of an abused child as provided in the first
sentence of Section 23(a)(2)(ii), the parents should not be deprived of their constitutional right of
parental authority. To deny them of this right would be an affront to the constitutional mandate to
protect and strengthen the family.
5 - Academic Freedom
It is asserted that Section 14 of the RH Law, in relation to Section 24 thereof, mandating the teaching of
Age-and Development-Appropriate Reproductive Health Education under threat of fine and/or

imprisonment violates the principle of academic freedom . According to the petitioners, these provisions
effectively force educational institutions to teach reproductive health education even if they believe
that the same is not suitable to be taught to their students.250 Citing various studies conducted in the
United States and statistical data gathered in the country, the petitioners aver that the prevalence of
contraceptives has led to an increase of out-of-wedlock births; divorce and breakdown of families; the
acceptance of abortion and euthanasia; the "feminization of poverty"; the aging of society; and
promotion of promiscuity among the youth.251
At this point, suffice it to state that any attack on the validity of Section 14 of the RH Law is premature
because the Department of Education, Culture and Sports has yet to formulate a curriculum on ageappropriate reproductive health education. One can only speculate on the content, manner and
medium of instruction that will be used to educate the adolescents and whether they will contradict the
religious beliefs of the petitioners and validate their apprehensions. Thus, considering the premature
nature of this particular issue, the Court declines to rule on its constitutionality or validity.
At any rate, Section 12, Article II of the 1987 Constitution provides that the natural and primary right
and duty of parents in the rearing of the youth for civic efficiency and development of moral character
shall receive the support of the Government. Like the 1973 Constitution and the 1935 Constitution, the
1987 Constitution affirms the State recognition of the invaluable role of parents in preparing the youth
to become productive members of society. Notably, it places more importance on the role of parents in
the development of their children by recognizing that said role shall be "primary," that is, that the right
of parents in upbringing the youth is superior to that of the State.252
It is also the inherent right of the State to act as parens patriae to aid parents in the moral development
of the youth. Indeed, the Constitution makes mention of the importance of developing the youth and
their important role in nation building.253 Considering that Section 14 provides not only for the ageappropriate-reproductive health education, but also for values formation; the development of
knowledge and skills in self-protection against discrimination; sexual abuse and violence against women
and children and other forms of gender based violence and teen pregnancy; physical, social and
emotional changes in adolescents; women's rights and children's rights; responsible teenage behavior;
gender and development; and responsible parenthood, and that Rule 10, Section 11.01 of the RH-IRR
and Section 4(t) of the RH Law itself provides for the teaching of responsible teenage behavior, gender
sensitivity and physical and emotional changes among adolescents - the Court finds that the legal
mandate provided under the assailed provision supplements, rather than supplants, the rights and
duties of the parents in the moral development of their children.
Furthermore, as Section 14 also mandates that the mandatory reproductive health education program
shall be developed in conjunction with parent-teacher-community associations, school officials and
other interest groups, it could very well be said that it will be in line with the religious beliefs of the
petitioners. By imposing such a condition, it becomes apparent that the petitioners' contention that
Section 14 violates Article XV, Section 3(1) of the Constitution is without merit.254
While the Court notes the possibility that educators might raise their objection to their participation in
the reproductive health education program provided under Section 14 of the RH Law on the ground that
the same violates their religious beliefs, the Court reserves its judgment should an actual case be filed
before it.
6 - Due Process

The petitioners contend that the RH Law suffers from vagueness and, thus violates the due process
clause of the Constitution. According to them, Section 23 (a)(l) mentions a "private health service
provider" among those who may be held punishable but does not define who is a "private health care
service provider." They argue that confusion further results since Section 7 only makes reference to a
"private health care institution."
The petitioners also point out that Section 7 of the assailed legislation exempts hospitals operated by
religious groups from rendering reproductive health service and modern family planning methods. It is
unclear, however, if these institutions are also exempt from giving reproductive health information
under Section 23(a)(l), or from rendering reproductive health procedures under Section 23(a)(2).
Finally, it is averred that the RH Law punishes the withholding, restricting and providing of incorrect
information, but at the same time fails to define "incorrect information."
The arguments fail to persuade.
A statute or act suffers from the defect of vagueness when it lacks comprehensible standards that men
of common intelligence must necessarily guess its meaning and differ as to its application. It is
repugnant to the Constitution in two respects: (1) it violates due process for failure to accord persons,
especially the parties targeted by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers
unbridled discretion in carrying out its provisions and becomes an arbitrary flexing of the Government
muscle.255 Moreover, in determining whether the words used in a statute are vague, words must not
only be taken in accordance with their plain meaning alone, but also in relation to other parts of the
statute. It is a rule that every part of the statute must be interpreted with reference to the context, that
is, every part of it must be construed together with the other parts and kept subservient to the general
intent of the whole enactment.256
As correctly noted by the OSG, in determining the definition of "private health care service provider,"
reference must be made to Section 4(n) of the RH Law which defines a "public health service provider,"
viz:
(n) Public health care service provider refers to: (1) public health care institution, which is duly licensed
and accredited and devoted primarily to the maintenance and operation of facilities for health
promotion, disease prevention, diagnosis, treatment and care of individuals suffering from illness,
disease, injury, disability or deformity, or in need of obstetrical or other medical and nursing care; (2)
public health care professional, who is a doctor of medicine, a nurse or a midvvife; (3) public health
worker engaged in the delivery of health care services; or (4) barangay health worker who has
undergone training programs under any accredited government and NGO and who voluntarily renders
primarily health care services in the community after having been accredited to function as such by the
local health board in accordance with the guidelines promulgated by the Department of Health (DOH) .
Further, the use of the term "private health care institution" in Section 7 of the law, instead of "private
health care service provider," should not be a cause of confusion for the obvious reason that they are
used synonymously.
The Court need not belabor the issue of whether the right to be exempt from being obligated to render
reproductive health service and modem family planning methods, includes exemption from being

obligated to give reproductive health information and to render reproductive health procedures. Clearly,
subject to the qualifications and exemptions earlier discussed, the right to be exempt from being
obligated to render reproductive health service and modem family planning methods, necessarily
includes exemption from being obligated to give reproductive health information and to render
reproductive health procedures. The terms "service" and "methods" are broad enough to include the
providing of information and the rendering of medical procedures.
The same can be said with respect to the contention that the RH Law punishes health care service
providers who intentionally withhold, restrict and provide incorrect information regarding reproductive
health programs and services. For ready reference, the assailed provision is hereby quoted as follows:
SEC. 23. Prohibited Acts. - The following acts are prohibited:
(a) Any health care service provider, whether public or private, who shall:
(1) Knowingly withhold information or restrict the dissemination thereof, and/ or intentionally provide
incorrect information regarding programs and services on reproductive health including the right to
informed choice and access to a full range of legal, medically-safe, non-abortifacient and effective family
planning methods;
From its plain meaning, the word "incorrect" here denotes failing to agree with a copy or model or with
established rules; inaccurate, faulty; failing to agree with the requirements of duty, morality or
propriety; and failing to coincide with the truth. 257 On the other hand, the word "knowingly" means
with awareness or deliberateness that is intentional.258 Used together in relation to Section 23(a)(l), they
connote a sense of malice and ill motive to mislead or misrepresent the public as to the nature and
effect of programs and services on reproductive health. Public health and safety demand that health
care service providers give their honest and correct medical information in accordance with what is
acceptable in medical practice. While health care service providers are not barred from expressing their
own personal opinions regarding the programs and services on reproductive health, their right must be
tempered with the need to provide public health and safety. The public deserves no less.
7-Egual Protection
The petitioners also claim that the RH Law violates the equal protection clause under the Constitution as
it discriminates against the poor because it makes them the primary target of the government program
that promotes contraceptive use . They argue that, rather than promoting reproductive health among
the poor, the RH Law introduces contraceptives that would effectively reduce the number of the poor.
Their bases are the various provisions in the RH Law dealing with the poor, especially those mentioned
in the guiding principles259 and definition of terms260 of the law.
They add that the exclusion of private educational institutions from the mandatory reproductive health
education program imposed by the RH Law renders it unconstitutional.
In Biraogo v. Philippine Truth Commission,261 the Court had the occasion to expound on the concept of
equal protection. Thus:

One of the basic principles on which this government was founded is that of the equality of right which
is embodied in Section 1, Article III of the 1987 Constitution. The equal protection of the laws is
embraced in the concept of due process, as every unfair discrimination offends the requirements of
justice and fair play. It has been embodied in a separate clause, however, to provide for a more specific
guaranty against any form of undue favoritism or hostility from the government. Arbitrariness in general
may be challenged on the basis of the due process clause. But if the particular act assailed partakes of an
unwarranted partiality or prejudice, the sharper weapon to cut it down is the equal protection clause.
"According to a long line of decisions, equal protection simply requires that all persons or things
similarly situated should be treated alike, both as to rights conferred and responsibilities imposed." It
"requires public bodies and inst itutions to treat similarly situated individuals in a similar manner." "The
purpose of the equal protection clause is to secure every person within a state's jurisdiction against
intentional and arbitrary discrimination, whether occasioned by the express terms of a statue or by its
improper execution through the state's duly constituted authorities." "In other words, the concept of
equal justice under the law requires the state to govern impartially, and it may not draw distinctions
between individuals solely on differences that are irrelevant to a legitimate governmental objective."
The equal protection clause is aimed at all official state actions, not just those of the legislature. Its
inhibitions cover all the departments of the government including the political and executive
departments, and extend to all actions of a state denying equal protection of the laws, through
whatever agency or whatever guise is taken.
It, however, does not require the universal application of the laws to all persons or things without
distinction. What it simply requires is equality among equals as determined according to a valid
classification. Indeed, the equal protection clause permits classification. Such classification, however, to
be valid must pass the test of reasonableness. The test has four requisites: (1) The classification rests on
substantial distinctions; (2) It is germane to the purpose of the law; (3) It is not limited to existing
conditions only; and (4) It applies equally to all members of the same class. "Superficial differences do
not make for a valid classification."
For a classification to meet the requirements of constitutionality, it must include or embrace all persons
who naturally belong to the class. "The classification will be regarded as invalid if all the members of the
class are not similarly treated, both as to rights conferred and obligations imposed. It is not necessary
that the classification be made with absolute symmetry, in the sense that the members of the class
should possess the same characteristics in equal degree. Substantial similarity will suffice; and as long as
this is achieved, all those covered by the classification are to be treated equally. The mere fact that an
individual belonging to a class differs from the other members, as long as that class is substantially
distinguishable from all others, does not justify the non-application of the law to him."
The classification must not be based on existing circumstances only, or so constituted as to preclude
addition to the number included in the class. It must be of such a nature as to embrace all those who
may thereafter be in similar circumstances and conditions. It must not leave out or "underinclude" those
that should otherwise fall into a certain classification. [Emphases supplied; citations excluded]
To provide that the poor are to be given priority in the government's reproductive health care program
is not a violation of the equal protection clause. In fact, it is pursuant to Section 11, Article XIII of the
Constitution which recognizes the distinct necessity to address the needs of the underprivileged by
providing that they be given priority in addressing the health development of the people. Thus:

Section 11. The State shall adopt an integrated and comprehensive approach to health development
which shall endeavor to make essential goods, health and other social services available to all the people
at affordable cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled,
women, and children. The State shall endeavor to provide free medical care to paupers.
It should be noted that Section 7 of the RH Law prioritizes poor and marginalized couples who are
suffering from fertility issues and desire to have children. There is, therefore, no merit to the contention
that the RH Law only seeks to target the poor to reduce their number. While the RH Law admits the use
of contraceptives, it does not, as elucidated above, sanction abortion. As Section 3(1) explains, the
"promotion and/or stabilization of the population growth rate is incidental to the advancement of
reproductive health."
Moreover, the RH Law does not prescribe the number of children a couple may have and does not
impose conditions upon couples who intend to have children. While the petitioners surmise that the
assailed law seeks to charge couples with the duty to have children only if they would raise them in a
truly humane way, a deeper look into its provisions shows that what the law seeks to do is to simply
provide priority to the poor in the implementation of government programs to promote basic
reproductive health care.
With respect to the exclusion of private educational institutions from the mandatory reproductive
health education program under Section 14, suffice it to state that the mere fact that the children of
those who are less fortunate attend public educational institutions does not amount to substantial
distinction sufficient to annul the assailed provision. On the other hand, substantial distinction rests
between public educational institutions and private educational institutions, particularly because there
is a need to recognize the academic freedom of private educational institutions especially with respect
to religious instruction and to consider their sensitivity towards the teaching of reproductive health
education.
8-Involuntary Servitude
The petitioners also aver that the RH Law is constitutionally infirm as it violates the constitutional
prohibition against involuntary servitude. They posit that Section 17 of the assailed legislation requiring
private and non-government health care service providers to render forty-eight (48) hours of pro bono
reproductive health services, actually amounts to involuntary servitude because it requires medical
practitioners to perform acts against their will.262
The OSG counters that the rendition of pro bono services envisioned in Section 17 can hardly be
considered as forced labor analogous to slavery, as reproductive health care service providers have the
discretion as to the manner and time of giving pro bono services. Moreover, the OSG points out that the
imposition is within the powers of the government, the accreditation of medical practitioners with
PhilHealth being a privilege and not a right.
The point of the OSG is well-taken.
It should first be mentioned that the practice of medicine is undeniably imbued with public interest that
it is both a power and a duty of the State to control and regulate it in order to protect and promote the
public welfare. Like the legal profession, the practice of medicine is not a right but a privileged burdened

with conditions as it directly involves the very lives of the people. A fortiori, this power includes the
power of Congress263 to prescribe the qualifications for the practice of professions or trades which affect
the public welfare, the public health, the public morals, and the public safety; and to regulate or control
such professions or trades, even to the point of revoking such right altogether.264
Moreover, as some petitioners put it, the notion of involuntary servitude connotes the presence of
force, threats, intimidation or other similar means of coercion and compulsion.265 A reading of the
assailed provision, however, reveals that it only encourages private and non- government reproductive
healthcare service providers to render pro bono service. Other than non-accreditation with PhilHealth,
no penalty is imposed should they choose to do otherwise. Private and non-government reproductive
healthcare service providers also enjoy the liberty to choose which kind of health service they wish to
provide, when, where and how to provide it or whether to provide it all. Clearly, therefore, no
compulsion, force or threat is made upon them to render pro bono service against their will. While the
rendering of such service was made a prerequisite to accreditation with PhilHealth, the Court does not
consider the same to be an unreasonable burden, but rather, a necessary incentive imposed by
Congress in the furtherance of a perceived legitimate state interest.
Consistent with what the Court had earlier discussed, however, it should be emphasized that
conscientious objectors are exempt from this provision as long as their religious beliefs and convictions
do not allow them to render reproductive health service, pro bona or otherwise.
9-Delegation of Authority to the FDA
The petitioners likewise question the delegation by Congress to the FDA of the power to determine
whether or not a supply or product is to be included in the Essential Drugs List (EDL).266
The Court finds nothing wrong with the delegation. The FDA does not only have the power but also the
competency to evaluate, register and cover health services and methods. It is the only government
entity empowered to render such services and highly proficient to do so. It should be understood that
health services and methods fall under the gamut of terms that are associated with what is ordinarily
understood as "health products."
In this connection, Section 4 of R.A. No. 3 720, as amended by R.A. No. 9711 reads:
SEC. 4. To carry out the provisions of this Act, there is hereby created an office to be called the Food and
Drug Administration (FDA) in the Department of Health (DOH). Said Administration shall be under the
Office of the Secretary and shall have the following functions, powers and duties:
"(a) To administer the effective implementation of this Act and of the rules and regulations
issued pursuant to the same;
"(b) To assume primary jurisdiction in the collection of samples of health products;
"(c) To analyze and inspect health products in connection with the implementation of this Act;

"(d) To establish analytical data to serve as basis for the preparation of health products
standards, and to recommend standards of identity, purity, safety, efficacy, quality and fill of
container;
"(e) To issue certificates of compliance with technical requirements to serve as basis for the
issuance of appropriate authorization and spot-check for compliance with regulations regarding
operation of manufacturers, importers, exporters, distributors, wholesalers, drug outlets, and
other establishments and facilities of health products, as determined by the FDA;
"x x x
"(h) To conduct appropriate tests on all applicable health products prior to the issuance of
appropriate authorizations to ensure safety, efficacy, purity, and quality;
"(i) To require all manufacturers, traders, distributors, importers, exporters, wholesalers,
retailers, consumers, and non-consumer users of health products to report to the FDA any
incident that reasonably indicates that said product has caused or contributed to the death,
serious illness or serious injury to a consumer, a patient, or any person;
"(j) To issue cease and desist orders motu propio or upon verified complaint for health products,
whether or not registered with the FDA Provided, That for registered health products, the cease
and desist order is valid for thirty (30) days and may be extended for sixty ( 60) days only after
due process has been observed;
"(k) After due process, to order the ban, recall, and/or withdrawal of any health product found
to have caused death, serious illness or serious injury to a consumer or patient, or is found to be
imminently injurious, unsafe, dangerous, or grossly deceptive, and to require all concerned to
implement the risk management plan which is a requirement for the issuance of the appropriate
authorization;
x x x.
As can be gleaned from the above, the functions, powers and duties of the FDA are specific to enable
the agency to carry out the mandates of the law. Being the country's premiere and sole agency that
ensures the safety of food and medicines available to the public, the FDA was equipped with the
necessary powers and functions to make it effective. Pursuant to the principle of necessary implication,
the mandate by Congress to the FDA to ensure public health and safety by permitting only food and
medicines that are safe includes "service" and "methods." From the declared policy of the RH Law, it is
clear that Congress intended that the public be given only those medicines that are proven medically
safe, legal, non-abortifacient, and effective in accordance with scientific and evidence-based medical
research standards. The philosophy behind the permitted delegation was explained in Echagaray v.
Secretary of Justice,267 as follows:
The reason is the increasing complexity of the task of the government and the growing inability of the
legislature to cope directly with the many problems demanding its attention. The growth of society has
ramified its activities and created peculiar and sophisticated problems that the legislature cannot be
expected reasonably to comprehend. Specialization even in legislation has become necessary. To many

of the problems attendant upon present day undertakings, the legislature may not have the
competence, let alone the interest and the time, to provide the required direct and efficacious, not to
say specific solutions.
10- Autonomy of Local Governments and the Autonomous Region
of Muslim Mindanao (ARMM)
As for the autonomy of local governments, the petitioners claim that the RH Law infringes upon the
powers devolved to local government units (LGUs) under Section 17 of the Local Government Code. Said
Section 17 vested upon the LGUs the duties and functions pertaining to the delivery of basic services and
facilities, as follows:
SECTION 17. Basic Services and Facilities.
(a) Local government units shall endeavor to be self-reliant and shall continue exercising the
powers and discharging the duties and functions currently vested upon them. They shall also
discharge the functions and responsibilities of national agencies and offices devolved to them
pursuant to this Code. Local government units shall likewise exercise such other powers and
discharge such other functions and responsibilities as are necessary, appropriate, or incidental
to efficient and effective provision of the basic services and facilities enumerated herein.
(b) Such basic services and facilities include, but are not limited to, x x x.
While the aforementioned provision charges the LGUs to take on the functions and
responsibilities that have already been devolved upon them from the national agencies on the
aspect of providing for basic services and facilities in their respective jurisdictions, paragraph (c)
of the same provision provides a categorical exception of cases involving nationally-funded
projects, facilities, programs and services.268Thus:
(c) Notwithstanding the provisions of subsection (b) hereof, public works and infrastructure
projects and other facilities, programs and services funded by the National Government under
the annual General Appropriations Act, other special laws, pertinent executive orders, and those
wholly or partially funded from foreign sources, are not covered under this Section, except in
those cases where the local government unit concerned is duly designated as the implementing
agency for such projects, facilities, programs and services. [Emphases supplied]
The essence of this express reservation of power by the national government is that, unless an LGU is
particularly designated as the implementing agency, it has no power over a program for which funding
has been provided by the national government under the annual general appropriations act, even if the
program involves the delivery of basic services within the jurisdiction of the LGU.269 A complete
relinquishment of central government powers on the matter of providing basic facilities and services
cannot be implied as the Local Government Code itself weighs against it.270
In this case, a reading of the RH Law clearly shows that whether it pertains to the establishment of
health care facilities,271 the hiring of skilled health professionals,272 or the training of barangay health
workers,273 it will be the national government that will provide for the funding of its implementation.

