G.R. No.

195155

DIVINE WORD COLLEGE OF LAOAG, Petitioner,

vs.
SHIRLEY B. MINA, as heir-substitute of the late DELFIN A. MINA, Respondent.

DECISION

REYES, J.:

Assailed in this petition for review 1 under Rule 45 of the Rules of Court is the Decision 2 dated July 19, 2010 and
Resolution3 dated January 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 107749 declaring respondent
Delfin A. Mina (Mina) to have been constructively dismissed by petitioner Divine Word College of Laoag (DWCL)
and awarding him backwages, damages and attorney's fees.

Antecedent Facts

DWCL is a non-stock educational institution offering catholic education to the public. It is run by the Society of
Divine Word (SVD), a congregation of Catholic priests that maintains several other member educational institutions
throughout the country.4

On July 1, 1969, the Society of Divine Word Educational Association (DWEA) established a Retirement Plan to
provide retirement benefits for qualified employees of DWEAs member institutions, offices and congregations. 5The
DWEA Retirement Plan6 contains a clause about the portability of benefits, to wit:

When a member who resigns or is separated from employment from one Participating Employer and who is
employed by another Participating Employer, the member will carry the credit he earned under his former
Participating Employer to his new Employer and the length of service in both will be taken into consideration in
determining his total years of continuous service on the following conditions:

a. The transfer is approved by both the Participating Employer whose service he is leaving and the new
Participating Employer;

b. The Retirement Board is notified of the transfer; and

c. The member is employed by another Participating Employer on the next working day after his
resignation.7

Mina was first employed in 1971 as a high school teacher, and later on a high school principal, at the Academy of St.
Joseph (ASJ), a school run by the SVD. On June 1, 1979, he transferred to DWCL and was accorded a permanent
status after a year of probationary status. 8 He was subsequently transferred in 2002 to DWCLs college department
as an Associate Professor III. Thereafter, on June 1, 2003, Mina was assigned as the College Laboratory Custodian
of the School of Nursing and was divested of his teaching load, effective June 1, 2003 until May 31, 2004, subject to
automatic termination and without need for any further notification. 9 He was the only one among several teachers
transferred to the college department who was divested of teaching load.10

In early June 2004, Mina was offered early retirement by Professor Noreen dela Rosa, Officer-in-Charge of DWCLs
School of Nursing. He initially declined the offer because of his familys dependence on him for support. He later
received a Memorandum11 dated July 27, 2004 from the Office of the Dean enumerating specific acts of gross or
habitual negligence, insubordination, and reporting for work under the influence of alcohol. He answered the
allegations against him;12 sensing, however, that it was
pointless to continue employment with DWCL, he requested that his retirement date be adjusted to September 2004
to enable him to avail of the 25-year benefits. He also requested for the inclusion of his eight years of service in ASJ,
to make his total years of service to 33 years pursuant to the portability clause of the retirement plan, which was
denied by DWCL. Instead, he was paid 275,513.10 as retirement pay.13 It was made to appear that his services were
terminated by reason of redundancy to avoid any tax implications. Mina was also made to sign a deed of waiver and
quitclaim14 stating that he no longer has any claim against DWCL with respect to any matter arising from his
employment in the school.15

On September 21, 2004, he filed a case for illegal dismissal and recovery of separation pay and other monetary
claims.16 Pending resolution of his case, Mina passed away on June 18, 2005.17

Ruling of the Labor Arbiter

On August 26, 2005, the Labor Arbiter (LA) rendered its Decision, 18 ruling that the actuation of DWCL is not
constitutive of constructive dismissal. The LA ratiocinated, however, that the computation of Minas retirement pay
based on redundancy is illegal; hence, it was modified, and the number of years he worked for ASJ was added to the
years he worked for DWCL thus making his creditable number of years of service to 33 years. According to the LA,
his length of service in both institutions will be taken into consideration in determining his total years of continuous
service since the DWEA Retirement Plan has a provision on portability, which allows a member to carry the earned
credit for his number of years of service from his former participating employer to his new employer. Moreover, the
LA held that there is no showing that Mina ceased to be a member of the plan when he left the ASJ as there was not
a day that he was separated from any school that is the member of the plan. The LAs computation of Minas
retirement benefits is as follows:

Monthly salary: P13,006.23

Date hired: June 1971
Years in service: 33 years
Birth day: 24 December 1950

Monthly pay/26.22 x 22.2 x 33 years x 100%

P13,006.23/26.23 x 22.2 [x] 33 years x 100% = P363,400.29
Less: Severance benefits received: = P275,513.10
Deficiency = P 87,887.1919

The LA disposed thus:

IN VIEW THEREOF, judgment is hereby rendered with the following dispositions:

1. Finding that [Mina] was underpaid in his retirement benefits pursuant to the DWEA Retirement Plan.
Consequently, [DWCL] must pay the deficiency in his retirement benefits in the amount of P87,887.19.

2. Finding that the respondents were harsh on him. Consequently, the DWCL must be adjudged to pay him
P50,000 as moral damages and P50,000 as exemplary damages.

3. That his claims for additional separation pay for his future services are denied.

4. [DWCL] must pay [Mina] 10% of the total award as attorneys fees for his having been forced to litigate
to protect his rights as an employee.

SO ORDERED.20
Both DWCL and Mina appealed to the National Labor Relations Commission (NLRC), with DWCL mainly
questioning the LAs decision making Minas creditable years of service 33 years, and awarding moral and
exemplary damages.21

Ruling of the NLRC

The NLRC ruled that Mina was constructively dismissed when he was appointed as College Laboratory Custodian
and divested of his teaching load without any justification. 22 It also ruled that Mina was not deemed to have waived
all his claims against DWCL as quitclaims cannot bar employees from demanding benefits to which they are legally
entitled.23 The NLRC, however, disregarded Minas eight years of service in ASJ in the computation of his
retirement pay because of his failure to show compliance with the portability provision. 24 The dispositive portion of
the NLRC

Decision dated July 10, 2008 provided:

WHEREFORE, We grant in partly [sic] the appeals of both [Mina] and [DWCL]. The decision dated August 26,
200[5] is hereby modified to delete the order adding the length of service rendered by [Mina] to the [ASJ] in the
computation of the latters retirement pay from the former. Accordingly, [DWCL] is held liable to pay [Mina] full
backwages and separation pay, in lieu of reinstatement and to his full compulsory retirement pay, less the
amount already received by him representing his optional retirement.

SO ORDERED.25 (Emphasis ours)

DWCL sought reconsideration of the NLRC decision but it was denied in a Resolution26 dated November 28, 2008.

DWCL thus filed a petition for certiorari before the CA, seeking to reverse and set aside the NLRC decision and
resolution.27 DWCL primarily asserted that the NLRC committed grave abuse of discretion in holding that Mina was
constructively dismissed from work, in holding DWCL liable for moral and exemplary damages, and in ordering the
payment of separation pay as well as retirement pay computed up to the age of 60.28

Ruling of the CA

On July 19, 2010, the CA rendered the assailed Decision, denying the petition but modifying the award. It sustained
the NLRCs ruling that Mina was indeed constructively dismissed from work. The CA also held that Mina is entitled
to receive backwages, to be computed from the time of hiring on June 1, 1979 until the time of his death on June 18,
2005, as he was constructively dismissed from work, as follows:

Monthly Salary Php 13, 006.23

x 26 (1 June 1979 - 18 June 