Local autonomy is not absolute. The national government still has the say when it comes to national
priority programs which the local government is called upon to implement like the RH Law.
Moreover, from the use of the word "endeavor," the LG Us are merely encouraged to provide these
services. There is nothing in the wording of the law which can be construed as making the availability of
these services mandatory for the LGUs. For said reason, it cannot be said that the RH Law amounts to an
undue encroachment by the national government upon the autonomy enjoyed by the local
governments.
The ARMM
The fact that the RH Law does not intrude in the autonomy of local governments can be equally applied
to the ARMM. The RH Law does not infringe upon its autonomy. Moreover, Article III, Sections 6, 10 and
11 of R.A. No. 9054, or the organic act of the ARMM, alluded to by petitioner Tillah to justify the
exemption of the operation of the RH Law in the autonomous region, refer to the policy statements for
the guidance of the regional government. These provisions relied upon by the petitioners simply
delineate the powers that may be exercised by the regional government, which can, in no manner, be
characterized as an abdication by the State of its power to enact legislation that would benefit the
general welfare. After all, despite the veritable autonomy granted the ARMM, the Constitution and the
supporting jurisprudence, as they now stand, reject the notion of imperium et imperio in the
relationship between the national and the regional governments.274 Except for the express and implied
limitations imposed on it by the Constitution, Congress cannot be restricted to exercise its inherent and
plenary power to legislate on all subjects which extends to all matters of general concern or common
interest.275
11 - Natural Law
With respect to the argument that the RH Law violates natural law,276 suffice it to say that the Court
does not duly recognize it as a legal basis for upholding or invalidating a law. Our only guidepost is the
Constitution. While every law enacted by man emanated from what is perceived as natural law, the
Court is not obliged to see if a statute, executive issuance or ordinance is in conformity to it. To begin
with, it is not enacted by an acceptable legitimate body. Moreover, natural laws are mere thoughts and
notions on inherent rights espoused by theorists, philosophers and theologists. The jurists of the
philosophical school are interested in the law as an abstraction, rather than in the actual law of the past
or present.277 Unless, a natural right has been transformed into a written law, it cannot serve as a basis
to strike down a law. In Republic v. Sandiganbayan,278 the very case cited by the petitioners, it was
explained that the Court is not duty-bound to examine every law or action and whether it conforms with
both the Constitution and natural law. Rather, natural law is to be used sparingly only in the most
peculiar of circumstances involving rights inherent to man where no law is applicable.279
At any rate, as earlier expounded, the RH Law does not sanction the taking away of life. It does not allow
abortion in any shape or form. It only seeks to enhance the population control program of the
government by providing information and making non-abortifacient contraceptives more readily
available to the public, especially to the poor.
Facts and Fallacies

and the Wisdom of the Law

In general, the Court does not find the RH Law as unconstitutional insofar as it seeks to provide access to
medically-safe, non-abortifacient, effective, legal, affordable, and quality reproductive healthcare
services, methods, devices, and supplies. As earlier pointed out, however, the religious freedom of some
sectors of society cannot be trampled upon in pursuit of what the law hopes to achieve. After all, the
Constitutional safeguard to religious freedom is a recognition that man stands accountable to an
authority higher than the State.
In conformity with the principle of separation of Church and State, one religious group cannot be
allowed to impose its beliefs on the rest of the society. Philippine modem society leaves enough room
for diversity and pluralism. As such, everyone should be tolerant and open-minded so that peace and
harmony may continue to reign as we exist alongside each other.
As healthful as the intention of the RH Law may be, the idea does not escape the Court that what it
seeks to address is the problem of rising poverty and unemployment in the country. Let it be said that
the cause of these perennial issues is not the large population but the unequal distribution of wealth.
Even if population growth is controlled, poverty will remain as long as the country's wealth remains in
the hands of the very few.
At any rate, population control may not be beneficial for the country in the long run. The European and
Asian countries, which embarked on such a program generations ago , are now burdened with ageing
populations. The number of their young workers is dwindling with adverse effects on their economy.
These young workers represent a significant human capital which could have helped them invigorate,
innovate and fuel their economy. These countries are now trying to reverse their programs, but they are
still struggling. For one, Singapore, even with incentives, is failing.
And in this country, the economy is being propped up by remittances from our Overseas Filipino
Workers. This is because we have an ample supply of young able-bodied workers. What would happen if
the country would be weighed down by an ageing population and the fewer younger generation would
not be able to support them? This would be the situation when our total fertility rate would go down
below the replacement level of two (2) children per woman.280
Indeed, at the present, the country has a population problem, but the State should not use coercive
measures (like the penal provisions of the RH Law against conscientious objectors) to solve it.
Nonetheless, the policy of the Court is non-interference in the wisdom of a law.
x x x. But this Court cannot go beyond what the legislature has laid down. Its duty is to say what the law
is as enacted by the lawmaking body. That is not the same as saying what the law should be or what is
the correct rule in a given set of circumstances. It is not the province of the judiciary to look into the
wisdom of the law nor to question the policies adopted by the legislative branch. Nor is it the business
of this Tribunal to remedy every unjust situation that may arise from the application of a particular law.
It is for the legislature to enact remedial legislation if that would be necessary in the premises. But as
always, with apt judicial caution and cold neutrality, the Court must carry out the delicate function of
interpreting the law, guided by the Constitution and existing legislation and mindful of settled
jurisprudence. The Court's function is therefore limited, and accordingly, must confine itself to the
judicial task of saying what the law is, as enacted by the lawmaking body.281

Be that as it may, it bears reiterating that the RH Law is a mere compilation and enhancement of the
prior existing contraceptive and reproductive health laws, but with coercive measures. Even if the Court
decrees the RH Law as entirely unconstitutional, there will still be the Population Act (R.A. No. 6365), the
Contraceptive Act (R.A. No. 4729) and the reproductive health for women or The Magna Carta of
Women (R.A. No. 9710), sans the coercive provisions of the assailed legislation. All the same, the
principle of "no-abortion" and "non-coercion" in the adoption of any family planning method should be
maintained.
WHEREFORE, the petitions are PARTIALLY GRANTED. Accordingly, the Court declares R.A. No. 10354 as
NOT UNCONSTITUTIONAL except with respect to the following provisions which are declared
UNCONSTITUTIONAL:
1) Section 7 and the corresponding provision in the RH-IRR insofar as they: a) require private
health facilities and non-maternity specialty hospitals and hospitals owned and operated by a
religious group to refer patients, not in an emergency or life-threatening case, as defined under
Republic Act No. 8344, to another health facility which is conveniently accessible; and b) allow
minor-parents or minors who have suffered a miscarriage access to modem methods of family
planning without written consent from their parents or guardian/s;
2) Section 23(a)(l) and the corresponding provision in the RH-IRR, particularly Section 5 .24
thereof, insofar as they punish any healthcare service provider who fails and or refuses to
disseminate information regarding programs and services on reproductive health regardless of
his or her religious beliefs.
3) Section 23(a)(2)(i) and the corresponding provision in the RH-IRR insofar as they allow a
married individual, not in an emergency or life-threatening case, as defined under Republic Act
No. 8344, to undergo reproductive health procedures without the consent of the spouse;
4) Section 23(a)(2)(ii) and the corresponding provision in the RH-IRR insofar as they limit the
requirement of parental consent only to elective surgical procedures.
5) Section 23(a)(3) and the corresponding provision in the RH-IRR, particularly Section 5.24
thereof, insofar as they punish any healthcare service provider who fails and/or refuses to refer
a patient not in an emergency or life-threatening case, as defined under Republic Act No. 8344,
to another health care service provider within the same facility or one which is conveniently
accessible regardless of his or her religious beliefs;
6) Section 23(b) and the corresponding provision in the RH-IRR, particularly Section 5 .24
thereof, insofar as they punish any public officer who refuses to support reproductive health
programs or shall do any act that hinders the full implementation of a reproductive health
program, regardless of his or her religious beliefs;
7) Section 17 and the corresponding prov1s10n in the RH-IRR regarding the rendering of pro
bona reproductive health service in so far as they affect the conscientious objector in securing
PhilHealth accreditation; and

8) Section 3.0l(a) and Section 3.01 G) of the RH-IRR, which added the qualifier "primarily" in
defining abortifacients and contraceptives, as they are ultra vires and, therefore, null and void
for contravening Section 4(a) of the RH Law and violating Section 12, Article II of the
Constitution.
The Status Quo Ante Order issued by the Court on March 19, 2013 as extended by its Order, dated July
16, 2013 , is hereby LIFTED, insofar as the provisions of R.A. No. 10354 which have been herein declared
as constitutional.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

3. Article XIII, Secs. 1, 2, 3, 13, 14

International School v. Quisumbing, G.R. No. 128845, June 1, 2000

FIRST DIVISION
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B.
TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in
his capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL,
INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle
that rests on fundamental notions of justice. That is the principle we uphold today.

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To enable the School to continue carrying out its
educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes
the School to
employ its own teaching and management personnel selected by it either locally or
abroad, from Philippine or other nationalities, such personnel being exempt from
otherwise applicable laws and regulations attending their employment, except laws that
have been or will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether
a faculty member should be classified as a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and was the
School responsible for bringing that individual to the Philippines?[2]
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor"
and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave
his family and friends, and take the risk of deviating from a promising career path-all for
the purpose of pursuing his profession as an educator, but this time in a foreign land.
The new foreign hire is faced with economic realities: decent abode for oneself and/or
for one's family, effective means of transportation, allowance for the education of one's
children, adequate insurance against illness and death, and of course the primary
benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same
economic reality after his term: that he will eventually and inevitably return to his home
country where he will have to confront the uncertainty of obtaining suitable
employment after a long period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain

competitive on an international level in terms of attracting competent professionals in
the field of international education.[3]
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in
the appropriate bargaining unit, eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in
favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's
motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all,
with nationalities other than Filipino, who have been hired locally and classified as local hires.[5]The
Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local
hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the present case.
The international character of the School requires the hiring of foreign personnel to deal
with different nationalities and different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded
to foreign hired personnel which system is universally recognized. We agree that certain
amenities have to be provided to these people in order to entice them to render their
services in the Philippines and in the process remain competitive in the international
market.
Furthermore, we took note of the fact that foreign hires have limited contract of
employment unlike the local hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also require parity in other terms and
conditions of employment which include the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for
salary and professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in
accordance with Appendix C hereof provided that the Superintendent of
the School has the discretion to recruit and hire expatriate teachers
from abroad, under terms and conditions that are consistent with
accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas
Recruited Staff (OSRS) salary schedule. The 25% differential is reflective
of the agreed value of system displacement and contracted status of the
OSRS as differentiated from the tenured status of Locally Recruited Staff
(LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in
the status of two types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It
is an established principle of constitutional law that the guarantee of equal protection of
the laws is not violated by legislation or private covenants based on reasonable
classification. A classification is reasonable if it is based on substantial distinctions and
apply to all members of the same class. Verily, there is a substantial distinction between
foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation
package in order to attract them to join the teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws
reflect the policy against these evils. The Constitution[8] in the Article on Social Justice and Human Rights
exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the
right of all people to human dignity, reduce social, economic, and political inequalities." The very broad
Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of
his duties, [to] act with justice, give everyone his due, and observe honesty and good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of equity,[10] i.e., the general principles of fairness and
justice, based on the test of what is reasonable.[11] The Universal Declaration of Human Rights,[12] the
International Covenant on Economic, Social, and Cultural Rights,[13] the International Convention on the
Elimination of All Forms of Racial Discrimination,[14] the Convention against Discrimination in
Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment and
Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness
and justice. The Philippines, through its Constitution, has incorporated this principle as part of its
national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These
conditions are not restricted to the physical workplace - the factory, the office or the field - but include
as well the manner by which employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State shall "ensure equal work opportunities regardless of
sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes
to unequal and discriminatory terms and conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of lesser compensation to a female employee as
against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order to encourage or discourage membership in any
labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof,
provides:
The States Parties to the present Covenant recognize the right of everyone to the
enjoyment of just and favourable conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed
conditions of work not inferior to those enjoyed by men, with equal pay
for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be paid similar salaries.[22] This rule applies to the School,
its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.[23] The Court finds this argument a little cavalier. If an employer accords employees
the same position and rank, the presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the employer pays one employee less than the
rest, it is not for that employee to explain why he receives less or why the others receive more. That
would be adding insult to injury. The employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that foreignhires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions
and responsibilities, which they perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid
at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his pains or
industry in another man's business. Whether it be derived from "salarium," or more
fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental
idea of compensation for services rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and
the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," [25] "to
afford labor full protection."[26] The State, therefore, has the right and duty to regulate the relations
between labor and capital.[27] These relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.[28] Should such contracts contain stipulations that are contrary to public policy, courts
will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of
the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not
deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law."[29] The factors in determining the appropriate collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.[30] The

basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their collective bargaining rights.[31]
It does not appear that foreign-hires have indicated their intention to be grouped together with localhires for purposes of collective bargaining. The collective bargaining history in the School also shows
that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits,
such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably
related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their
respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders
of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreignhires higher salaries than local-hires.
SO ORDERED.
Puno, and Pardo, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave.
Ynares-Santiago, J., on leave.

See:Serrano v. Gallant Maritime, G.R. No. 167614, March 24, 2009 supra
Canuel v. Magsaysay Maritime, G.R. No. 190161, October 13, 2014
G.R. No. 190161

October 13, 2014

ANITA N. CANUEL, for herself and on behalf of her minor children, namely: CHARMAINE, CHARLENE,
and
CHARL
SMITH,
all
surnamed
CANUEL, Petitioners,
vs.
MAGSAYSAY MARITIME CORPORATION, EDUARDO U. MANESE, and KOTANI SHIPMANAGEMENT
LIMITED,Respondents.
DECISION
PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 19, 2009 and the
Resolution3 dated October 30, 2009 of the Court of Appeals (CA) in CA-G.R. SP. No. 104479 which
dismissed petitioners' complaint for death benefits.
The Facts
On July 14, 2006, Nancing R. Canuel (Nancing) was hired by respondent Magsaysay Maritime
Corporation (Magsaysay) as Third Assistant Engineer for its foreign principal, respondent Kotani Ship
management Limited (Kotani), to be deployed on board the vessel M/V North Sea (vessel) for a period of
twelve (12) months, with a basic salary of US$640.00 a month.4 He underwent the required preemployment medical examination, and was declared fit to work by the company-designated
physician.5 Thereafter, he joined the vessel and commenced his work on July 19, 2006.6
On February 20, 2007, Nancing figured in an accident while in the performance of his duties on board
the vessel, and, as a result, injured the right side of his body.7 On March 5, 2007, he was brought to
Shanghai Seamens Hospital in Shanghai, China where he was diagnosed to have suffered "bilateral
closed traumatic hemothorax."8On March 12, 2007, Nancing informed his wife, herein petitioner Anita
N. Canuel (Anita), about the accident and his confinement.9 On March 24, 2007, he was medically
repatriated and immediately admitted to the Manila Doctors Hospital under the care of a team of
medical doctors led by Dr. Benigno A. Agbayani, Jr., Magsaysays Medical Coordinator.10 Due to his
worsening condition, Nancing was placed at the hospitals intensive care unit on April 8, 2007.11 He
eventually died on April 25, 2007.12 Nancings death certificate13 indicated the immediate cause of his
death as acute respiratory failure, with lung metastasis and r/o bone cancer as antecedent cause and
underlying cause, respectively.
On May 23, 2007, Nancings widow, Anita, for herself and on behalf of their children, Charmaine,
Charlene, and Charl Smith, all surnamed Canuel (petitioners) filed a complaint14 against Magsaysay and
Kotani, as well as Magsaysays Manager/President, Eduardo U. Manese (respondents), before the
National Labor Relations Commission (NLRC), docketed as NLRC-OFW Case No. (M)-07-05-01423-00,
seeking to recover death benefits, death compensation of minor children, burial allowance, damages,
and attorneys fees.
In their defense, respondents denied any liability and contended that while Nancing died of acute
respiratory failure, the real cause of his death, as shown in the autopsy conducted by the National
Bureau of Investigation, was "moderately differentiated andenocarcinoma, pneumonia and pulmonary
edema, lung tissue" or lung cancer.15The said illness is not work-related per advise of their company
doctor, Dr. Marie Cherry Lyn Samson- Fernando, hence, not compensable.16
The LA Ruling
In a Decision17 dated December 27, 2007, the Labor Arbiter (LA) ruled in favor of petitioners and thereby
ordered respondents to pay them: (a) the aggregate sum of US$72,000.00 consisting of US$50,000.00 as
death benefits, US$21,000.00 as death compensation for the three minor children (US$7,000.00 each),
and US$1,000.00 for burial expenses; (b) illness allowance from March 5, 2007 to April 25, 2007; (c)
_100,000.00 as moral damages; (d) _100,000.00 as exemplary damages; and (e) 10% of the total award
as attorneys fees.18

The LA found that Nancings death on April 25, 2007 occurred during the term of his twelve-month
employment contract.19 Moreover, the evidence on record supports the conclusion that his demise was
caused by the injury he sustained in an accident while performing his job on board the vessel. Hence, his
death was the result of a work-related injury that occurred during the term of his
employment.20 Corollary thereto, the LA disregarded respondents contention that lung cancer, a nonwork related illness, caused Nancings death as it was apparent that it was the injury he sustained while
working on board the vessel that triggered the deterioration of his resistance against the said illness or
any other affliction that he may have had.21
At odds with the LA Ruling, respondents appealed to the NLRC.
The NLRC Ruling
Respondents appeal22 was denied by the NLRC in a Decision23 dated April 30, 2008.
The NLRC ruled that while respondents correctly argued that Nancings death did not occur during the
term of his employment pursuant to Section 18 of the Philippine Overseas Employment Administration
Standard Employment Contract (POEA-SEC) as his employment was deemed terminated after his
medical repatriation, still, it cannot be doubted that his death was brought about by the same or similar
cause or illness which caused him to be repatriated.24 Thus, it sustained the findings of the LA that
petitioners are entitled to receive compensation for Nancings death.25 It further affirmed the award of
damages and attorneys fees in petitioners favor but found respondents not liable for sickness
allowance and burial benefits since the same were already paid by respondents.26
Dissatisfied, respondents sought reconsideration27 but were denied by the NLRC in a Resolution28 dated
June 18, 2008, prompting them to elevate the case to the CA on certiorari.29
The CA Ruling
In a Decision30 dated May 19, 2009, the CA found that the NLRC Ruling was tainted with grave abuse of
discretion and, thus, rendered a new judgment dismissing petitioners complaint for death
benefits.31 Citing the case of Klaveness Maritime Agency, Inc. v. Beneficiaries of the Late Second Officer
Anthony S. Allas (Klaveness),32 it held that the death of the seafarer after the termination of his contract
is not compensable, even if the death is caused by the same illness which prompted the repatriation of
the seafarer and the termination of his contract.33
Petitioners motion for reconsideration34 therefrom was denied by the CA in a Resolution35 dated
October 30, 2009, hence, the instant petition.
The Issue Before the Court
The core issue for the Courts resolution is whether or not the CA committed reversible error in holding
that the NLRC committed grave abuse of discretion in granting petitioners complaint for death benefits.
Petitioners claim that the death of Nancing after his repatriation is compensable because it was the
accident he suffered on board the vessel that triggered his traumatic hemothorax,36 eventually leading
to his acute respiratory failure, the immediate cause of his death.37

Echoing the CA, respondents aver that since the Nancings employment contract was deemed
terminated when he was medically repatriated on March 24, 2007, petitioners are not entitled to death
and other benefits.38 They also maintain that Nancing died of lung cancer which is not a work-related
illness.39
The Courts Ruling
The terms and conditions of a seafarers employment are governed by the provisions of the contract he
signs with the employer at the time of his hiring. Deemed integrated in his employment contract is a set
of standard provisions determined and implemented by the POEA, called the "Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels," which
provisions are considered to be the minimum requirements acceptable to the government for the
employment of Filipino seafarers on board foreign ocean-going vessels.40
The provisions currently governing the entitlement of the seafarers beneficiaries to death benefits are
found in Section 20 of the 2000 POEASEC.
Part A (1) thereof states that the seafarers beneficiaries may successfully claim death benefits if they
are able to establish that the seafarers death is (a) work-related, and (b) had occurred during the term
of his employment contract, viz.:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH
1. In case of work-related death of the seafarer, during the term of his contract, the employer shall pay
his beneficiaries the Philippine Currency equivalent to the amount of Fifty Thousand US dollars
(US$50,000) and an additional amount of Seven Thousand US dollars (US$7,000) to each child under the
age of twenty-one (21) but not exceeding four (4) children, at the exchange rate prevailing during the
time of payment. (Emphases supplied)
Part A (4) of the same provision further complements Part A (1) by stating the "other liabilities" of the
employer to the seafarers beneficiaries if the seafarer dies (a) as a result of work-related injury or
illness, and (b) during the term of his employment, viz.:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH
xxxx
4. The other liabilities of the employer when the seafarer dies as a result of work-related injury or illness
during the term of employment are as follows:
a. The employer shall pay the deceaseds beneficiary all outstanding obligations due the seafarer
under this Contract.

b. The employer shall transport the remains and personal effects of the seafarer to the
Philippines at employers expense except if the death occurred in a port where local
government laws or regulations do not permit the transport of such remains. In case death
occurs at sea, the disposition of the remains shall be handled or dealt with in accordance with
the masters best judgment. In all cases, the employer/master shall communicate with the
manning agency to advise for disposition of seafarers remains.
c. The employer shall pay the beneficiaries of the seafarer the Philippines currency equivalent to
the amount of One Thousand US dollars (US$1,000) for burial expenses at the exchange rate
prevailing during the time of payment. (Emphasis and underscoring supplied)
Integral as they are for a valid claim for death compensation, the Court examines this case according to
the above-stated dual requirements.
First Requirement:
The Seafarers Death Should Be Work-Related.
While the 2000 POEA-SEC does not expressly define what a "work related death" means, it is palpable
from Part A (4) as above-cited that the said term refers to the seafarers death resulting from a workrelated injury or illness. This denotation complements the definitions accorded to the terms "workrelated injury" and "work-related illness" under the 2000 POEA-SEC as follows:
Definition of Terms:
For purposes of this contract, the following terms are defined as follows:
xxxx
11. Work-Related Injury injury(ies) resulting in disability or death arising out of and in the
course of employment.
12. Work-Related Illness any sickness resulting to disability or death as a result of an
occupational disease listed under Section 32-A of this contract with the conditions set therein
satisfied. (Emphases supplied)
Given that the seafarers death in this case resulted from a work-related injury as defined in the 2000
POEA-SEC above, it is clear that the first requirement for death compensability is present.
As the records show, Nancing suffered a work-related injury within the term of his employment contract
when he figured in an accident while performing his duties as Third Assistant Engineer at cylinder
number 7 of the vessel on February 20, 2007.41 The foregoing circumstances aptly fit the legal
attribution of the phrase "arising out of and in the course of employment" which the Court, in the early
case of Iloilo Dock & Engineering Co. v. Workmens Compensation Commission,42 pronounced as follows:
The two components of the coverage formula "arising out of" and "in the course of employment" are
said to be separate tests which must be independently satisfied; however, it should not be forgotten

that the basic concept of compensation coverage is unitary, not dual, and is best expressed in the word,
"work-connection," because an uncompromising insistence on an independent application of each of
the two portions of the test can, in certain cases, exclude clearly work-connected injuries. The words
"arising out of" refer to the origin or cause of the accident, and are descriptive of its character, while the
words "in the course of" refer to the time, place, and circumstances under which the accident takes
place.
As a matter of general proposition, an injury or accident is said to arise "in the course of employment"
when it takes place within the period of the employment, at a place where the employee reasonably
may be, and while he is fulfilling his duties or is engaged in doing something incidental
thereto. 43 (Emphases supplied; citations omitted)
That Nancing was suffering from lung cancer, which was found to have been pre-existing, hardly impels
a contrary conclusion since as the LA herein earlier noted the February 20, 2007 injury actually led to
the deterioration of his condition.44 As held in More Maritime Agencies, Inc. v. NLRC,45 "[i]f the injury is
the proximate cause of [the seafarers] death or disability for which compensation is sought, [his]
previous physical condition x x x is unimportant and recovery may be had for injury independent of any
pre-existing weakness or disease," viz.:
Compensability x x x does not depend on whether the injury or disease was pre-existing at the time of
the employment but rather if the disease or injury is work-related or aggravated his condition. It is
indeed safe to presume that, at the very least, the arduous nature of [the seafarers] employment had
contributed to the aggravation of his injury, if indeed it was pre-existing at the time of his employment.
Therefore, it is but just that he be duly compensated for it. It is not necessary, in order for an employee
to recover compensation, that he must have been in perfect condition or health at the time he received
the injury, or that he be free from disease. Every workman brings with him to his employment certain
infirmities, and while the employer is not the insurer of the health of his employees, he takes them as he
finds them, and assumes the risk of having a weakened condition aggravated by some injury which
might not hurt or bother a perfectly normal, healthy person. If the injury is the proximate cause of his
death or disability for which compensation is sought, the previous physical condition of the employee is
unimportant and recovery may be had for injury independent of any pre-existing weakness or
disease. 46 (Emphases and underscoring supplied)
Clearly, Nancings injury was the proximate cause of his death considering that the same, unbroken by
any efficient, intervening cause, triggered the following sequence of events: (a) Nancings hospitalization
at the Shanghai Seamens Hospital47 where he was diagnosed with "bilateral closed traumatic
haemothorax";48 (b) his repatriation and eventual admission to the Manila Doctors Hospital;49 and (c)
his acute respiratory failure, which was declared to be the immediate cause of his death.50
Thus, for the foregoing reasons, it cannot be seriously disputed that the first requirement for death
compensability concurs in this case.
Second Requirement:
The Seafarers Death Should Occur During The Term Of Employment.

With respect to the second requirement for death compensability, the Court takes this opportunity to
clarify that while the general rule is that the seafarers death should occur during the term of his
employment, the seafarers death occurring after the termination of his employment due to his medical
repatriation on account of a work-related injury or illness constitutes an exception thereto. This is based
on a liberal construction of the 2000 POEA-SEC as impelled by the plight of the bereaved heirs who
stand to be deprived of a just and reasonable compensation for the seafarers death, notwithstanding its
evident work-connection. The present petition is a case in point.
Here, Nancings repatriation occurred during the eighth (8th) month of his one (1) year employment
contract. Were it not for his injury, which had been earlier established as work-related, he would not
have been repatriated for medical reasons and his contract consequently terminated pursuant to Part 1
of Section 18 (B) of the 2000 POEA-SEC as hereunder quoted:
SECTION 18. TERMINATION OF EMPLOYMENT
xxxx
B. The employment of the seafarer is also terminated when the seafarer arrives at the point of
hire for any of the following reasons:
1. when the seafarer signs-off and is disembarked for medical reasons pursuant to Section 20
(B)[5] of this Contract.
The terminative consequence of a medical repatriation case then appears to present a rather prejudicial
quandary to the seafarer and his heirs. Particularly, if the Court were to apply the provisions of Section
20 of the 2000 POEA-SEC as above-cited based on a strict and literal construction thereof, then the heirs
of Nancing would stand to be barred from receiving any compensation for the latters death despite its
obvious work-relatedness. Again, this is for the reason that the work-related death would, by mere legal
technicality, be considered to have occurred after the term of his employment on account of his medical
repatriation. It equally bears stressing that neither would the heirs be able to receive any disability
compensation since the seafarers death in this case precluded the determination of a disability grade,
which, following Section 20 (B)51 in relation to Section 3252 of the 2000 POEA-SEC, stands as the basis
therefor.
However, a strict and literal construction of the 2000 POEA-SEC, especially when the same would result
into inequitable consequences against labor, is not subscribed to in this jurisdiction. Concordant with
the States avowed policy to give maximum aid and full protection to labor as enshrined in Article XIII of
the 1987 Philippine Constitution,53 contracts of labor, such as the 2000 POEA-SEC, are deemed to be so
impressed with public interest that the more beneficial conditions must be endeavoured in favor of the
laborer.54 The rule therefore is one of liberal construction. As enunciated in the case of Philippine
Transmarine Carriers, Inc. v. NLRC:55
The POEA Standard Employment Contract for Seamen is designed primarily for the protection and
benefit of Filipino seamen in the pursuit of their employment on board ocean-going vessels. Its
provisions must [therefore] be construed and applied fairly, reasonably and liberally in their favor [as it
is only] then can its beneficent provisions be fully carried into effect.56 (Emphasis supplied)

Applying the rule on liberal construction, the Court is thus brought to the recognition that medical
repatriation cases should be considered as an exception to Section 20 of the 2000 POEA-SEC.
Accordingly, the phrase "work-related death of the seafarer, during the term of his employment
contract" under Part A (1) of the said provision should not be strictly and literally construed to mean
that the seafarers work-related death should have precisely occurred during the term of his
employment. Rather, it is enough that the seafarers work-related injury or illness which eventually
causes his death should have occurred during the term of his employment. Taking all things into
account, the Court reckons that it is by this method of construction that undue prejudice to the laborer
and his heirs may be obviated and the State policy on labor protection be championed. For if the
laborers death was brought about (whether fully or partially) by the work he had harbored for his
masters profit, then it is but proper that his demise be compensated. Here, since it has been
established that (a) the seafarer had been suffering from a work-related injury or illness during the term
of his employment, (b) his injury or illness was the cause for his medical repatriation, and (c) it was later
determined that the injury or illness for which he was medically repatriated was the proximate cause of
his actual death although the same occurred after the term of his employment, the above-mentioned
rule should squarely apply. Perforce, the present claim for death benefits should be granted.
To quell any confusion, it is but fitting to make clear that a liberal construction of Section 20 of the 2000
POEA-SEC as above-discussed would not offend the Courts ruling in Klaveness,57 which was inaccurately
relied upon by the CA to justify its decision. The inaccuracy so recognized stems from the glaring factual
and legal variance between Klaveness and the present case. Upon careful scrutiny, the seafarer in
Klaveness was not medically repatriated but was actually signed off from the vessel after the completion
of his contract. He was subsequently diagnosed to have urinary bladder cancer, which was not proven to
be work-related, and died almost two (2) years after the termination of his contract of employment.
Hence, since the employment contract was terminated without any connection to a work-related cause,
but rather because of its mere lapse, death benefits were denied to the seafarers heirs. In contrast, the
seafarer in this case was medically repatriated due to a work-related injury which resulted to his death a
month after his confinement in a local hospital. Again, were it not for said injury, the seafarer would not
have been medically repatriated and his employment contract, in turn, terminated. By these
circumstances, it is clear that the termination of the employment contract was forced upon by a workrelated cause. As alluded earlier, it would then be antithetical to the States policy on labor to deprive
the seafarers heirs of death compensation despite its palpable work-connection. Based on the
foregoing, it is, hence, apparent that the Courts pronouncement herein would not conflict that in
Klaveness. Truth be told, the defining parameter in workers compensation cases should be the element
of work-relatedness which was clearly absent in the "contract-completion" situation in Klaveness.58 To
reiterate, if the death is work-related, as herein ascribed, then the seafarers heirs should not be denied
compensation.
To reinforce the point, a survey of previous Court rulings wherein death compensability had been
denied the heirs of the seafarer actually demonstrates the significance of the work-relatedness element
in workers compensation cases. For instance, in Gau Sheng Phils., Inc. v. Joaquin,59 the illness of the
seafarer therein, who was terminated based on mutual consent, was found to be non-compensable
since he died of chronic renal failure which was not listed as a compensable illness. Likewise, in Aya-ay,
Sr. v. Arpaphil Shipping Corp.,60 the Court denied the claim for death compensation because the seafarer
therein was repatriated due to an eye injury but subsequently died of a stroke, which was not listed as a
compensable illness under the POEA-SEC. Death compensation was also denied to the claimants in
Hermogenes v. Osco Shipping Services, Inc.,61 since no evidence was offered to prove the cause of the
termination of the contract of employment, whereas it was found that the seafarer therein died three

(3) years after his disembarkation of an illness which was not shown to have been contracted during his
employment. An identical ruling was rendered in Prudential Shipping and Management Corp. v. Sta.
Rita,62wherein the seafarer in said case was repatriated due to umbilical hernia but died one (1) year
after of cardiopulmonary arrest, which was not, however, established as work-related. Similarly, death
compensation was denied the claimants in Ortega v. CA,63 considering that the seafarer therein died of
lung cancer which was not found to be work-related.
Meanwhile, on the opposite end of the jurisprudential spectrum, the Court, in a number of cases,
granted claims for death benefits although the seafarers death therein had occurred after their
repatriation primarily because of the causal connection between their work and the illness which had
eventually resulted in their death.
In the 1999 case of Wallem Maritime Service, Inc. v. NLRC,64 the death benefit claims of the heirs of the
seafarer who had died after having been repatriated on account of "mutual consent" between him and
his employer was allowed by the Court because of the "reasonable connection" between his job and his
illness. As pertinently stated in that case:
It is not required that the employment be the sole factor in the growth, development or acceleration of
the illness to entitle the claimant to the benefits provided therefor. It is enough that the employment
had contributed, even in a small degree, to the development of the disease and in bringing about his
death.
It is indeed safe to presume that, at the very least, the nature of Faustino Inductivos employment had
contributed to the aggravation of his illness if indeed it was pre-existing at the time of his
employment and therefore it is but just that he be duly compensated for it. It cannot be denied that
there was at least a reasonable connection between his job and his lung infection, which eventually
developed into septicemia and ultimately caused his death. As a [utility man] on board the vessel, he
was exposed to harsh sea weather, chemical irritants, dusts, etc., all of which invariably contributed to
his illness.
Neither is it necessary, in order to recover compensation, that the employee must have been in perfect
condition or health at the time he contracted the disease. Every workingman brings with him to his
employment certain infirmities, and while the employer is not the insurer of the health of the
employees, he takes them as he finds them and assumes the risk of liability.1wphi1 If the disease is the
proximate cause of the employees death for which compensation is sought, the previous physical
condition of the employee is unimportant and recovery may be had therefor independent of any preexisting disease.65 (Emphases and underscoring supplied)
Later, the Court, in Seagull Shipmanagement and Transport, Inc. v. NLRC66 a sickness and permanent
disability claims case decided under the auspices of the 1984 version of the POEA-SEC (which, unlike the
present standard contract, only requires that the illness of death occur during the term of the
employment whether work-related or not) significantly observed that:
Even assuming that the ailment of the worker was contracted prior to his employment, this still would
not deprive him of compensation benefits. For what matters is that his work had contributed, even in a
small degree, to the development of the disease and in bringing about his eventual death. Neither is it
necessary, in order to recover compensation, that the employee must have been in perfect health at the

time he contracted the disease. A worker brings with him possible infirmities in the course of his
employment, and while the employer is not the insurer of the health of the employees, he takes them
as he finds them and assumes the risk of liability. If the disease is the proximate cause of the employees
death for which compensation is sought, the previous physical condition of the employee is
unimportant, and recovery may be had for said death, independently of any pre-existing
disease. 67 (Emphases and underscoring supplied; citations omitted)
The Court similarly took into account the work-relatedness element in granting the death benefits claim
in Interorient Maritime Enterprises, Inc. v. Remo,68 a 2010 case decided under the 1996 POEA-SEC which
operated under parameters identical to the 1984 POEA-SEC. Quoted hereunder are the pertinent
portions of that ruling:
It was established on record that before the late Lutero Remo signed his last contract with private
respondents as Cook-Steward of the vessel "M/T Captain Mitsos L," he was required to undergo a series
of medical examinations. Yet, he was declared "fit to work" by private respondents company
designated-physician. On April 19, 1999, Remo was discharged from his vessel after he was hospitalized
in Fujairah for atrial fibrillation and congestive heart failure. His death on August 28, 2000, even if it
occurred months after his repatriation, due to hypertensive cardio-vascular disease, could clearly have
been work related. Declared as "fit to work" at the time of hiring, and hospitalized while on service
onaccount of "atrial fibrillation and congestive heart failure," his eventual death due to "hypertensive
cardio-vascular disease" could only be work related. The death due to "hypertensive cardio-vascular
disease" could in fact be traced to Lutero Remos being the "Cook-Steward." As Cook-Steward of an
ocean going vessel, Remo had no choice but to prepare and eat hypertension inducing food, a kind of
food that eventually caused his "hypertensive cardio-vascular disease," a disease which in turn
admittedly caused his death.
Private respondents cannot deny liability for the subject death by claiming that the seafarers death
occurred beyond the term of his employment and worsely, that there has been misrepresentation on
the part of the seafarer. For, as employer, the private respondents had all the opportunity to prequalify, thoroughly screen and choose their applicants to determine if they are medically,
psychologically and mentally fit for employment. That the seafarer here was subjected to the required
prequalification standards before he was admitted as Cook-Steward, it thus has to be safely presumed
that the late Remo was in a good state of health when he boarded the vessel.69 (Emphases and
underscoring supplied; citation omitted)
More recently, in the 2013 case of Inter-Orient Maritime, Incorporated v. Candava,70 also decided under
the framework of the 1996 POEA-SEC, the Court pronounced that the seafarers death therein, despite
occurring after his repatriation, remains "compensable for having been caused by an illness duly
established to have been contracted in the course of his employment."71
Thus, considering the constitutional mandate on labor as well as relative jurisprudential context, the
rule, restated for a final time, should be as follows: if the seafarers work-related injury or illness (that
eventually causes his medical repatriation and, thereafter, his death, as in this case) occurs during the
term of his employment, then the employer becomes liable for death compensation benefits under
Section 20 (A) of the 2000 POEA-SEC. The provision cannot be construed otherwise for to do so would
not only transgress prevailing constitutional policy and deride the bearings of relevant case law but also
result in a travesty of fairness and an indifference to social justice.

For all these reasons, the Court hereby grants the petition.
WHEREFORE, the petition is GRANTED. The Decision dated May 19, 2009 and the Resolution dated
October 30, 2009 of the Court of Appeals in CA-G.R. SP No. 104479 are hereby REVERSED and SET ASIDE
and the Decision dated April 30, 2008 of the National Labor Relations Commission is REINSTATED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

Asia Brewery v. TPMA, G.R. Nos. 171594-96, September 18, 2013

G.R. Nos. 171594-96

September 18, 2013

ASIA
BREWERY,
vs.
TUNAY NA PAGKAKAISA NG MGA MANGGAGAWA SA ASIA (TPMA), Respondent.

INC., Petitioner,

DECISION
DEL CASTILLO, J.:
In cases of compulsory arbitration before the Secretary of Labor pursuant to Article 263(g) of the Labor
Code, the financial statements of the employer must be properly audited by an external and
independent auditor in order to be admissible in evidence for purposes of determining the proper wage
award.
This Petition for Review on Certiorari assails the Court of Appeals (CA) October 6, 2005 Decision1 and
the February 17, 2006 Amended Decision2 in CA-G.R. SP Nos. 80839, and 83168 which modified the
January 19, 2004 Decision3 of the Secretary of Labor in OS-AJ-0042-2003.
Factual Antecedents
The antecedents are aptly summarized by the CA:
Respondent union Tunay Na Pagkakaisa ng mga Manggagawa sa Asia (TPMA) is a legitimate labor
organization, certified as the sole and exclusive bargaining agent of all regular rank and file employees of
petitioner corporation Asia Brewery, Incorporated (ABI). The petitioner corporation, on the other hand,
is a company engaged in the manufacture, sale and distribution of beer, shandy, glass and bottled water

products. It employs about 1,500 workers and has existing distributorship agreements with at least 13
companies.
Respondent union and petitioner corporation had been negotiating for a new collective bargaining
agreement (CBA) for the years 2003-2006 since the old CBA expired last July 2003. After about 18
sessions or negotiations, the parties were still unable to reconcile their differences on their respective
positions on most items, particularly on wages and other economic benefits.
On October 21, 2003, the Respondent union declared a deadlock. On October 27, 2003, Respondent
union filed a notice of strike with the National Conciliation and Mediation Board (NCMB), docketed as
NCMB-RB-IV-LAG- NS-10-064-03. However, the parties did not come to terms even before the NCMB.
On November 18, 2003, Respondent union conducted a strike vote. Out of the 840 union members, 768
voted in favor of holding a strike.
On November 20, 2003, petitioner corporation then petitioned the Secretary of the Department of
Labor and Employment (DOLE) to assume jurisdiction over the parties labor dispute, invoking Article
263 (g) of the Labor Code. In answer, Respondent union opposed the assumption of jurisdiction,
reasoning therein that the business of petitioner corporation is not in dispensable to the national
interest.
On December 2, 2003, Respondent union filed before the Court of Appeals a petition for injunction,
docketed as CA-G.R. SP No. 80839, which sought to enjoin the respondent Secretary of Labor from
assuming jurisdiction over the labor dispute, or in the alternative, to issue a temporary restraining order,
likewise to enjoin the former from assuming jurisdiction.
On December 19, 2003, the public respondent, through Undersecretary/Acting Secretary Manuel G.
Imson, issued an order assuming jurisdiction over the labor dispute between the Respondent union and
petitioner corporation. The pertinent portions of the said order read:
xxxx
"WHEREFORE, based on our considered determination that the current labor dispute is likely to
adversely affect national interest, this Office hereby ASSUMES JURISDICTION over the labor dispute
between the ASIA BREWERY, INCORPORATED and the TUNAY NA PAGKAKAISA NGMANGGAGAWA SA
ASIA pursuant to Article 263 (g) of the Labor Code, as amended. Accordingly, any strike or lockout in the
Company, whether actual or impending, is hereby enjoined. Parties are hereby directed to cease and
desist from taking any action that might exacerbate the situation.
xxxx
"To expedite the resolution of this dispute, the parties are directed to submit in three (3) copies, their
Position Papers within ten (10) days from receipt of this Order and another five (5) days from receipt of
the said position papers to submit their Reply.
"1. The Company shall be required to provide:

"a. Complete Audited Financial Statements for the past five (5) years certified as to its
completeness by the Chief Financial Comptroller or Accountant;
"b. Projected Financial Statements of the Company for the next three (3) years;
"c. CBA history as to economic issues; and
"d. The average monthly salary of the employees in this bargaining unit.
"2. The Union is required to provide an itemized summary of their CBA demands with financial
costing and sample CBAs (if any) in similarly situated or comparable bargaining units.
"In the interest of speedy labor justice, this Office will entertain no motion for extension or
postponement.
"The appropriate police authority is hereby deputized to enforce this Order in case of defiance or the
same is not forthwith obeyed.
"SO ORDERED."
xxxx
On January 19, 2004, respondent union filed another petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 81639,imputing bad faith and grave abuse of discretion to the Secretary of
Labor. Respondent union prayed therein for the nullification of the order of assumption of jurisdiction
and the declaration that petitioner corporation is not an industry indispensable to the national interest.
In the meantime, in a decision dated January 19, 2004, Secretary of Labor Patricia Sto. Tomas resolved
the deadlock between the parties. As summarized in a later resolution, the public respondent granted
the following arbitral awards:
(1) WAGE INCREASES as follows:
First Year

= P18.00

Second Year = 15.00

Third Year

= 12.00

Total

= P45.00

(2) HEALTH CARE (HMO)

P1,300 premium to be shouldered by Asia Brewery, Inc., for each covered employee and P1,800
contribution for each Union member-dependent.

xxxx
The respondent union moved for a reconsideration of the decision on the ground that the ruling lacks
evidentiary proof to sufficiently justify the same. It also filed a "Paglilinaw o Pagwawasto" of the
Decision. Similarly, petitioner corporation also filed a motion for clarification/reconsideration. The
respondent Secretary of Labor resolved all three motions in a resolution dated January 29, 2004 x x x.
xxxx
Thereafter, on February 9, 2004, the parties executed and signed the Collective Bargaining Agreement
with a term from August 1, 2003 to July 31,2006.
Subsequently, on April 1, 2004, respondent union filed another petition for certiorari before the Court of
Appeals, which was docketed as SP-83168, assailing the arbitral award and imputing grave abuse of
discretion upon the public respondent.
x x x x4
Court of Appeals Ruling
On October 6, 2005, the CA rendered the first assailed Decision affirming with modification the arbitral
award of the Secretary of Labor, viz:
WHEREFORE, judgment is hereby rendered with the following rulings:
1) The assailed order dated December 19, 2003 of public respondent Secretary of Labor is
AFFIRMED . The petitions for injunction and certiorari in CA-G.R. SP Nos. 80839 and 81639 are
denied and accordingly DISMISSED.
2) In CA-G.R. SP No. 81368, the assailed decision dated January 19,2004 and the order dated
January 29, 2004 of the public respondent are hereby MODIFIED to read as follows:
a) The present CBA is declared effective as of August 1, 2003;
b) Consequently, the employees are entitled to the arbitral awards or benefits from
August 1, 2003 on top of the P2,500.00 signing bonus;
c) The computation of the wage increase is REMANDED to the public respondent; and
d) The health benefit of the employees shall be P1,390.00.
SO ORDERED.5
In modifying the arbitral award of the Secretary of Labor, the CA ruled that: (1)The effectivity of the CBA
should be August 1, 2003 because this is the date agreed upon by the parties and not January 1, 2004 as
decreed by the Secretary of Labor; (2) The computation of wage increase should be remanded to the
Secretary of Labor because the computation was based on petitioner corporations unaudited financial

statements, which have no probative value pursuant to the ruling in Restaurante Las Conchas v.
Llego,6 and was done in contravention of DOLE Advisory No. 1, Series of 2004, which contained the
guidelines in resolving bargaining deadlocks; and (3) The health benefits should be P1,390.00 per
covered employee because petitioner corporation had already agreed to this amount and the same
cannot be altered or reduced by the Secretary of Labor.
Aggrieved, respondent union and petitioner corporation moved for reconsideration and partial
reconsideration, respectively. On February 17, 2006,the CA issued an Amended Decision, viz :
WHEREFORE , the foregoing considered, the Motion for Reconsideration of respondent union is DENIED
and the Partial Motion for Reconsideration of petitioner corporation is PARTIALLY GRANTED
.Accordingly, Our Decision is MODIFIED and the signing bonus previously awarded is hereby DELETED .
The assailed Decision of the respondent Secretary with respect to the issue on salary increases is
REMANDED to her office for a definite resolution within one month from the finality of this Courts
Decision using as basis the externally audited financial statements to be submitted by petitioner
corporation.
SO ORDERED.7
The CA partially modified its previous Decision by deleting the award of the signing bonus. It ruled that,
pursuant to the express provisions of the CBA, the signing bonus is over and beyond what the parties
agreed upon in the said CBA.
From this Amended Decision, only petitioner corporation appealed to this Court via this Petition for
Review on Certiorari.
Issues
Petitioner corporation raises the following issues for our resolution:
I. Whether the CA erred when it failed to dismiss CA-G.R. SP No.83168 despite the lack of
authority of those who instituted it.
II. Whether the CA erred when it remanded to the Secretary of Labor the issue on wage
increase.
III. Whether the CA erred when it awarded P1,390.00 as premium payment for each covered
employee.8
Our Ruling
The Petition lacks merit.
The
authority
to
file
the
sufficiently refuted.

of
petition

Rodrigo
before
the

Perez
CA

was

(Perez)
not

Petitioner corporation claims that Perez, the person who verified the Petition in CA-G.R. SP No. 83168
questioning the propriety of the arbitral award issued by the Secretary of Labor, was without authority
to represent respondent union. While there was a Secretarys Certificate attached to the aforesaid
Petition purportedly authorizing Perez to file the Petition on behalf of the union, there was no showing
that the union president, Jose Manuel Miranda (Miranda), called for and presided over the meeting
when the said resolution was adopted as required by the unions constitution and by-laws. Moreover,
the aforesaid resolution was adopted on March 23, 2004 while the Petition was filed on April 1, 2004 or
nine days from the adoption of the resolution. Under the unions constitution and by-laws, the decision
of the board of directors becomes effective only after two weeks from its issuance. Thus, at the time of
the filing of the aforesaid Petition, the resolution authorizing Perez to file the same was still ineffective.
Petitioner corporation also adverts to two labor cases allegedly divesting Perez of authority to represent
the union in the case before the appellate court.
We disagree.
The Secretarys Certificate9 attached to the Petition in CA-G.R. SP No.83168 stated that the unions
board of directors held a special meeting on March23, 2004 and unanimously passed a resolution
authorizing Perez to file a Petition before the CA to question the Secretary of Labors arbitral
award.10 While petitioner corporation claims that the proper procedure for calling such a meeting was
not followed, it presented no proof to establish the same. Miranda, the union president who allegedly
did not call for and preside over the said meeting, did not come out to contest the validity of the
aforesaid resolution or Secretarys Certificate. Similarly, petitioner corporations claim that the aforesaid
resolution was still ineffective at the time of the filing of the subject Petition is unsubstantiated. A fair
reading of the provisions which petitioner corporation cited in the unions constitution and by-laws,
particularly Article VIII, Section 211 thereof, would show that the same refers to decisions of the board of
directors regarding the laws or rules that would govern the union, hence, the necessity of a two-week
prior notice to the affected parties before they become effective. These provisions have not been shown
to apply to resolutions granting authority to individuals to represent the union in court cases. Besides,
even if we assume that these provisions in the unions constitution and by-laws apply to the subject
resolution, the continuing silence of the union, from the time of its adoption to the filing of the Petition
with the CA and up to this point in these proceedings, would indicate that such defect, if at all present,
in the authority of Perez to file the subject Petition, was impliedly ratified by respondent union itself.
As to the two labor cases allegedly divesting Perez of the authority to file the subject Petition, an
examination of the same would show that they did not affect the legal capacity of Perez to file the
subject Petition. The first labor case (i.e., RO400-0407-AU-002,12 RO400-0409-AU-006,13 and RO4000412-AU-00114) involved the move of Perez and other union members to amend the unions
Constitution and By-Laws in order to include a provision on recall elections and to conduct a recall
elections on June 26, 2004. In that case, the Med-Arbiter, in his January 25, 2005 Order,15 ruled that the
amendment sought to be introduced was not validly ratified by the requisite two-thirds vote from the
union membership. As a result, the recall elections held on June 26, 2004 was annulled.16The second
labor case (
i.e. , NLRC NCR CC No. 000282-0417 and NLRC-RAB IV-12-20200-04-L18) involved the strike staged by
Perez and other union members on October 4, 2004. There, the National Labor Relations Commission, in
its March 2006Decision,19 ruled that the strike was illegal and, as a consequence, Perez and the other
union members were declared to have lost their employment status.20

These two labor cases had no bearing on the legal capacity of Perez to represent the union in CA-G.R. SP
No. 83168 because (1) they did not nullify the authority granted to Perez in the March 23, 2004
resolution of the unions board of directors to file the subject Petition, and (2) the material facts of these
cases occurred and the Decisions thereon were rendered after the subject Petition was already filed
with the CA on April 1, 2004.
The
remand
of
Labor
was proper.

of
as

to

this
the

case
issue

to
of

the
wage

Secretary
increase

Petitioner corporation admits that what it submitted to the Secretary of Labor were unaudited financial
statements which were then used as one of the bases in fixing the wage award. However, petitioner
corporation argues that these financial statements were duly signed and certified by its chief financial
officer. These statements have also been allegedly submitted to various government agencies and
should, thus, be considered official and public documents. Moreover, respondent union did not object
to the subject financial statements in the proceedings before the Secretary of Labor and even used the
same in formulating its (the unions) arguments in said proceedings. Thus, petitioner corporation
contends that although the subject financial statements were not audited by an external and
independent auditor, the same should be considered substantial compliance with the order of the
Secretary of Labor to produce the petitioner corporations complete audited financial statements for the
past five years. Furthermore, the Decision of the Secretary of Labor was not solely based on the subject
financial statements as the CBA history, costing of the proposals, and wages in other similarly situated
bargaining units were considered. Finally, petitioner corporation claims that the demands of respondent
union on wage increase are unrealistic and will cause the former to close shop.
The contention is untenable.
In Restaurante Las Conchas v. Llego,21 several employees filed a case for illegal dismissal after the
employer closed its restaurant business. The employer sought to justify the closure through unaudited
financial statements showing the alleged losses of the business. We ruled that such financial statements
are mere self-serving declarations and inadmissible in evidence even if the employees did not object to
their presentation before the Labor Arbiter.22 Similarly, in Uichico v. National Labor Relations
Commission,23 the services of several employees were terminated on the ground of retrenchment due
to alleged serious business losses suffered by the employer. We ruled that by submitting unaudited
financial statements, the employer failed to prove the alleged business losses, viz :
x x x It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical
rules of procedure in the adjudication of cases. However, this procedural rule should not be construed
as a license to disregard certain fundamental evidentiary rules. While the rules of evidence prevailing in
the courts of law or equity are not controlling in proceedings before the NLRC, the evidence presented
before it must at least have a modicum of admissibility for it to be given some probative value. The
Statement of Profit and Losses submitted by Crispa, Inc. to prove its alleged losses, without the
accompanying signature of a certified public accountant or audited by an independent auditor, are
nothing but self-serving documents which ought to be treated as a mere scrap of paper devoid of any
probative value. For sure, this is not the kind of sufficient and convincing evidence necessary to
discharge the burden of proof required of petitioners to establish the alleged losses suffered by Crispa,
Inc. in the years immediately preceding 1990 that would justify the retrenchment of respondent
employees. x x x24

While the above-cited cases involve proof necessary to establish losses in cases of business closure or
retrenchment, we see no reason why this rule should not equally apply to the determination of the
proper level of wage award in cases where the Secretary of Labor assumes jurisdiction in a labor dispute
pursuant to Article 263(g)25 of the Labor Code.
In MERALCO v. Sec. Quisumbing,26 we had occasion to expound on the extent of our review powers over
the arbitral award of the Secretary of Labor, in general, and the factors that the Secretary of Labor must
consider in determining the proper wage award, in particular, viz:
The extent of judicial review over the Secretary of Labor's arbitral award is not limited to a
determination of grave abuse in the manner of the secretary's exercise of his statutory powers. This
Court is entitled to, and must in the exercise of its judicial power review the substance of the
Secretary's award when grave abuse of discretion is alleged to exist in the award, i.e., in the
appreciation of and the conclusions the Secretary drew from the evidence presented.
xxxx
In this case we believe that the more appropriate and available standard and one does not require a
constitutional interpretation is simply the standard of reasonableness. In layman's terms,
reasonableness implies the absence of arbitrariness; in legal parlance, this translates into the exercise of
proper discretion and to the observance of due process. Thus, the question we have to answer in
deciding this case is whether the Secretary's actions have been reasonable in light of the parties'
positions and the evidence they presented.
xxxx
This Court has recognized the Secretary of Labor's distinct expertise in the study and settlement of labor
disputes falling under his power of compulsory arbitration. It is also well-settled that factual findings of
labor administrative officials, if supported by substantial evidence, are entitled not only to great respect
but even to finality. x x x
But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise
of the Secretary's arbitral functions; his findings in an arbitration case are usually based on position
papers and their supporting documents (as they are in the present case), and not on the thorough
examination of the parties' contending claims that may be present in a court trial and in the face-to-face
adversarial process that better insures the proper presentation and appreciation of evidence. There may
also be grave abuse of discretion where the board, tribunal or officer exercising judicial function fails to
consider evidence adduced by the parties. Given the parties' positions on the justiciability of the issues
before us, the question we have to answer is one that goes into the substance of the Secretary's
disputed orders: Did the Secretary properly consider and appreciate the evidence presented before
him?
xxxx
While We do not seek to enumerate in this decision the factors that should affect wage determination,
we must emphasize that a collective bargaining dispute such as this one requires due consideration and
proper balancing of the interests of the parties to the dispute and of those who might be affected by the

dispute. To our mind, the best way in approaching this task holistically is to consider the available
objective facts, including, where applicable, factors such as the bargaining history of the company, the
trends and amounts of arbitrated and agreed wage awards and the company's previous CBAs, and
industry trends in general. As a rule, affordability or capacity to pay should be taken into account but
cannot be the sole yardstick in determining the wage award, especially in a public utility like
MERALCO.1wphi1 In considering a public utility, the decision maker must always take into account the
"public interest" aspects of the case; MERALCO's income and the amount of money available for
operating expenses including labor costs are subject to State regulation. We must also keep in
mind that high operating costs will certainly and eventually be passed on to the consuming public as
MERALCO has bluntly warned in its pleadings.
We take note of the "middle ground" approach employed by the Secretary in this case which we do not
necessarily find to be the best method of resolving a wage dispute. Merely finding the midway point
between the demands of the company and the union, and "splitting the difference" is a simplistic
solution that fails to recognize that the parties may already be at the limits of the wage levels they can
afford. It may lead to the danger too that neither of the parties will engage in principled bargaining; the
company may keep its position artificially low while the union presents an artificially high position, on
the fear that a "Solomonic" solution cannot be avoided. Thus, rather than encourage agreement, a
"middle ground approach" instead promotes a "play safe" attitude that leads to more deadlocks than to
successfully negotiated CBAs.27
Thus, we rule that the Secretary of Labor gravely abused her discretion when she relied on the
unaudited financial statements of petitioner corporation in determining the wage award because such
evidence is self-serving and inadmissible. Not only did this violate the December 19, 2003 Order28 of the
Secretary of Labor herself to petitioner corporation to submit its complete audited financial statements,
but this may have resulted to a wage award that is based on an inaccurate and biased picture of
petitioner corporation's capacity to pay one of the more significant factors in making a wage award.
Petitioner corporation has offered no reason why it failed and/or refused to submit its audited financial
statements for the past five years relevant to this case. This only further casts doubt as to the veracity
and accuracy of the unaudited financial statements it submitted to the Secretary of Labor. Verily, we
cannot countenance this procedure because this could unduly deprive labor of its right to a just share in
the fruits of production29 and provide employers with a means to understate their profitability in order
to defeat the right of labor to a just wage.
We also note with disapproval the manner by which the Secretary of Labor issued the wage award in
this case, effectively paying lip service to the guidelines we laid down in Meralco. To elaborate, the
Secretary of Labor held:
Based on such factors as BARGAINING HISTORY, TRENDS OFARBITRATED AND AGREED AWARDS AND
INDUSTRY TRENDS, in general, we hold that vis--vis the Unions demands and the Companys offers, as
follows:
UNION[S] DEMANDS
For the FIRST YEAR:

COMPANYS OFFERS
P36

For the SECOND YEAR: 36

For the First 18 months:

P18

For the Second 18 months: 18

For the THIRD YEAR:

36

TOTAL:

=======
P108
for
three (3) years

=======
P36
for 36 months

this Office awards the following wage increases:

For the FIRST YEAR:

P18

For the SECOND YEAR: 15

For the THIRD YEAR:

12P
===
=
45

for three (3) years30

As can be seen, the Secretary of Labor failed to indicate the actual data upon which the wage award was
based.1wphi1It even appears that she utilized the "middle ground" approach which we precisely
warned against in Meralco . Factors such as the actual and projected net operating income, impact of
the wage increase on net operating income, the company's previous CBAs, and industry trends were not
discussed in detail so that the precise bases of the wage award are not discernible on the face of the
Decision. The contending parties are effectively precluded from seeking a review of the wage award,
even if proper under our ruling in Meralco , because of the general but unsubstantiated statement in the
Decision that the wage award was based on factors like the bargaining history, trends of arbitrated and
agreed awards, and industry trends. In fine, there is no way of determining if the Secretary of Labor
utilized the proper evidence, figures or data in arriving at the subject wage award as well as the
reasonableness thereof. This falls short of the requirement of administrative due process obligating the
decision-maker to adjudicate the rights of the parties in such a manner that they can know the various
issues involved and the reasons for the decision rendered.31
Based on the foregoing, we hold that the Secretary of Labor gravely abused her discretion in making the
subject wage award. The appellate court, thus, correctly remanded this case to the Secretary of Labor
for the proper determination of the wage award which should utilize, among others, the audited
financial statements of petitioner corporation and state with sufficient clarity the facts and law on which
the wage award is based.
The modification of the arbitral award
on health benefits from P1,300.00 to
P1,390.00 was proper.
The CA held that the Secretary of Labor gravely abused her discretion when the latter
awarded P1,300.00 as premium payment for each covered employee because the minutes of the
October 17, 2003 collective bargaining negotiations between the parties showed that they had
previously agreed to a higher P1,390.00 premium payment for each covered employee. However,
petitioner corporation claims that it never agreed to this higher amount as borne out by the same

minutes. The final offer of petitioner corporation on this item was allegedly to provide onlyP1,300.00
(not P1,390.00) as premium payment for each covered employee.
We have reviewed the minutes32 of the October 17, 2003 collective bargaining negotiations adverted to
by both parties. A fair reading thereof indicates that the issue of premium payments underwent several
proposals and counter-proposals from petitioner corporation and respondent union, respectively. The
last proposal of petitioner corporation relative thereto was to allot P1,390.00 as premium payment per
covered employee provided that it (petitioner corporation) would not shoulder the premium payments
of the employees dependents. For its part, respondent union accepted the proposal provided that the
premium payment would be renegotiated on the second and third years of the CBA. Consequently, both
parties agreed at the minimum that the premium payment shall be P1,390.00 per covered employee
and the remaining point of contention was whether the premium payment could be renegotiated on the
second and third years of the CBA. It was, thus, grave abuse of discretion on the part of the Secretary of
Labor to reduce the award to P1,300.00 which is below the minimum of P1,390.00 previously agreed
upon by the parties. We also note that in the proceedings before the CA, respondent union only pleaded
for the award of the P1,390.00 premium payment per covered employee33 thereby effectively waiving
its proposal on the renegotiation of the premium payment on the second and third years of the CBA.
WHEREFORE, the Petition is DENIED. The February 17, 2006 Amended Decision of the Court of Appeals
in CA-G.R. SP Nos. 80839, 81639, and 83168 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

B. Civil Code
1. Article 19
Dongon v. Rapid Movers, G.R. No. 163431, August 28, 2013
G.R. No. 163431

August 28, 2013

NATHANIEL
N.
DONGON, PETITIONER,
vs.
RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO, JR., RESPONDENTS.
DECISION

BERSAMIN, J.:
The prerogative of the employer to dismiss an employee on the ground of willful disobedience to
company policies must be exercised in good faith and with due regard to the rights of labor.
The Case
By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October 24,
2003,1whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the National
Labor Relations Commission (NLRC) in his favor.2 The NLRC had thereby reversed the ruling dated
September 10, 2001 of the Labor Arbiter dismissing his complaint for illegal dismissal.3
Antecedents
The following background facts of this case are stated in the CAs assailed decision, viz:
From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business while
private respondent Nathaniel T. Dongon is a former truck helper leadman.
Private respondents area of assignment is the Tanduay Otis Warehouse where he has a job of
facilitating the loading and unloading [of the] petitioners trucks. On 23 April 2001, private respondent
and his driver, Vicente Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be
distributed to their clients.
Tanduays security guard called the attention of private respondent as to the fact that Mr. Villaruz[s]
was not wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that he
will secure a special permission from the management to warrant the orderly release of goods.
Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by
reason of such misrepresentation , private respondent and Mr. Villaruz got a clearance from Tanduay for
the release of the goods. However, the security guard, who saw the misrepresentation committed by
private respondent and Mr. Villaruz, accosted them and reported the matter to the management of
Tanduay.
On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed
from the petitioning Company.
On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x4
In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers and
Forwarders Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner, considering
that: (1) he had admitted lending his company ID to driver Vicente Villaruz; (2) his act had constituted
mental dishonesty and deceit amounting to breach of trust; (3) Rapid Movers relationship with Tanduay
had been jeopardized by his act; and (4) he had been banned from all the warehouses of Tanduay as a
result, leaving Rapid Movers with no available job for him.5

On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not
discharged its burden to prove the validity of petitioners dismissal from his employment. It opined that
Rapid Movers did not suffer any pecuniary damage from his act; and that his dismissal was a penalty
disproportionate to the act of petitioner complained of. It awarded him backwages and separation pay
in lieu of reinstatement, to wit:
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED ordering
the payment of his backwages from April 25, 2001 up to the finality of this decision and in lieu of
reinstatement, he should be paid his separation pay from date of hire on May 2, 1994 up to the finality
hereof.
SO ORDERED.6
Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the part
of the NLRC, to wit:
I.
x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS] ILLEGAL ALLEGEDLY FOR
BEING GROSSLY DISPROPORTIONATE TO THE OFFENSE COMMITTED IN THAT NEITHER THE PETITIONERS
NOR ITS CLIENT TANDUAY SUFFERED ANY PECUNIARY DAMAGE THEREFROM THEREBY IMPLYING THAT
FOR A DISHONEST ACT/MISCONDUCT TO BE A GROUND FOR DISMISSAL OF AN EMPLOYEE, THE SAME
MUST AT LEAST HAVE RESULTED IN PECUNIARY DAMAGE TO THE EMPLOYER;
II.
x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT IN THE LIGHT OF ITS
PERCEIVED CONFLICTING DATES OF THE LETTER OF TANDUAY TO RAPID MOVERS (JANUARY 25, 2001)
AND THE OCCURRENCE OF THE INCIDENT ON APRIL 25, 2001 WHEN SAID CONFLICT OF DATES
CONSIDERING THE EVIDENCE ON RECORD, WAS MORE APPARENT THAN REAL.7
Ruling of the CA
On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor
Arbiter, and upholding the right of Rapid Movers to discipline its workers, holding thusly:
There is no dispute that the private respondent lent his I.D. Card to another employee who used the
same in entering the compound of the petitioner customer, Tanduay. Considering that this amounts to
dishonesty and is provided for in the petitioning Companys Manual of Discipline, its imposition is but
proper and appropriate.
It is basic in any enterprise that an employee has the obligation of following the rules and regulations of
its employer. More basic further is the elementary obligation of an employee to be honest and truthful
in his work. It should be noted that honesty is one of the foremost criteria of an employer when hiring a
prospective employee. Thus, we see employers requiring an NBI clearance or police clearance before
formally accepting an applicant as their employee. Such rules and regulations are necessary for the
efficient operation of the business.

Employees who violate such rules and regulations are liable for the penalties and sanctions so provided,
e.g., the Companys Manual of Discipline (as in this case) and the Labor Code.
The argument of the respondent commission that no pecuniary damage was sustained is off-tangent
with the facts of the case. The act of lending an ID is an act of dishonesty to which no pecuniary estimate
can be ascribed for the simple reason that no monetary equation is involved. What is involved is plain
and simple adherence to truth and violation of the rules. The act of uttering or the making of a
falsehood does not need any pecuniary estimate for the act to gestate to one punishable under the
labor laws. In this case, the illegal use of the I.D. Card while it may appear to be initially trivial is of
crucial relevance to the petitioners customer, Tanduay, which deals with drivers and leadmen
withdrawing goods and merchandise from its warehouse. For those with criminal intentions can use
anothers ID to asport goods and merchandise.
Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that the
offense does not only constitute dishonesty but also willful disobedience to the lawful order of the
Company, e.g., to observe at all time the terms and conditions of the Manual of Discipline. Article 282 of
the Labor Code provides:
"Termination by Employer An employer may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
x x x." (Emphasis, supplied)
The constitutional protection afforded to labor does not condone wrongdoings by the employee; and an
employers power to discipline its workers is inherent to it. As honesty is always the best policy, the
Court is convinced that the ruling of the Labor Arbiter is more in accord with the spirit of the Labor
Code. "The Constitutional policy of providing full protection to labor is not intended to oppress or
destroy management (Capili vs. NLRC, 270 SCRA 488[1997]." Also, in Atlas Fertilizer Corporation vs.
NLRC, 273 SCRA 549 [1997], the Highest Magistrate declared that "The law, in protecting the rights of
the laborers, authorizes neither oppression nor self-destruction of the employer."
WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002 Decision of
respondent Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10 September 2001
Decision of Labor Arbiter Vicente R. Layawen is ordered REINSTATED. No costs.
SO ORDERED.8
Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004.9
Undaunted, the petitioner is now on appeal.
Issue

Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience. He
contends that:
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN SUSTAINING THE DECISION
DATED 10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R. LAYAWEN WHERE THE LATTER RULED THAT
BY LENDING HIS ID TO VILLARUZ, PETITIONER (COMPLAINANT) COMMITTED MISREPRESENTATION AND
DECEIT CONSTITUTING MENTAL DISHONESTY WHICH CANNOT BE DISCARDED AS INSIGNIFICANT OR
TRIVIAL.10
Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his employment
as driver; and that the CA gravely abused its discretion in disregarding his showing that he did not
violate Rapid Movers rules and regulations but simply performed his work in line with the duties
entrusted to him, and in not appreciating his good faith and lack of any intention to willfully disobey the
companys rules.
In its comment,11 Rapid Movers prays that the petition for certiorari be dismissed for being an improper
remedy and apparently resorted to as a substitute for a lost appeal; and insists that the CA did not
commit grave abuse of discretion.1wphi1
In his reply,12 petitioner submits that his dismissal was a penalty too harsh and disproportionate to his
supposed violation; and that his dismissal was inappropriate due to the violation being his first infraction
that was even committed in good faith and without malice.
Based on the parties foregoing submissions, the issues to be resolved are, firstly: Was the petition
improper and dismissible?; and, secondly: If the petition could prosper, was the dismissal of petitioner
on the ground of willful disobedience to the company regulation lawful?
Ruling
The petition has merit.
1.
Petition should not be dismissed
In St. Martin Funeral Home v. National Labor Relations Commission,13 the Court has clarified that parties
seeking the review of decisions of the NLRC should file a petition for certiorari in the CA on the ground
of grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC.
Thereafter, the remedy of the aggrieved party from the CA decision is an appeal via petition for review
on certiorari.14
The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out
that the petition was really one for certiorari under Rule 65 of the Rules of Court due to its basis being
the commission by the CA of a grave abuse of its discretion and because the petition was filed beyond
the reglementary period of appeal under Rule 45. Hence, Rapid Movers insists that the Court should
dismiss the petition because certiorari under Rule 65 could not be a substitute of a lost appeal under
Rule 45.

Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an
appeal by petition for review on certiorari under Rule 45 of the Rules of Court and an original action for
certiorari under Rule 65 of the Rules of Court are mutually exclusive, not alternative nor successive,
remedies.15 On several occasions, however, the Court has treated a petition for certiorari as a petition
for review on certiorari when: (a) the petition has been filed within the 15-day reglementary
period;16 (b) public welfare and the advancement of public policy dictate such treatment; (c) the broader
interests of justice require such treatment; (d) the writs issued were null and void; or (e) the questioned
decision or order amounts to an oppressive exercise of judicial authority.17
The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in the
broader interest of substantial justice, particularly because the NLRCs appellate adjudication was set
aside by the CA, and in order to put at rest the doubt that the CA, in so doing, exercised its judicial
authority oppressively. Whether the petition was proper or not should be of less importance than
whether the CA gravely erred in undoing and setting aside the determination of the NLRC as a reviewing
forum vis--vis the Labor Arbiter. We note in this regard that the NLRC had declared the dismissal of
petitioner to be harsh and not commensurate to the infraction committed. Given the spirit and intention
underlying our labor laws of resolving a doubtful situation in favor of the working man, we will have to
review the judgment of the CA to ascertain whether the NLRC had really committed grave abuse of its
discretion. This will settle the doubts on the propriety of terminating petitioner, and at the same time
ensure that justice is served to the parties.18
2.
Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal
Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had
acted in good faith and with the sole intention of facilitating deliveries for Rapid Movers when he
allowed Villaruz to use his company ID.
Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an
employee under Article 296 (formerly Article 282) of the Labor Code.19 For willful disobedience to be a
ground, it is required that: (a) the conduct of the employee must be willful or intentional; and (b) the
order the employee violated must have been reasonable, lawful, made known to the employee, and
must pertain to the duties that he had been engaged to discharge.20 Willfulness must be attended by a
wrongful and perverse mental attitude rendering the employees act inconsistent with proper
subordination.21 In any case, the conduct of the employee that is a valid ground for dismissal under the
Labor Code constitutes harmful behavior against the business interest or person of his employer. 22 It is
implied that in every act of willful disobedience, the erring employee obtains undue advantage
detrimental to the business interest of the employer.
Under the foregoing standards, the disobedience attributed to petitioner could not be justly
characterized as willful within the contemplation of Article 296 of the Labor Code. He neither benefitted
from it, nor thereby prejudiced the business interest of Rapid Movers. His explanation that his deed had
been intended to benefit Rapid Movers was credible. There could be no wrong or perversity on his part
that warranted the termination of his employment based on willful disobedience.

Rapid Movers argues, however, that the strict implementation of company rules and regulations should
be accorded respect as a valid exercise of its management prerogative. It posits that it had the
prerogative to terminate petitioner for violating its following company rules and regulations, to wit:
(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa
operations, maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2); and
(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang alituntunin
ng kumpanya" (Article 5.28).23
We cannot sustain the argument of Rapid Movers.
It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of
disciplinary measures on its employees. But the exercise of a management prerogative like this is not
limitless, but hemmed in by good faith and a due consideration of the rights of the worker.24 In this light,
the management prerogative will be upheld for as long as it is not wielded as an implement to
circumvent the laws and oppress labor.25
To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant
circumstances have been appreciated and evaluated with the goal of ensuring that the ground for
dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious and
grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in keeping
with the spirit of our Constitution and laws to lean over backwards in favor of the working class, and
with the mandate that every doubt must be resolved in their favor.26
Although we recognize the inherent right of the employer to discipline its employees, we should still
ensure that the employer exercises the prerogative to discipline humanely and considerately, and that
the sanction imposed is commensurate to the offense involved and to the degree of the infraction. The
discipline exacted by the employer should further consider the employees length of service and the
number of infractions during his employment.27The employer should never forget that always at stake in
disciplining its employee are not only his position but also his livelihood,28 and that he may also have a
family entirely dependent on his earnings.29
Considering that petitioners motive in lending his company ID to Villaruz was to benefit Rapid Movers
as their employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to
Rapid Movers clients, and considering also that petitioner had rendered seven long unblemished years
of service to Rapid Movers, his dismissal was plainly unwarranted. The NLRCs reversal of the decision of
the Labor Arbiter by holding that penalty too harsh and disproportionate to the wrong attributed to him
was legally and factually justified, not arbitrary or whimsical. Consequently, for the CA to pronounce
that the NLRC had thereby gravely abused its discretion was not only erroneous but was itself a grave
abuse of discretion amounting to lack of jurisdiction for not being in conformity with the pertinent laws
and jurisprudence. We have held that a conclusion or finding derived from erroneous considerations is
not a mere error of judgment but one tainted with grave abuse of discretion.30

WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision promulgated by
the Court of Appeals on October 24, 2003; REINSTATES the decision of the National Labor Relations
Commission rendered on June 17, 2002; and ORDERS respondents to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice

Cirtex Employees v. Cirtex, G.R. No. 190515, November 15, 2010

THIRD DIVISION
CIRTEK EMPLOYEES LABOR UNIONFEDERATION OF FREE WORKERS,
Petitioner,

- versus -

CIRTEK ELECTRONICS, INC.,

Respondent.

G.R. No. 190515

Present:
CARPIO MORALES, J., Chairperson,
DE-CASTRO,*
BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.
Promulgated:

November 15, 2010

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

DECISION

CARPIO MORALES, J.:

Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated inside the
Laguna Technopark, had an existing Collective Bargaining Agreement (CBA) with Cirtek Employees Labor
Union-Federation of Free Workers (petitioner) for the period January 1, 2001 up to December 31,
2005. Prior to the 3rd year of the CBA, the parties renegotiated its economic provisions but failed to
reach a settlement, particularly on the issue of wage increases. Petitioner thereupon declared a
bargaining deadlock and filed a Notice of Strike with the National Conciliation and Mediation Board-

Regional Office No. IV (NCMB-RO IV) on April 26, 2004. Respondent, upon the other hand, filed a Notice
of Lockout on June 16, 2004.
While the conciliation proceedings were ongoing, respondent placed seven union officers
including the President, a Vice President, the Secretary and the Chairman of the Board of Directors
under preventive suspension for allegedly spearheading a boycott of overtime work. The officers were
eventually dismissed from employment, prompting petitioner to file another Notice of Strike which was,
after conciliation meetings, converted to a voluntary arbitration case. The dismissal of the officers was
later found to be legal, hence, petitioner appealed.
In the meantime, as amicable settlement of the CBA was deadlocked, petitioner went on strike
on June 20, 2005. By Order[1] dated June 23, 2005, the Secretary of Labor assumed jurisdiction over the
controversy and issued a Return to Work Order which was complied with.
Before the Secretary of Labor could rule on the controversy, respondent created a Labor
Management Council (LMC) through which it concluded with the remaining officers of petitioner a
Memorandum of Agreement (MOA)[2] providing for daily wage increases of P6.00 per day effective
January 1, 2004 and P9.00 per day effective January 1, 2005. Petitioner submitted the MOA via Motion
and Manifestation[3] to the Secretary of Labor, alleging that the remaining officers signed the MOA
under respondents assurance that should the Secretary order a higher award of wage increase,
respondent would comply.
By Order[4] dated March 16, 2006, the Secretary of Labor resolved the CBA deadlock by awarding
a wage increase of from P6.00 to P10.00 per day effective January 1, 2004 and from P9.00 to P15.00 per
day effective January 1, 2005, and adopting all other benefits as embodied in the MOA.
Respondent moved for a reconsideration of the Decision as petitioners vice-president submitted
a Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang ika-4 ng Agosto 2005,[5] stating
that the union members were waiving their rights and benefits under the Secretarys
Decision. Reconsideration of the Decision was denied by Resolution[6] of August 12, 2008, hence,
respondent filed a petition for certiorari before the Court of Appeals.
By Decision[7] of September 24, 2009, the appellate court ruled in favor of respondent and
accordingly set aside the Decision of the Secretary of Labor. It held that the Secretary of Labor gravely
abused his discretion in not respecting the MOA. It did not give credence to the minutes of the
meeting[8] that attended the forging of the MOA as it was not verified, nor to the Paliwanag[9] submitted
by respondent union members explaining why they signed the MOA as it was not notarized.
Petitioners motion for reconsideration having been denied by Resolution[10] of December 2,
2009, the present petition was filed, maintaining that the Secretary of Labors award is in order, being in
accord with the parties CBA history respondent having already granted P15.00 per day for
2001, P10.00 per day for 2002, and P10.00 per day for 2003, and that the Secretary has the power to
grant awards higher than what are stated in the CBA.
Respecting the MOA, petitioner posits that it was surreptitiously entered into [in] bad faith, it
having been forged without the assistance of the Federation of Free Workers or counsel, adding that
respondent could have waited for the Secretarys resolution of the pending CBA deadlock or that the
MOA could have been concluded before representatives of the Secretary of Labor.
The relevant issues for resolution are 1) whether the Secretary of Labor is authorized to give an award
higher than that agreed upon in the MOA, and 2) whether the MOA was entered into and ratified by the
remaining officers of petitioner under the condition, which was not incorporated in the MOA, that
respondent would honor the Secretary of Labors award in the event that it is higher.
The Court resolves both issues in the affirmative.
It is well-settled that the Secretary of Labor, in the exercise of his power to assume jurisdiction under
Art. 263 (g)[11] of the Labor Code, may resolve all issues involved in the controversy including the award
of wage increases and benefits.[12] While an arbitral award cannot per se be categorized as an agreement

voluntarily entered into by the parties because it requires the intervention and imposing power of the
State thru the Secretary of Labor when he assumes jurisdiction, the arbitral award can be considered
an approximation of a collective bargaining agreement which would otherwise have been entered into
by the parties, hence, it has the force and effect of a valid contract obligation.[13]
That the arbitral award was higher than that which was purportedly agreed upon in the MOA is
of no moment. For the Secretary, in resolving the CBA deadlock, is not limited to considering the MOA
as basis in computing the wage increases. He could, as he did, consider the financial
documents[14] submitted by respondent as well as the parties bargaining history and respondents
financial outlook and improvements as stated in its website.[15]
It bears noting that since the filing and submission of the MOA did not have the effect of
divesting the Secretary of his jurisdiction, or of automatically disposing the controversy, then neither
should the provisions of the MOA restrict the Secretarys leeway in deciding the matters before him.
The appellate courts brushing aside of the Paliwanag and the minutes of the meeting that resulted in
the conclusion of the MOA because they were not verified and notarized, thus violating, so the appellate
court reasoned, the rules on parol evidence, does not lie. Like any other rule on evidence, parol
evidence should not be strictly applied in labor cases.
The reliance on the parol evidence rule is misplaced. In labor cases pending
before the Commission or the Labor Arbiter, the rules of evidence prevailing in courts
of law or equity are not controlling. Rules of procedure and evidence are not applied in
a very rigid and technical sense in labor cases. Hence, the Labor Arbiter is not precluded
from accepting and evaluating evidence other than, and even contrary to, what is stated
in the CBA.[16] (emphasis supplied)
While a contract constitutes the law between the parties, this is so in the present case with
respect to the CBA, not to the MOA in which even the unions signatories had expressed reservations
thereto. But even assuming arguendo that the MOA is treated as a new CBA, since it is imbued with
public interest, it must be construed liberally and yield to the common good.
While the terms and conditions of a CBA constitute the law between the
parties, it is not, however, an ordinary contract to which is applied the principles of
law governing ordinary contracts. A CBA, as a labor contract within the contemplation
of Article 1700 of the Civil Code of the Philippines which governs the relations between
labor and capital, is not merely contractual in nature but impressed with public
interest, thus, it must yield to the common good. As such, it must be construed
liberally rather than narrowly and technically, and the courts must place a practical and
realistic construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.[17] (emphasis and underscoring
supplied)
WHEREFORE, the petition is GRANTED. The Decision dated September 24, 2009 and the Resolution
dated December 2, 2009 of the Court of Appeals are REVERSED and SET ASIDE and the Order dated
March 16, 2006 and Resolution dated August 12, 2008 of the Secretary of Labor are REINSTATED.
SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

PNCC Traffic v. PNCC, G.R. No. 171231, February 17, 2010

Republic of the Philippines
Supreme Court
Manila
THIRD DIVISION

G.R. No. 171231

Present:

PNCC SKYWAY TRAFFIC MANAGEMENT AND

SECURITY DIVISION WORKERS ORGANIZATION
(PSTMSDWO), represented by its President,
RENE SORIANO,

CORONA, J., Chairperson,

Petitioner,

NACHURA,

VELASCO, JR.,

PERALTA, and
MENDOZA, JJ.
- versus -

Promulgated:
PNCC SKYWAY CORPORATION,
Respondent.

February 17, 2010

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

DECISION

PERALTA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set
aside the Decision[1] and the Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP. No. 87069, which
annulled and set aside the Decision and Order of the Voluntary Arbitrator dated July 12, 2004 and
August 11, 2004, respectively.
The factual antecedents are as follows:

Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers' Organization
(PSTMSDWO) is a labor union duly registered with the Department of Labor and Employment (DOLE).
Respondent PNCC Skyway Corporation is a corporation duly organized and operating under and by
virtue of the laws of the Philippines.
On November 15, 2002, petitioner and respondent entered into a Collective Bargaining Agreement
(CBA) incorporating the terms and conditions of their agreement which included vacation leave and
expenses for security license provisions.
The pertinent provisions of the CBA relative to vacation leave and sick leave are as follows:

ARTICLE VIII
VACATION LEAVE AND SICK LEAVE
Section 1. Vacation Leave.
[a] Regular Employees covered by the bargaining unit who have completed at least one [1] year
of continuous service shall be entitled to vacation leave with pay depending on the length of
service as follows:
1-9 years of service - 15 working days
10-15 years of service - 16 working days
16-20 years of service - 17 working days
21-25 years of service - 18 working days
26 and above years of service - 19 working days.
[b] The company shall schedule the vacation leave of employees during the year taking into
consideration the request of preference of the employees.(emphasis supplied)

[c] Any unused vacation leave shall be converted to cash and shall be paid to the employees on
the first week of December each year.

ARTICLE XXI
Section 6. Security License All covered employees must possess a valid License
[Security Guard License] issued by the Chief, Philippine National Police or his duly
authorized representative, to perform his duties as security guard. All expenses of
security guard in securing/renewing their licenses shall be for their personal account.
Guards, securing/renewing their license must apply for a leave of absence and/or a
change of schedule. Any guard who fails to renew his security guard license should be
placed on forced leave until such time that he can present a renewed security license.
In a Memorandum dated December 29, 2003,[3] respondent's Head of the Traffic Management and
Security Department (TMSD) published the scheduled vacation leave of its TMSD personnel for the year
2004. Thereafter, the Head of the TMSD issued a Memorandum[4] dated January 9, 2004 to all TMSD
personnel. In the said memorandum, it was provided that:

SCHEDULED VACATION LEAVE WITH PAY.

The 17 days (15 days SVL plus 2-day-off) scheduled vacation leave (SVL) with
pay for the year 2004 had been published for everyone to take a vacation with pay
which will be our opportunity to enjoy quality time with our families and perform our
other activities requiring our personal attention and supervision. Swapping of SVL
schedule is allowed on a one-on-one basis by submitting a written request at least 30
days before the actual schedule of SVL duly signed by the concerned parties. However,
the undersigned may consider the re-scheduling of the SVL upon the written request of
concerned TMSD personnel at least 30 days before the scheduled SVL. Re-scheduling
will be evaluated taking into consideration the TMSDs operational requirement.

Petitioner objected to the implementation of the said memorandum. It insisted that the individual
members of the union have the right to schedule their vacation leave. It opined that the unilateral
scheduling of the employees' vacation leave was done to avoid the monetization of their vacation leave
in December 2004. This was allegedly apparent in the memorandum issued by the Head
HRD,[5] addressed to all department heads, which provides:
FOR : All Dept. Heads
FROM : Head, HRD
SUBJECT : Leave Balances as of January 01, 2004
DATE : January 9, 2004
We are furnishing all the departments the leave balances of their respective
staff as of January 01, 2004, so as to have them monitor and program the schedule of
such leave.

Please consider the leave credit they earned each month [1-2-0], one day and
two hours in anticipation of the later schedule. As we are targeting the zero conversion
comes December 2004, it is suggested that the leave balances as of to date be given
preferential scheduling.
x x x.
Petitioner also demanded that the expenses for the required in-service training of its member
security guards, as a requirement for the renewal of their license, be shouldered by the
respondent. However, the respondent did not accede to petitioner's demands and stood firm on its
decision to schedule all the vacation leave of petitioner's members.
Due to the disagreement between the parties, petitioner elevated the matter to the DOLE-NCMB for
preventive mediation. For failure to settle the issue amicably, the parties agreed to submit the issue
before the voluntary arbitrator.
The voluntary arbitrator issued a Decision dated July 12, 2004, the dispositive portion of which reads:
WHEREFORE, premises all considered, declaring that:
a) The scheduling of all vacation leaves under Article VIII, Section 6, thereof, shall be
under the discretion of the union members entitled thereto, and the management to
convert them into cash all the leaves which the management compelled them to use.
b) To pay the expenses for the in-service-training of the company security guards, as a
requirement for renewal of licenses, shall not be their personal account but that of the
company.
All other claims are dismissed for lack of merit.
SO ORDERED.[6]

Respondent filed a motion for reconsideration, which the voluntary arbitrator denied in the
Order[7] dated August 11, 2004.
Aggrieved, on October 22, 2004, respondent filed a Petition for Certiorari with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction with the CA, and the CA rendered a Decision
dated October 4, 2005,[8] annulling and setting aside the decision and order of the voluntary
arbitrator. The CA ruled that since the provisions of the CBA were clear, the voluntary arbitrator has no
authority to interpret the same beyond what was expressly written.
Petitioner filed a motion for reconsideration, which the CA denied through a Resolution dated January
23, 2006.[9] Hence, the instant petition assigning the following errors:
I

WITH ALL DUE RESPECT, THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS
[THIRTEENTH DIVISION] ERRED IN HOLDING THAT:
A) THE MANAGEMENT HAS THE SOLE DISCRETION TO SCHEDULE THE VACATION LEAVE
OF HEREIN PETITIONER.
B) THE MANAGEMENT IS NOT LIABLE FOR THE IN-SERVICE-TRAINING OF THE SECURITY
GUARDS.
II
THE HONORABLE PUBLIC RESPONDENT ERRED IN OVERSEEING THE CONVERSION
ASPECT OF THE UNUSED LEAVE.

Before considering the merits of the petition, We shall first address the objection based on technicality
raised by respondent.

Respondent alleged that the petition was fatally defective due to the lack of authority of its union
president, Rene Soriano, to sign the certification and verification against forum shopping on petitioner's
behalf. It alleged that the authority of Rene Soriano to represent the union was only conferred on June
30, 2006 by virtue of a board resolution,[10] while the Petition for Review had long been filed on February
27, 2006. Thus, Rene Soriano did not possess the required authority at the time the petition was filed on
February 27, 2006.
The petitioner countered that the Board Resolution[11] dated June 30, 2006 merely reiterated the
authority given to the union president to represent the union, which was conferred as early as October
2005. The resolution provides in part that:
WHEREAS, in a meeting duly called for October 2005, the Union decided to file a
Motion for Reconsideration and if the said motion be denied, to file a petition before
the Supreme Court. (Emphasis supplied)

Thus, the union president, representing the union, was clothed with authority to file the petition on
February 27, 2006.
The purpose of requiring verification is to secure an assurance that the allegations in the petition have
been made in good faith; or are true and correct, not merely speculative. This requirement is simply a
condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it
fatally defective. Truly, verification is only a formal, not a jurisdictional, requirement.
With respect to the certification of non-forum shopping, it has been held that the certification
requirement is rooted in the principle that a party-litigant shall not be allowed to pursue simultaneous
remedies in different fora, as this practice is detrimental to an orderly judicial procedure. However, this
Court has relaxed, under justifiable circumstances, the rule requiring the submission of such certification
considering that, although it is obligatory, it is not jurisdictional. Not being jurisdictional, it can be
relaxed under the rule of substantial compliance.[12]

In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,[13] We said that:

In a slew of cases, however, we have recognized the authority of some
corporate officers to sign the verification and certification against forum shopping.
In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of a
general manager or acting general manager to sign the verification and certificate
against forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed
by an employment specialist who had not even presented any proof of her authority to
represent the company; in Novelty Philippines, Inc., v. CA, we ruled that a personnel
officer who signed the petition but did not attach the authority from the company is
authorized to sign the verification and non-forum shopping certificate; and in Lepanto
Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we
ruled that the Chairperson of the Board and President of the Company can sign
the verification and certificate against non-forum shopping even without the submission
of the boards authorization.

In sum, we have held that the following officials or employees of the company
can sign the verification and certification without need of a board resolution: (1) the
Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General
Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.

While the above cases do not provide a complete listing of authorized

signatories to the verification and certification required by the rules, the determination
of the sufficiency of the authority was done on a case to case basis. The rationale
applied in the foregoing cases is to justify the authority of corporate officers or
representatives of the corporation to sign the verification or certificate against forum
shopping, being in a position to verify the truthfulness and correctness of the allegations
in the petition.

In the case at bar, We rule that Rene Soriano has sufficient authority to sign the verification and
certification against forum shopping for the following reasons: First, the resolution dated June 30, 2006
was merely a reiteration of the authority given to the Union President to file a case before this Court
assailing the CBA violations committed by the management, which was previously conferred during a
meeting held on October 5, 2005. Thus, it can be inferred that even prior to the filing of the petition
before Us on February 27, 2006, the president of the union was duly authorized to represent the union
and to file a case on its behalf. Second, being the president of the union, Rene Soriano is in a position to
verify the truthfulness and correctness of the allegations in the petition. Third, assuming that Mr.
Soriano has no authority to file the petition on February 27, 2006, the passing on June 30, 2006 of a
Board Resolution authorizing him to represent the union is deemed a ratification of his prior execution,
on February 27, 2006, of the verification and certificate of non-forum shopping, thus curing any defects
thereof. Ratification in agency is the adoption or confirmation by one person of an act performed on his
behalf by another without authority.[14]
We now go to the merits of the case.

Petitioner insisted that their union members have the preference in scheduling their vacation leave. On
the other hand, respondent argued that Article VIII, Section 1 (b) gives the management the final say
regarding the vacation leave schedule of its employees. Respondent may take into consideration the
employees' preferred schedule, but the same is not controlling.

Petitioner also requested the respondent to provide and/or shoulder the expenses for the in-service
training of their members as a requirement for the renewal of the security guards' license.Respondent
did not accede to the union's request invoking the CBA provision which states that all expenses of
security guards in securing /renewing their license shall be for their personal account. The petitioner
further argued that any doubts or ambiguity in the interpretation of the CBA should be resolved in favor
of the laborer.
As to the issue on vacation leaves, the same has no merit.
The rule is that where the language of a contract is plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or aids. The intention of the parties must be gathered
from that language, and from that language alone. Stated differently, where the language of a written
contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it
purports to mean, unless some good reason can be assigned to show that the words used should be
understood in a different sense.[15]
In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII, Section 1 (b)
of the CBA categorically provides that the scheduling of vacation leave shall be under the option of the
employer. The preference requested by the employees is not controlling because respondent retains its
power and prerogative to consider or to ignore said request.
Thus, if the terms of a CBA are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulation shall prevail.[16] In fine, the CBA must be strictly adhered to and
respected if its ends have to be achieved, being the law between the parties. In Faculty Association of
Mapua Institute of Technology (FAMIT) v. Court of Appeals,[17] this Court held that the CBA during its
lifetime binds all the parties. The provisions of the CBA must be respected since its terms and conditions
constitute the law between the parties. The parties cannot be allowed to change the terms they agreed
upon on the ground that the same are not favorable to them.
As correctly found by the CA:
The words of the CBA were unequivocal when it provided that The company
shall schedule the vacation leave of employees during the year taking into consideration
the request of preference of the employees. The word shall in this instance connotes an
imperative command, there being nothing to show a different intention. The only
concession given under the subject clause was that the company should take into
consideration the preferences of the employees in scheduling the vacations; but
certainly, the concession never diminished the positive right of management to
schedule the vacation leaves in accordance with what had been agreed and stipulated
upon in the CBA.
There is, thus, no basis for the Voluntary Arbitrator to interpret the subject
provision relating to the schedule of vacation leaves as being subject to the discretion of

the union members. There is simply nothing in the CBA which grants the union members
this right.
It must be noted the grant to management of the right to schedule vacation
leaves is not without good reason. Indeed, if union members were given the unilateral
discretion to schedule their vacation leaves, the same may result in significantly
crippling the number of key employees of the petitioner manning the toll ways on
holidays and other peak seasons, where union members may wittingly or unwittingly
choose to have a vacation. Put another way, the grant to management of the right to
schedule vacation leaves ensures that there would always be enough people manning
and servicing the toll ways, which in turn assures the public plying the same orderly and
efficient toll way service.
Indeed, the multitude or scarcity of personnel manning the tollways should not rest upon the option of
the employees, as the public using the skyway system should be assured of its safety, security and
convenience.

Although the preferred vacation leave schedule of petitioner's members should be given priority, they
cannot demand, as a matter of right, that their request be automatically granted by the respondent. If
the petitioners were given the exclusive right to schedule their vacation leave then said right should
have been incorporated in the CBA. In the absence of such right and in view of the mandatory provision
in the CBA giving respondent the right to schedule the vacation leave of its employees, compliance
therewith is mandated by law.
In the grant of vacation leave privileges to an employee, the employer is given the leeway to impose
conditions on the entitlement to and commutation of the same, as the grant of vacationleave is not a
standard of law, but a prerogative of management.[18] It is a mere concession or act of grace of the
employer and not a matter of right on the part of the employee.[19] Thus, it is well within the power and
authority of an employer to impose certain conditions, as it deems fit, on the grant of vacation leaves,
such as having the option to schedule the same.
Along that line, since the grant of vacation leave is a prerogative of the employer, the latter can compel
its employees to exhaust all their vacation leave credits. Of course, any vacation leave credits left
unscheduled by the employer, or any scheduled vacation leave that was not enjoyed by the employee
upon the employer's directive, due to exigencies of the service, must be converted to cash, as provided
in the CBA. However, it is incorrect to award payment of the cash equivalent of vacation leaves that
were already used and enjoyed by the employees. By directing the conversion to cash of all utilized and
paid vacation leaves, the voluntary arbitrator has licensed unjust enrichment in favor of the petitioner
and caused undue financial burden on the respondent. Evidently, the Court cannot tolerate this.
It would seem that petitioner's goal in relentlessly arguing that its members preferred vacation leave
schedule should be given preference is not allowed to them to avail themselves of their respective
vacation leave credits at all but, instead, to convert these into cash.
In Cuajo v. Chua Lo Tan,[20] We said that the purpose of a vacation leave is to afford a laborer a chance to
get a much-needed rest to replenish his worn-out energy and acquire a new vitality to enable him to
efficiently perform his duties, and not merely to give him additional salary and bounty.

This purpose is manifest in the Memorandum dated January 9, 2004[21] addressed to all TMSD Personnel
which provides that:
SCHEDULED VACATION LEAVE WITH PAY
The 17 days (15 days SVL plus 2-Day-Off) scheduled vacation leave (SVL) with
pay for the year 2004 had been published for everyone to take a vacation with pay
which will be our opportunity to enjoy quality time with our families and perform our
other activities requiring our personal attention and supervision.(Emphasis ours.)

Accordingly, the vacation leave privilege was not intended to serve as additional salary, but as a nonmonetary benefit. To give the employees the option not to consume it with the aim of converting it to
cash at the end of the year would defeat the very purpose of vacation leave.

Petitioner's contention that labor contracts should be construed in favor of the laborer is without basis
and, therefore, inapplicable to the present case. This rule of construction does not benefit petitioners
because, as stated, there is here no room for interpretation. Since the CBA is clear and unambiguous, its
terms should be implemented as they are written.
This brings Us to the issue of who is accountable for the in-service training of the security guards. On this
point, We find the petition meritorious.
Although it is a rule that a contract freely entered into between the parties should be respected, since a
contract is the law between the parties, there are, however, certain exceptions to the rule,
specifically Article 1306 of the Civil Code, which provides:
The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.

Moreover, the relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good x x x.[22] The supremacy of the
law over contracts is explained by the fact that labor contracts are not ordinary contracts; they are
imbued with public interest and therefore are subject to the police power of the state.[23] However, it
should not be taken to mean that provisions agreed upon in the CBA are absolutely beyond the ambit of
judicial review and nullification. If the provisions in the CBA run contrary to law, public morals, or public
policy, such provisions may very well be voided.

In the present case, Article XXI, Section 6 of the CBA provides that All expenses of security guards in
securing /renewing their licenses shall be for their personal account. A reading of the provision would
reveal that it encompasses all possible expenses a security guard would pay or incur in order to secure

or renew his license. In-service training is a requirement for the renewal of a security guards
license.[24] Hence, following the aforementioned CBA provision, the expenses for the same must be on
the personal account of the employee. However, the 1994 Revised Rules and Regulations Implementing
Republic Act No. 5487 provides the following:
Section 17. Responsibility for Training and Progressive Development. It is the
primary responsibility of all operators private security agency and company security
forces to maintain and upgrade the standards of efficiency, discipline, performance and
competence of their personnel. To attain this end, each duly licensed private security
agency and company security force shall establish a staff position for training and
appoint a training officer whose primary functions are to determine the training needs
of the agency/guards in relation to the needs of the client/ market/ industry, and to
supervise and conduct appropriate training requirements. All private security personnel
shall be re-trained at least once very two years.
Section 12. In service training. - a. To maintain and/or upgrade the standard of
efficiency, discipline and competence of security guards and detectives, company
security force and private security agencies upon prior authority shall conduct-in-service
training at least two (2) weeks duration for their organic members by increments of at
least two percent (2%) of their total strength. Where the quality of training is better
served by centralization, the CSFD Directors may activate a training staff from local
talents to assist. The cost of training shall be pro-rated among the participating
agencies/private companies. All security officer must undergo in-service training at
least once every two (2) years preferably two months before his or her birth month.

Since it is the primary responsibility of operators of company security forces to maintain and upgrade
the standards of efficiency, discipline, performance and competence of their personnel, it follows that
the expenses to be incurred therein shall be for the personal account of the company. Further, the
intent of the law to impose upon the employer the obligation to pay for the cost of its employees
training is manifested in the aforementioned laws provision that Where the quality of training is better
served by centralization, the CFSD Directors may activate a training staff from local talents to assist. The
cost of training shall be pro-rated among the participating agencies/private companies. It can be
gleaned from the said provision that cost of training shall be pro-rated among participating agencies and
companies if the training is best served by centralization. The law mandates pro-rating of expenses
because it would be impracticable and unfair to impose the burden of expenses suffered by all
participants on only one participating agency or company. Thus, it follows that if there is no
centralization, there can be no pro-rating, and the company that has its own security forces shall
shoulder the entire cost for such training. If the intent of the law were to impose upon individual
employees the cost of training, the provision on the pro-rating of expenses would not have found print
in the law.
Further, petitioner alleged that prior to the inking of the CBA, it was the respondent company providing
for the in-service training of the guards.[25] Respondent never controverted the said allegation and is
thus deemed to have admitted the same.[26] Implicit from respondent's actuations was its
acknowledgment of its legally mandated responsibility to shoulder the expenses for in-service training.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of Appeals,
dated October 4, 2005 and January 23, 2006, respectively, in CA-G.R. SP. No. 87069 is MODIFIED. The
cost of in-service training of the respondent company's security guards shall be at the expense of the
respondent company. This case is remanded to the voluntary arbitrator for the computation of the
expenses incurred by the security guards for their in-service training, and respondent company is
directed to reimburse its security guards for the expenses incurred.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

Magis Center v. Manalo, G.R. No. 178835, February 13, 2009

THIRD DIVISION
MAGIS YOUNG ACHIEVERSLEARNING CENTER and

G.R. No. 178835

MRS. VIOLETA T. CARIO,

Petitioners,

Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus -

AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
PERALTA, JJ.

ADELAIDA P. MANALO,

Promulgated:

Respondent.
February 13, 2009
x------------------------------------------------------------------------------------x

DECISION
NACHURA, J.:

This is a petition for review on certiorari of the Decision dated January 31, 2007 and of the
Resolution dated June 29, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 93917 entitled Magis
Young Achievers Learning Center and Violeta T. Cario v. National Labor Relations Commission,
3rd Division, Quezon City, and Adelaida P. Manalo.
The pertinent facts are as follows:
On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher and acting principal of
petitioner Magis Young Achievers Learning Center with a monthly salary ofP15,000.00.
It appears on record that respondent, on March 29, 2003, wrote a letter of resignation
addressed to Violeta T. Cario, directress of petitioner, which reads:
Dear Madame:
I am tendering my irrevocable resignation effective April 1, 2003 due to
personal and family reasons.
I would like to express my thanks and gratitude for the opportunity, trust and
confidence given to me as an Acting Principal in your prestigious school.
God bless and more power to you.
Sincerely yours,
(Signed)
Mrs. ADELAIDA P. MANALO[1]

On March 31, 2003, respondent received a letter of termination from petitioner, viz.:
Dear Mrs. Manalo:

Greetings of Peace!
The Board of Trustees of the Cario Group of Companies, particularly that of Magis Young
Achievers Learning Center convened, deliberated and came up with a Board Resolution
that will strictly impose all means possible to come up with a cost-cutting scheme. Part
of that scheme is a systematic reorganization which will entail streamlining of human
resources.
As agreed upon by the Board of Directors, the position of PRINCIPAL will be abolished
next school year. Therefore, we regret to inform you that we can no longer renew your
contract, which will expire on March 31, 2003. Thus, thank you for the input you have
given to Magis during your term of office as Acting Principal. The function of the said
position shall be delegated to other staff members in the organization.
Hoping for your understanding on this matter and we pray for your future endeavors.
Very truly yours,
(Signed)
Mrs. Violeta T. Cario
School Directress
Noted by:
(Signed)
Mr. Severo Cario
President[2]

On April 4, 2003, respondent instituted against petitioner a Complaint[3] for illegal dismissal and nonpayment of 13th month pay, with a prayer for reinstatement, award of full backwages and moral and
exemplary damages.
In her position paper,[4] respondent claimed that her termination violated the provisions of her
employment contract, and that the alleged abolition of the position of Principal was not among the
grounds for termination by an employer under Article 282[5] of the Labor Code. She further asserted that
petitioner infringed Article 283[6] of the Labor Code, as the required 30-day notice to the Department of
Labor and Employment (DOLE) and to her as the employee, and the payment of her separation pay were
not complied with. She also claimed that she was terminated from service for the alleged expiration of
her employment, but that her contract did not provide for a fixed term or period. She likewise prayed
for the payment of her 13th month pay under Presidential Decree (PD) No. 851.
Petitioner, in its position paper,[7] countered that respondent was legally terminated because the oneyear probationary period, from April 1, 2002 to March 3, 2003, had already lapsed and she failed to

meet the criteria set by the school pursuant to the Manual of Regulation for Private Schools, adopted by
the then Department of Education, Culture and Sports (DECS), paragraph 75 of which provides that:
(75) Full-time teachers who have rendered three years of satisfactory service shall be
considered permanent.

On December 3, 2003, Labor Arbiter (LA) Renell Joseph R. dela Cruz rendered a Decision[8] dismissing the
complaint for illegal dismissal, including the other claims of respondent, for lack of merit, except that it
ordered the payment of her 13th month pay in the amount of P3,750.00. The LA ratiocinated in this wise:
It is our considered opinion [that] complainant was not dismissed, much less,
illegally. On the contrary, she resigned. It is hard for us to imagine complainant would
accede to sign a resignation letter as a precondition to her hiring considering her
educational background. Thus, in the absence of any circumstance tending to show she
was probably coerced her resignation must be upheld. x x x
x x x The agreement (Annex 1 to Respondents [petitioners] Position Paper; Annex A to
Complainants Position Paper) by its very nature and terms is a contract of employment
with a period (from 01 April 2002 to 31 March 2003, Annex 1 to Respondents Position
Paper). Complainants observation that the space reserved for the duration and
effectivity of the contract was left blank (Annex A to Complainants [respondents]
Position Paper) to our mind is plain oversight. Read in its entirety, it is a standard
contract which by its very terms and conditions speaks of a definite period of
employment. The parties could have not thought otherwise. The notification
requirement in the contract in case of termination before the expiration of the period
confirms it. x x x

On appeal, on October 28, 2005, the National Labor Relations Commission (NLRC), Third
Division,[9] in its Decision[10] dated October 28, 2005, reversed the Arbiters judgment.Petitioner was
ordered to reinstate respondent as a teacher, who shall be credited with one-year service of
probationary employment, and to pay her the amounts of P3,750.00 andP325,000.00 representing her
13th month pay and backwages, respectively. Petitioners motion for reconsideration was denied in the
NLRCs Resolution[11] dated January 31, 2006.
Imputing grave abuse of discretion on the part of the NLRC, petitioner went up to the CA via a petition
for certiorari. The CA, in its Decision dated January 31, 2007, affirmed the NLRC decision and dismissed
the petition. It likewise denied petitioners motion for reconsideration in the Resolution dated June 29,
2007. Hence, this petition anchored on the following grounds
I. THE COURT OF APPEALS ERRED WHEN IT CONCLUDED THAT THE RESIGNATION OF
RESPONDENT MANALO DID NOT BECOME EFFECTIVE DUE TO ALLEGED LACK OF
ACCEPTANCE;

II. THE COURT OF APPEALS ERRED WHEN IT RULED THAT RESPONDENT MANALO IS A
PERMANENT EMPLOYEE;
III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONTRACT OF
EMPLOYMENT BETWEEN PETITIONER AND RESPONDENT DID NOT STIPULATE A
PERIOD.[12]

Before going to the core issues of the controversy, we would like to restate basic legal principles
governing employment of secondary school teachers in private schools, specifically, on the matter of
probationary employment.
A probationary employee or probationer is one who is on trial for an employer, during which the latter
determines whether or not he is qualified for permanent employment. The probationary employment is
intended to afford the employer an opportunity to observe the fitness of a probationary employee while
at work, and to ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain whether he is
qualified for permanent employment, the probationer, on the other hand, seeks to prove to the
employer that he has the qualifications to meet the reasonable standards for permanent employment.
Thus, the word probationary, as used to describe the period of employment, implies the purpose of the
term or period, not its length.[13]
Indeed, the employer has the right, or is at liberty, to choose who will be hired and who will be
declined. As a component of this right to select his employees, the employer may set or fix a
probationary period within which the latter may test and observe the conduct of the former before
hiring him permanently.[14]
But the law regulates the exercise of this prerogative to fix the period of probationary
employment. While there is no statutory cap on the minimum term of probation, the law sets a
maximum trial period during which the employer may test the fitness and efficiency of the employee.
The general rule on the maximum allowable period of probationary employment is found in
Article 281 of the Labor Code, which states:
Art. 281. Probationary Employment. Probationary employment shall not exceed six (6) months
from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards made known by
the employer at the time of his engagement. An employee who is allowed to work after
a probationary period shall be considered a regular employee.

This upper limit on the term of probationary employment, however, does not apply to all classes of
occupations.
For academic personnel in private schools, colleges and universities, probationary employment
is governed by Section 92 of the 1992 Manual of Regulations for Private Schools[15](Manual), which
reads:
Section 92. Probationary Period. Subject in all instances to compliance with the Department and
school requirements, the probationary period for academic personnel shall not be more
than three (3) consecutive years of satisfactory service for those in the elementary and
secondary levels, six (6) consecutive regular semesters of satisfactory service for those
in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those
in the tertiary level where collegiate courses are offered on a trimester basis.[16]

This was supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated February 7, 1996, which provides
that the probationary period for academic personnel shall not be more than three (3) consecutive
school years of satisfactory service for those in the elementary and secondary levels.[17] By this
supplement, it is made clear that the period of probation for academic personnel shall be counted in
terms of school years, and not calendar years.[18] Then, Section 4.m(4)[c] of the Manual delineates the
coverage of Section 92, by defining the term academic personnel to include:
(A)ll school personnel who are formally engaged in actual teaching service or in research
assignments, either on full-time or part-time basis; as well as those who possess certain
prescribed academic functions directly supportive of teaching, such as registrars,
librarians, guidance counselors, researchers, and other similar persons. They include
school officials responsible for academic matters, and may include other school
officials.[19]

The reason for this disparate treatment was explained many years ago in Escudero v. Office of
the President of the Philippines,[20] where the Court declared:
However, the six-month probationary period prescribed by the Secretary of Labor is
merely the general rule. x x x
It is, thus, clear that the Labor Code authorizes different probationary periods,
according to the requirements of the particular job. For private school teachers, the
period of probation is governed by the 1970 Manual of Regulations for Private Schools x
x x.[21]

The probationary period of three years for private school teachers was, in fact, confirmed earlier
in Labajo v. Alejandro,[22] viz.:

The three (3)-year period of service mentioned in paragraph 75 (of the Manual of
Regulations for Private Schools) is of course the maximum period or upper limit, so to
speak, of probationary employment allowed in the case of private school teachers. This
necessarily implies that a regular or permanent employment status may, under certain
conditions, be attained in less than three (3) years. By and large, however, whether or
not one has indeed attained permanent status in ones employment, before the passage
of three (3) years, is a matter of proof.

Over the years, even with the enactment of a new Labor Code and the revision of the Manual,
the rule has not changed.
Thus, for academic personnel in private elementary and secondary schools, it is only after one has
satisfactorily completed the probationary period of three (3) school years and is rehired that he acquires
full tenure as a regular or permanent employee. In this regard, Section 93 of the Manual pertinently
provides:
Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be
made regular or permanent. Full-time teachers who have satisfactorily completed their
probationary period shall be considered regular or permanent.

Accordingly, as held in Escudero, no vested right to a permanent appointment shall accrue until the
employee has completed the prerequisite three-year period necessary for the acquisition of a
permanent status. Of course, the mere rendition of service for three consecutive years does not
automatically ripen into a permanent appointment. It is also necessary that the employee be a full-time
teacher, and that the services he rendered are satisfactory.[23]
The common practice is for the employer and the teacher to enter into a contract, effective for one
school year. At the end of the school year, the employer has the option not to renew the contract,
particularly considering the teachers performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary
employment continues. Again, at the end of that period, the parties may opt to renew or not to renew
the contract. If renewed, this second renewal of the contract for another school year would then be the
last year since it would be the third school year of probationary employment. At the end of this third
year, the employer may now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable standards of competence and
efficiency set by the employer. For the entire duration of this three-year period, the teacher remains
under probation. Upon the expiration of his contract of employment, being simply on probation, he
cannot automatically claim security of tenure and compel the employer to renew his employment

contract.[24] It is when the yearly contract is renewed for the third time that Section 93 of the Manual
becomes operative, and the teacher then is entitled to regular or permanent employment status.
It is important that the contract of probationary employment specify the period or term of its
effectivity. The failure to stipulate its precise duration could lead to the inference that the contract is
binding for the full three-year probationary period.[25]
All this does not mean that academic personnel cannot acquire permanent employment status earlier
than after the lapse of three years. The period of probation may be reduced if the employer, convinced
of the fitness and efficiency of a probationary employee, voluntarily extends a permanent appointment
even before the three-year period ends. Conversely, if the purpose sought by the employer is neither
attained nor attainable within the said period, the law does not preclude the employer from terminating
the probationary employment on justifiable ground;[26] or, a shorter probationary period may be
incorporated in a collective bargaining agreement.[27] But absent any circumstances which unmistakably
show that an abbreviated probationary period has been agreed upon, the three-year probationary term
governs.
Be that as it may, teachers on probationary employment enjoy security of tenure. In Biboso v. Victorias
Milling Co., Inc.,[28] we made the following pronouncement:
This is, by no means, to assert that the security of tenure protection of the Constitution does not
apply to probationary employees. x x x During such period, they could remain in their
positions and any circumvention of their rights, in accordance with the statutory
scheme, is subject to inquiry and thereafter correction by the Department of Labor.

The ruling in Biboso simply signifies that probationary employees enjoy security of tenure during the
term of their probationary employment. As such, they cannot be removed except for cause as provided
by law, or if at the end of every yearly contract during the three-year period, the employee does not
meet the reasonable standards set by the employer at the time of engagement. But this guarantee of
security of tenure applies only during the period of probation. Once that period expires, the
constitutional protection can no longer be invoked.[29]
All these principles notwithstanding, we do not discount the validity of fixed-term employment where
the fixed period of employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the former over
the latter.[30]

It does not necessarily follow that where the duties of the employees consist of activities usually
necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on
a period of time for the performance of such activities.[31] Thus, in St. Theresas School of Novaliches
Foundation v. NLRC,[32] we held that a contractual stipulation providing for a fixed term of nine (9)
months, not being contrary to law, morals, good customs, public order and public policy, is valid, binding
and must be respected, as it is the contract of employment that governs the relationship of the parties.
Now, to the issues in the case at bench.
There should be no question that the employment of the respondent, as teacher, in petitioner school on
April 18, 2002 is probationary in character, consistent with standard practice in private schools. In light
of our disquisition above, we cannot subscribe to the proposition that the respondent has acquired
regular or permanent tenure as teacher. She had rendered service as such only from April 18, 2002 until
March 31, 2003. She has not completed the requisite three-year period of probationary employment, as
provided in the Manual. She cannot, by right, claim permanent status.
There should also be no doubt that respondents appointment as Acting Principal is merely temporary, or
one that is good until another appointment is made to take its place.[33] An acting appointment is
essentially a temporary appointment, revocable at will. The undisturbed unanimity of cases shows that
one who holds a temporary appointment has no fixed tenure of office; his employment can be
terminated any time at the pleasure of the appointing power without need to show that it is for
cause.[34] Further, in La Salette of Santiago v. NLRC,[35] we acknowledged the customary arrangement in
private schools to rotate administrative positions, e.g., Dean or Principal, among employees, without the
employee so appointed attaining security of tenure with respect to these positions.
We are also inclined to agree with the CA that the resignation of the respondent[36] is not valid, not only
because there was no express acceptance thereof by the employer, but because there is a cloud of
doubt as to the voluntariness of respondents resignation.
Resignation is the voluntary act of an employee who finds himself in a situation where he believes that
personal reasons cannot be sacrificed in favor of the exigency of the service, and that he has no other
choice but to dissociate himself from employment.[37] Voluntary resignation is made with the intention
of relinquishing an office, accompanied by the act of abandonment.[38] It is the acceptance of an
employees resignation that renders it operative.[39]
Furthermore, well-entrenched is the rule that resignation is inconsistent with the filing of a complaint
for illegal dismissal.[40] To be valid, the resignation must be unconditional, with the intent to operate as
such; there must be a clear intention to relinquish the position.[41] In this case, respondent actively

pursued her illegal dismissal case against petitioner, such that she cannot be said to have voluntarily
resigned from her job.
What is truly contentious is whether the probationary appointment of the respondent on April 18, 2002
was for a fixed period of one (1) year, or without a fixed term, inasmuch as the parties presented
different versions of the employment agreement. As articulated by the CA:
In plain language, We are confronted with two (2) copies of an agreement, one with a
negative period and one provided for a one (1) year period for its effectivity. Ironically,
none among the parties offered corroborative evidence as to which of the two (2)
discrepancies is the correct one that must be given effect. x x x.[42]

The CA resolved the impass in this wise:

Under this circumstance, We can only apply Article 1702 of the Civil Code which provides that, in
case of doubt, all labor contracts shall be construed in favor of the laborer. Then, too,
settled is the rule that any ambiguity in a contract whose terms are susceptible of
different interpretations must be read against the party who drafted it. In the case at
bar, the drafter of the contract is herein petitioners and must, therefore, be read against
their contention.[43]

We agree with the CA.

In this case, there truly existed a doubt as to which version of the employment agreement
should be given weight. In respondents copy, the period of effectivity of the agreement remained
blank. On the other hand, petitioners copy provided for a one-year period, surprisingly from April 1,
2002 to March 31, 2003, even though the pleadings submitted by both parties indicated that
respondent was hired on April 18, 2002. What is noticeable even more is that the handwriting indicating
the one-year period in petitioners copy is different from the handwriting that filled up the other needed
information in the same agreement.[44]
Thus, following Article 1702 of the Civil Code that all doubts regarding labor contracts should be
construed in favor of labor, then it should be respondents copy which did not provide for an express
period which should be upheld, especially when there are circumstances that render the version of
petitioner suspect. This is in line with the State policy of affording protection to labor, such that the
lowly laborer, who is usually at the mercy of the employer, must look up to the law to place him on
equal footing with his employer.[45]
In addition, the employment agreement may be likened into a contract of adhesion considering
that it is petitioner who insists that there existed an express period of one year from April 1, 2002 to

March 31, 2003, using as proof its own copy of the agreement. While contracts of adhesion are valid and
binding, in cases of doubt which will cause a great imbalance of rights against one of the parties, the
contract shall be construed against the party who drafted the same. Hence, in this case, where the very
employment of respondent is at stake, the doubt as to the period of employment must be construed in
her favor.
The other issue to resolve is whether respondent, even as a probationary employee, was illegally
dismissed. We rule in the affirmative.
As above discussed, probationary employees enjoy security of tenure during the term of their
probationary employment such that they may only be terminated for cause as provided for by law, or if
at the end of the probationary period, the employee failed to meet the reasonable standards set by the
employer at the time of the employees engagement. Undeniably, respondent was hired as a
probationary teacher and, as such, it was incumbent upon petitioner to show by competent evidence
that she did not meet the standards set by the school. This requirement, petitioner failed to
discharge. To note, the termination of respondent was effected by that letter stating that she was being
relieved from employment because the school authorities allegedly decided, as a cost-cutting measure,
that the position of Principal was to be abolished. Nowhere in that letter was respondent informed that
her performance as a school teacher was less than satisfactory.
Thus, in light of our ruling of Espiritu Santo Parochial School v. NLRC[46] that, in the absence of an express
period of probation for private school teachers, the three-year probationary period provided by the
Manual of Regulations for Private Schools must apply likewise to the case of respondent. In other words,
absent any concrete and competent proof that her performance as a teacher was unsatisfactory from
her hiring on April 18, 2002 up to March 31, 2003, respondent is entitled to continue her three-year
period of probationary period, such that from March 31, 2003, her probationary employment is deemed
renewed for the following two school years.[47]
Finally, we rule on the propriety of the monetary awards. Petitioner, as employer, is entitled to decide
whether to extend respondent a permanent status by renewing her contract beyond the three-year
period. Given the acrimony between the parties which must have been generated by this controversy, it
can be said unequivocally that petitioner had opted not to extend respondents employment beyond this
period. Therefore, the award of backwages as a consequence of the finding of illegal dismissal in favor of
respondent should be confined to the three-year probationary period. Computing her monthly salary
of P15,000.00 for the next two school years (P15,000.00 x 10 months x 2), respondent already having
received her full salaries for the year 2002-2003, she is entitled to a total amount
of P300,000.00.[48] Moreover, respondent is also entitled to receive her 13th month pay correspondent
to the said two school years, computed as yearly salary, divided by 12 months in a year, multiplied by 2,
corresponding to the school years 2003-2004 and 2004-2005, or P150,000.00 / 12 months x 2

= P25,000.00.Thus, the NLRC was correct in awarding respondent the amount of P325,000.00 as
backwages, inclusive of 13th month pay for the school years 2003-2004 and 2004-2005, and the amount
of P3,750.00 as pro-rated 13th month pay.
WHEREFORE, the petition is DENIED. The assailed Decision dated January 31, 2007 and the Resolution
dated June 29, 2007 of the Court of Appeals are AFFIRMED.
SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

2. Article 1700
3. Article 1702

C. Labor Code
1. Article 3
Moresco v. Cagalawan, G.R. No. 175170, September 5, 2012
G.R. No. 175170

September 5, 2012

MISAMIS ORIENTAL II ELECTRIC

vs.
VIRGILIO M. CAGALAWAN, Respondent.

SERVICE

COOPERATIVE

(MORESCO

II), Petitioner,

DECISION
DEL CASTILLO, J.:
In labor cases, strict adherence with the technical rules is not required.1 This literal policy, however,
should still conform with the rudiments of equitable principles of law. For instance, belated submission
of evidence may only be allowed if the delay is adequately justified and the evidence is clearly material
to establish the party's cause.2

By this Petition for Review on Certiorari,3 petitioner Misamis Oriental II Electric Service Cooperative
(MORESCO II) assails the Decision4 dated July 26, 2005 of the Court of Appeals (CA) in CA-G.R. SP No.
84991, which reversed and set aside the Resolutions dated February 27, 20045 and April 26, 20046 of the
National Labor Relations Commission (NLRC), and thereby reinstated the Labor Arbiters Decision7 dated
September 30, 2003 pronouncing respondent Virgilio M. Cagalawan (Cagalawan) to have been
constructively dismissed from employment. Also assailed is the CA Resolution8 dated September 6, 2006
which denied MORESCO IIs Motion for Reconsideration and granted Cagalawans Partial Motion for
Reconsideration.
Factual Antecedents
On September 1, 1993, MORESCO II, a rural electric cooperative, hired Cagalawan as a Disconnection
Lineman on a probationary basis. On March 1, 1994 Cagalawan was appointed to the same post this
time on a permanent basis.9 On July 17, 2001, he was designated as Acting Head of the disconnection
crew in Area III sub-office of MORESCO II in Balingasag, Misamis Oriental (Balingasag sub-office).10 In a
Memorandum11 dated May 9, 2002, MORESCO II General Manager Amado B. Ke-e (Ke-e) transferred
Cagalawan to Area I sub-office in Gingoog City, Misamis Oriental (Gingoog sub-office) as a member of
the disconnection crew. Said memorandum stated that the transfer was done "in the exigency of the
service."
In a letter12 dated May 15, 2002, Cagalawan assailed his transfer claiming he was effectively demoted
from his position as head of the disconnection crew to a mere member thereof. He also averred that his
transfer to the Gingoog sub-office is inconvenient and prejudicial to him as it would entail additional
travel expenses to and from work. He likewise sought clarification on what kind of exigency exists as to
justify his transfer and why he was the one chosen to be transferred.
In a Memorandum13 dated May 16, 2002, Ke-e explained that Cagalawans transfer was not a demotion
since he was holding the position of Disconnection Head only by mere designation and not by
appointment. Ke-e did not, however, state the basis of the transfer but instead advised Cagalawan to
just comply with the order and not to question managements legitimate prerogative to reassign him.
In reply, Cagalawan claimed that he was transferred because he executed an Affidavit14 in support of his
co-employee Jessie Rances, who filed an illegal dismissal case against MORESCO II.15 He emphasized
though that his action was not an act of disloyalty to MORESCO II, contrary to what was being accused
of him. Nonetheless, Cagalawan still reported for work at Gingoog sub-office on May 27, 2002 but
reserved his right to contest the legality of such transfer.16
Meanwhile and in view of Cagalawans transfer, Ke-e issued an order17 recalling the formers previous
designation as Acting Head of the disconnection crew of the Balingasag sub-office.
Cagalawan eventually stopped reporting for work. On July 1, 2002, he filed a Complaint for constructive
dismissal before the Arbitration branch of the NLRC against MORESCO II and its officers, Ke-e and Danilo
Subrado (Subrado), in their capacities as General Manager and Board Chairman, respectively.
Proceedings before the Labor Arbiter

When the Labor Arbiter, in an Order18 dated September 13, 2002, directed the parties to submit their
respective verified position papers, only Cagalawan complied.19 He alleged that his transfer was
unnecessary and was made only in retaliation for his having executed an affidavit in favor of a co-worker
and against MORESCO II. In support of his contention, Cagalawan submitted a certification20 executed by
the Head of the disconnection crew of the Gingoog sub-office, Teodoro Ortiz (Ortiz), attesting that the
said sub-office was not undermanned. In fact, when Cagalawan stopped working, no other employee
was transferred or hired in his stead, a proof that there were enough disconnection crew members in
Gingoog sub-office who can very well handle the assigned tasks. Moreover, Cagalawan claimed that his
transfer constituted a demotion from his position as Acting Head of the disconnection crew which he
had occupied for almost 10 months. As such, he should be considered regular in that position and
entitled to its corresponding salary.
Cagalawan further alleged that his transfer from Balingasag to Gingoog sub-office was tantamount to
illegal constructive dismissal for being prejudicial and inconvenient as he had to spend an additional
amount of P197.0021 a day, leaving him nothing of his salary. He therefore had no choice but to stop
working.
Aside from reinstatement and backwages, Cagalawan sought to recover damages and attorneys fees
because to him, his transfer was effected in a wanton, fraudulent, oppressive or malevolent manner.
Apart from MORESCO II, he averred that Ke-e and Subrado should also be held personally liable for
damages since the two were guilty of bad faith in effecting his transfer. He believed that Subrado had a
hand in his arbitrary transfer considering that he is the son-in-law of Subrados opponent in the recent
election for directorship in the electric cooperative. In fact, Subrado even asked a certain Cleopatra
Moreno Manuel to file a baseless complaint against him as borne out by the declaration of Bob Abao in
an affidavit.22
In view of MORESCO IIs failure to file a position paper, Cagalawan filed a Motion23 for the issuance of an
order to declare the case submitted for decision. This was granted in an Order24 dated March 14, 2003.
On September 30, 2003, the Labor Arbiter rendered a Decision25 declaring that Cagalawans transfer
constituted illegal constructive dismissal. Aside from finding merit in Cagalawans uncontroverted
allegation that the transfer became grossly inconvenient for him, the Labor Arbiter found no sufficient
reason for his transfer and that the same was calculated to rid him of his employment, impelled by a
vindictive motive after he executed an Affidavit in favor of a colleague and against MORESCO II.
Thus, the Labor Arbiter ordered Cagalawans reinstatement to the position of Collector and awarded
him backwages from the date of his transfer on May 16, 2002 up to his actual reinstatement. However,
the Labor Arbiter denied his prayer for regularization as head of the disconnection crew since the period
of six months which he claimed as sufficient to acquire regular status applies only to probationary
employment. Hence, the fact that he was acting as head of the disconnection crew for 10 months did
not entitle him to such position on a permanent basis. Moreover, the decision to promote him to the
said position should only come from the management.
With respect to damages, the Labor Arbiter found Ke-e to have acted capriciously in effecting the
transfer, hence, he awarded moral and exemplary damages to Cagalawan. Attorneys fees was likewise
adjudged in his favor.

The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is rendered declaring the transfer of complainant as
tantamount to constructive dismissal and ordering respondents to reinstate complainant to his position
as collector in Balingasag, Misamis Oriental without loss of seniority rights and to pay complainant the
following:
1. Backwages
- P 189,096.00
2. Exemplary damages - P 10,000.00
3. Moral damages
- P 20,000.00
4. Attorney's fee 10% - P 21,909.60
GRAND TOTAL AWARD P 241,005.60
SO ORDERED.26
Proceedings before the National Labor Relations Commission
MORESCO II and Cagalawan both appealed the Labor Arbiters Decision.
In its Memorandum on Appeal,27 MORESCO II invoked the liberal application of the rules and prayed for
the NLRC to admit its evidence on appeal. MORESCO II denied that Cagalawans transfer was done in
retaliation for executing an affidavit in favor of a co-worker. MORESCO II explained that the transfer was
in response to the request of the area manager in Gingoog sub-office for additional personnel in his
assigned area. To substantiate this, it submitted a letter28 dated May 8, 2002 from Gingoog sub-office
Area Manager, Engr. Ronel B. Canada (Engr. Canada), addressed to Ke-e. In said letter, Engr. Canada
requested for two additional disconnection linemen in order to attain the collection quota allocated in
his area. MORESCO II then averred that as against this letter of Engr. Canada who is a managerial
employee, the certification issued by Ortiz should be considered as incompetent since the latter is a
mere disconnection crew.
Moreover, Cagalawans claim of additional expenses brought about by his transfer, specifically for meal
and transportation, deserves no appreciation at all since he would still incur these expenses regardless
of his place of assignment and also considering that he was provided with a rented motorcycle with fuel
and oil allowance.
Also, MORESCO II intimated that it has no intention of removing Cagalawan from its employ especially
since his father-in-law was its previous Board Member. In fact, it was Cagalawan himself who committed
an act of insubordination when he abandoned his job.
In his Reply29 to MORESCO IIs Memorandum of Appeal, Cagalawan averred that the latter cannot
present any evidence for the first time on appeal without giving any valid reason for its failure to submit
its evidence before the Labor Arbiter as provided under the NLRC rules. Further, the evidence sought to
be presented by MORESCO II is not newly discovered evidence as to warrant its admission on appeal. In
particular, he claimed that the May 8, 2002 letter of Engr. Canada should have been submitted at the
earliest opportunity, that is, before the Labor Arbiter. MORESCO IIs failure to present the same at such
time thus raises suspicion that the document was merely fabricated for the purpose of appeal.

Moreover, Cagalawan claimed that if there was indeed a request from the Area Manager of Gingoog
sub-office for additional personnel as required by the exigency of the service, such reason should have
been mentioned in Ke-es May 16, 2002 Memorandum. In this way, the transfer would appear to have a
reasonable basis at the outset. However, no such mention was made precisely because the transfer was
without any valid reason.
Anent Cagalawans partial appeal,30 he prayed that the decision be modified in that he should be
reinstated as Disconnection Lineman and not as Collector.
The NLRC, through a Resolution31 dated February 27, 2004, set aside and vacated the Decision of the
Labor Arbiter and dismissed Cagalawans complaint against MORESCO II. The NLRC admitted MORESCO
IIs evidence even if submitted only on appeal in the interest of substantial justice. It then found said
evidence credible in showing that Cagalawans transfer to Gingoog sub-office was required in the
exigency of the cooperatives business interest. It also ruled that the transfer did not entail a demotion
in rank and diminution of pay as to constitute constructive dismissal and thus upheld the right of
MORESCO II to transfer Cagalawan in the exercise of its sound business judgment.
Cagalawan filed a Motion for Reconsideration32 but the same was denied by the NLRC in a
Resolution33 dated April 26, 2004.
Proceedings before the Court of Appeals
Cagalawan thus filed a Petition for Certiorari34 with the CA. In a Decision35 dated July 26, 2005, the CA
found the NLRC to have gravely abused its discretion in admitting MORESCO IIs evidence, citing Section
3, Rule V of the NLRC Rules of Procedure36 which prohibits the parties from making new allegations or
cause of action not included in the complaint or position paper, affidavits and other documents. It held
that what MORESCO II presented on appeal was not just an additional evidence but its entire evidence
after the Labor Arbiter rendered a Decision adverse to it. To the CA, MORESCO IIs belated submission of
evidence despite the opportunities given it cannot be countenanced as such practice "defeats speedy
administration of justice" and "smacks of unfairness."
The dispositive portion of the CA Decision reads:
IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is reinstated with the
modification that if reinstatement of petitioner is not feasible, he should be paid separation pay in
accordance with law.
SO ORDERED.37
MORESCO II filed a Motion for Reconsideration38 insisting that it may present evidence for the first time
on appeal as the NLRC is not precluded from admitting the same because technical rules are not binding
in labor cases. Besides, of paramount importance is the opportunity of the other party to rebut or
comment on the appeal, which in this case, was afforded to Cagalawan.
Cagalawan, for his part, filed a Partial Motion for Reconsideration,39 seeking modification of the Decision
by ordering his reinstatement to the position of Disconnection Lineman instead of Collector.

In a Resolution40 dated September 6, 2006, the CA maintained its ruling that MORESCO IIs unexplained
failure to present evidence or submit a position paper before the Labor Arbiter for almost 12 months
from receipt of Cagalawans position paper is intolerable and cannot be permitted. Hence, it denied its
Motion for Reconsideration. With respect to Cagalawans motion, the same was granted by the CA, viz:
Anent petitioners Partial Motion for Reconsideration, We find the same meritorious. The records of this
case reveal that prior to his constructive dismissal, petitioner was a Disconnection Lineman, not a
Collector, assigned at Balingasag, Misamis Oriental. Hence, We modify the dispositive portion of Our July
26, 2005 Decision, to read:
IN VIEW THEREOF, the petition is GRANTED. The Decision of the Labor Arbiter is reinstated with
modification that petitioner be reinstated to his position as Disconnection Lineman in Balingasag,
Misamis Oriental with further modification that if reinstatement of petitioner is not feasible, he should
be paid separation pay in accordance with law. 41(Emphasis in the original.)
Issues
MORESCO II thus filed this petition raising the following issues:
(1) Was the respondent constructively dismissed by the petitioner?
(2) Did the Court of Appeals err in reversing the NLRC?42
MORESCO II insists that Cagalawans transfer was necessary in order to attain the collection quota of the
Gingoog sub-office. It contests the credibility of Ortizs certification which stated that there was no need
for additional personnel in the Gingoog sub-office. According to it, Ortiz is not a managerial employee
but merely a disconnection crew who is not competent to make declarations in relation to MORESCO IIs
business needs. It likewise refutes Cagalawans claim of incurring additional expenses due to his transfer
which caused him inconvenience. In sum, it claims that Cagalawan was not constructively dismissed but
instead had voluntarily abandoned his job.
MORESCO II avers that the CAs ruling is not in accordance with jurisprudence on the matter of
admitting evidence on appeal in labor cases. It submits that the NLRC is correct in accepting its evidence
submitted for the first time on appeal in line with the basic precepts of equity and fairness. The NLRC
also correctly ruled in its favor after properly appreciating its evidence which had been rebutted and
contradicted by Cagalawan.
Our Ruling
The petition has no merit.
MORESCO
IIs
evidence cannot be permitted.

belated

submission

of

Labor tribunals, such as the NLRC, are not precluded from receiving evidence submitted on appeal as
technical rules are not binding in cases submitted before them.43 However, any delay in the submission

of evidence should be adequately explained and should adequately prove the allegations sought to be
proven.44
In the present case, MORESCO II did not cite any reason why it had failed to file its position paper or
present its cause before the Labor Arbiter despite sufficient notice and time given to do so. Only after an
adverse decision was rendered did it present its defense and rebut the evidence of Cagalawan by
alleging that his transfer was made in response to the letter-request of the area manager of the Gingoog
sub-office asking for additional personnel to meet its collection quota. To our mind, however, the
belated submission of the said letter-request without any valid explanation casts doubt on its credibility,
specially so when the same is not a newly discovered evidence. For one, the letter-request was dated
May 8, 2002 or a day before the memorandum for Cagalawans transfer was issued. MORESCO II could
have easily presented the letter in the proceedings before the Labor Arbiter for serious examination.
Why it was not presented at the earliest opportunity is a serious question which lends credence to
Cagalawans theory that it may have just been fabricated for the purpose of appeal.
It should also be recalled that after Cagalawan received the memorandum for his transfer to the
Gingoog sub-office, he immediately questioned the basis thereof through a letter addressed to Ke-e. If
at that time there was already a letter-request from the Gingoog area manager, Ke-e could have easily
referred to or specified this in his subsequent memorandum of May 16, 2002 which served as his
response to Cagalawans queries about the transfer. However, the said memorandum was silent in this
respect. Nevertheless, Cagalawan, for his part, faithfully complied with the transfer order but with the
reservation to contest its validity precisely because he was not adequately informed of its real basis.
The rule is that it is within the ambit of the employers prerogative to transfer an employee for valid
reasons and according to the requirement of its business, provided that the transfer does not result in
demotion in rank or diminution of salary, benefits and other privileges.45 This Court has always
considered the managements prerogative to transfer its employees in pursuit of its legitimate interests.
But this prerogative should be exercised without grave abuse of discretion and with due regard to the
basic elements of justice and fair play, such that if there is a showing that the transfer was unnecessary
or inconvenient and prejudicial to the employee, it cannot be upheld.46
Here, while we find that the transfer of Cagalawan neither entails any demotion in rank since he did not
have tenurial security over the position of head of the disconnection crew, nor result to diminution in
pay as this was not sufficiently proven by him, MORESCO IIs evidence is nevertheless not enough to
show that said transfer was required by the exigency of the electric cooperatives business interest.
Simply stated, the evidence sought to be admitted by MORESCO II is not substantial to prove that there
was a genuine business urgency that necessitated the transfer.
Notably, the only evidence adduced by MORESCO II to support the legitimacy of the transfer was the
letter-request of Engr. Canada. However, this piece of evidence cannot in itself sufficiently establish that
the Gingoog sub-office was indeed suffering from losses due to collection deficiency so as to justify the
assignment of additional personnel in the area. Engr. Canadas letter is nothing more than a mere
request for additional personnel to augment the number of disconnection crew assigned in the area.
While it mentioned that the areas collection efficiency should be improved and that there is a shortage
of personnel therein, it is, standing alone, self-serving and thus cannot be considered as competent
evidence to prove the accuracy of the allegations therein. MORESCO II could have at least presented
financial documents or any other concrete documentary evidence showing that the collection quota of
the Gingoog sub-office has not been met or could not be reached. It should have also submitted such

other documents which would show the lack of sufficient personnel in the area. Unfortunately, the area
managers letter provides no more than bare allegations which deserve not even the slightest credit.
When there is doubt between the evidence submitted by the employer and that submitted by the
employee, the scales of justice must be tilted in favor of the employee.47 This is consistent with the rule
that an employers cause could only succeed on the strength of its own evidence and not on the
weakness of the employees evidence.48Thus, MORESCO II cannot rely on the weakness of Ortizs
certification in order to give more credit to its own evidence. Self-serving and unsubstantiated
declarations are not sufficient where the quantum of evidence required to establish a fact is substantial
evidence, described as more than a mere scintilla.49 "The evidence must be real and substantial, and not
merely apparent."50 MORESCO II has miserably failed to discharge the onus of proving the validity of
Cagalawans transfer.
Clearly, not only was the delay in the submission of MORESCO IIs evidence not explained, there was
also failure on its part to sufficiently support its allegation that the transfer of Cagalawan was for a
legitimate purpose. This being the case, MORESCO IIs plea that its evidence be admitted in the interest
of justice does not deserve any merit.
Ke-e
and
Subrado,
could
not
be
held
Cagalawans monetary awards.

as

corporate
personally

liable

officers,
for

In the Decision of the Labor Arbiter, the manager of MORESCO II was held to have acted in an arbitrary
manner in effecting Cagalawans transfer such that moral and exemplary damages were awarded in the
latters favor. However, the said Decision did not touch on the issue of bad faith on the part of
MORESCO IIs officers, namely, Ke-e and Subrado. Consequently, no pronouncement was made as to
whether the two are also personally liable for Cagalawans money claims arising from his constructive
dismissal.
Still, we hold that Ke-e and Subrado cannot be held personally liable for Cagalawans money claims.
"Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some
moral obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent
or ill will; it partakes of the nature of fraud."51 Here, although we agree with the Labor Arbiter that Ke-e
acted in an arbitrary manner in effecting Cagalawans transfer, the same, absent any showing of some
dishonest or wrongful purpose, does not amount to bad faith.
Suffice it to say that bad faith must be established clearly and convincingly as the same is never
presumed.52Similarly, no bad faith can be presumed from the fact that Subrado was the opponent of
Cagalawans father-in-law in the election for directorship in the cooperative. Cagalawan's claim that this
was one of the reasons why he was transferred is a mere allegation without proof. Neither does
Subrado 's alleged instruction to file a complaint against Cagalawan bolster the Iatter's claim that the
former had malicious intention against him. As the Chairman of the Board of Directors of MORESCO II,
Subrado has the duty and obligation to act upon complaints of its clients. On the contrary, the Court
finds that Subrado had no participation whatsoever in Cagalawan's illegal dismissal; hence. the
imputation of bad faith against him is untenable.

WHEREFORE, the petition is DENIED. The Decision dated July 26, 2005 or the Court of Appeals in CA-G.R.
SP No. 84991 and its Resolution dated September 6, 2006, are AFFIRMED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

PAL v. PALEA, G.R. No. 85985, August 13, 1993

G.R. No. 85985 August 13, 1993
PHILIPPINE
AIRLINES,
INC.
(PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.

MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation
of a Code of Discipline among employees is a shared responsibility of the employer and the employees.
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The
Code was circulated among the employees and was immediately implemented, and some employees
were forthwith subjected to the disciplinary measures embodied therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before
the National Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with
the following remarks: "ULP with arbitrary implementation of PAL's Code of Discipline without notice
and prior discussion with Union by Management" (Rollo, p. 41). In its position paper, PALEA contended
that PAL, by its unilateral implementation of the Code, was guilty of unfair labor practice, specifically
Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the
Code had been circulated in limited numbers; that being penal in nature the Code must conform with
the requirements of sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial
to the rights of the employees. It prayed that implementation of the Code be held in abeyance; that PAL

should discuss the substance of the Code with PALEA; that employees dismissed under the Code be
reinstated and their cases subjected to further hearing; and that PAL be declared guilty of unfair labor
practice and be ordered to pay damages (pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules
and regulations regarding employess' conduct in carrying out their duties and functions, and alleging
that by implementing the Code, it had not violated the collective bargaining agreement (CBA) or any
provision of the Labor Code. Assailing the complaint as unsupported by evidence, PAL maintained that
Article 253 of the Labor Code cited by PALEA reffered to the requirements for negotiating a CBA which
was inapplicable as indeed the current CBA had been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated
when PAL unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the
Code as defective for, respectively, running counter to the construction of penal laws and making
punishable any offense within PAL's contemplation. These provisions are the following:
Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and
regulations of the company. Every employee is bound to comply with all applicable
rules, regulations, policies, procedures and standards, including standards of quality,
productivity and behaviour, as issued and promulgated by the company through its duly
authorized officials. Any violations thereof shall be punishable with a penalty to be
determined by the gravity and/or frequency of the offense.
Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The
penalty for an offense shall be determined on the basis of his past record of offenses of
any nature or the absence thereof. The more habitual an offender has been, the greater
shall be the penalty for the latest offense. Thus, an employee may be dismissed if the
number of his past offenses warrants such penalty in the judgment of management
even if each offense considered separately may not warrant dismissal. Habitual
offenders or recidivists have no place in PAL. On the other hand, due regard shall be
given to the length of time between commission of individual offenses to determine
whether the employee's conduct may indicate occasional lapses (which may
nevertheless require sterner disciplinary action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to
appear at the scheduled date. Interpreting such failure as a waiver of the parties' right to present
evidence, the labor arbiter considered the case submitted for decision. On November 7, 1986, a decision
was rendered finding no bad faith on the part of PAL in adopting the Code and ruling that no unfair labor
practice had been committed. However, the arbiter held that PAL was "not totally fault free" considering
that while the issuance of rules and regulations governing the conduct of employees is a "legitimate
management prerogative" such rules and regulations must meet the test of "reasonableness, propriety
and fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing
provision that makes punishable any offense one can think of in the company"; while Section 7, likewise
quoted above, is "objectionable for it violates the rule against double jeopardy thereby ushering in two
or more punishment for the same misdemeanor." (pp. 38-39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting
that PAL's assertion that it had furnished all its employees copies of the Code is unsupported by

documentary evidence, she stated that such "failure" on the part of PAL resulted in the imposition of
penalties on employees who thought all the while that the 1966 Code was still being followed. Thus, the
arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance . . . finds
application only after it has been conclusively shown that the law was circulated to all the parties
concerned and efforts to disseminate information regarding the new law have been exerted. (p.
39, Rollo.) She thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under the New Code of
Discipline and remand the same for further hearing; and
3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the
decision.
All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)
PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with
Presiding Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of
unfair labor practice committed by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the
NLRC made the following observations:
Indeed, failure of management to discuss the provisions of a contemplated code of
discipline which shall govern the conduct of its employees would result in the erosion
and deterioration of an otherwise harmonious and smooth relationship between them
as did happen in the instant case. There is no dispute that adoption of rules of conduct
or discipline is a prerogative of management and is imperative and essential if an
industry, has to survive in a competitive world. But labor climate has progressed, too. In
the Philippine scene, at no time in our contemporary history is the need for a
cooperative, supportive and smooth relationship between labor and management more
keenly felt if we are to survive economically. Management can no longer exclude labor
in the deliberation and adoption of rules and regulations that will affect them.
The complainant union in this case has the right to feel isolated in the adoption of the
New Code of Discipline. The Code of Discipline involves security of tenure and loss of
employment a property right! It is time that management realizes that to attain
effectiveness in its conduct rules, there should be candidness and openness by
Management and participation by the union, representing its members. In fact, our
Constitution has recognized the principle of "shared responsibility" between employers
and workers and has likewise recognized the right of workers to participate in "policy
and decision-making process affecting their rights . . ." The latter provision was
interpreted by the Constitutional Commissioners to mean participation in
"management"' (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of the code if conduct could have
accelerated and enhanced their feelings of belonging and would have resulted in
cooperation rather than resistance to the Code. In fact, labor-management cooperation
is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed decision in the sense that
the New Code of Discipline should be reviewed and discussed with complainant union,
particularly the disputed provisions [.] (T)hereafter, respondent is directed to furnish
each employee with a copy of the appealed Code of Discipline. The pending cases
adverted to in the appealed decision if still in the arbitral level, should be reconsidered
by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are
sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public respondents with grave abuse of
discretion in: (a) directing PAL "to share its management prerogative of formulating a Code of
Discipline"; (b) engaging in quasi-judicial legislation in ordering PAL to share said prerogative with the
union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to reconsider pending
cases still in the arbitral level (p. 7, Petition; p. 8,Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is whether
management may be compelled to share with the union or its employees its prerogative of formulating
a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the
sharing of responsibility therefor between employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211
of the Labor Code, that the law explicitly considered it a State policy "(t)o ensure the participation of
workers in decision and policy-making processes affecting the rights, duties and welfare." However,
even in the absence of said clear provision of law, the exercise of management prerogatives was never
considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that management's
prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the
company's right to implement a new system of distributing its products, but gave the following caveat:
So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements,
this
Court
will
uphold
them.
(at p. 28.)

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is
circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of
fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated
in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly established that the prerogative
being invoked is clearly a managerial one.
A close scrutiny of the objectionable provisions of the Code reveals that they are not purely businessoriented nor do they concern the management aspect of the business of the company as in the San
Miguel case. The provisions of the Code clearly have repercusions on the employee's right to security of
tenure. The implementation of the provisions may result in the deprivation of an employee's means of
livelihood which, as correctly pointed out by the NLRC, is a property right (Callanta, vs Carnation
Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on
infringement of constitutional rights, we must uphold the constitutional requirements for the protection
of labor and the promotion of social justice, for these factors, according to Justice Isagani Cruz, tilt "the
scales of justice when there is doubt, in favor of the worker" (Employees Association of the Philippine
American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business operations per
se and those which affect the rights of the employees. In treating the latter, management should see to
it that its employees are at least properly informed of its decisions or modes action. PAL asserts that all
its employees have been furnished copies of the Code. Public respondents found to the contrary, which
finding, to say the least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990,
PALEA in effect, recognized PAL's "exclusive right to make and enforce company rules and regulations to
carry out the functions of management without having to discuss the same with PALEA and much less,
obtain the latter'sconformity thereto" (pp. 11-12, Petitioner's Memorandum; pp 180-181, Rollo.)
Petitioner's view is based on the following provision of the agreement:
The Association recognizes the right of the Company to determine matters of
management it policy and Company operations and to direct its manpower.
Management of the Company includes the right to organize, plan, direct and control
operations, to hire, assign employees to work, transfer employees from one
department, to another, to promote, demote, discipline, suspend or discharge
employees for just cause; to lay-off employees for valid and legal causes, to introduce
new or improved methods or facilities or to change existing methods or facilities and the
right to make and enforce Company rules and regulations to carry out the functions of
management.
The exercise by management of its prerogative shall be done in a just reasonable,
humane and/or lawful manner.
Such provision in the collective bargaining agreement may not be interpreted as cession of employees'
rights to participate in the deliberation of matters which may affect their rights and the formulation of
policies relative thereto. And one such mater is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the
discussion of matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442)
was amended by Republic Act No. 6715, it was already declared a policy of the State, "(d) To promote
the enlightenment of workers concerning their rights and obligations . . . as employees." This was, of
course, amplified by Republic Act No 6715 when it decreed the "participation of workers in decision and
policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be
saddled with the "obligation" of sharing management prerogatives as during the formulation of the
Code, Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212),
cannot thus be sustained. While such "obligation" was not yet founded in law when the Code was
formulated, the attainment of a harmonious labor-management relationship and the then already
existing state policy of enlightening workers concerning their rights as employees demand no less than
the observance of transparency in managerial moves affecting employees' rights.
Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the
nature of its business cannot be overemphasized. In fact, its being a local monopoly in the business
demands the most stringent of measures to attain safe travel for its patrons. Nonetheless, whatever
disciplinary measures are adopted cannot be properly implemented in the absence of full cooperation of
the employees. Such cooperation cannot be attained if the employees are restive on account, of their
being left out in the determination of cardinal and fundamental matters affecting their employment.
WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special
pronouncement is made as to costs.
SO ORDERED.
Feliciano, Bidin, Romero and Vitug, JJ., concur.

2. Article 4
3. Article 166
4. Article 211
5. Article 212
6. Article 255
7. Article 277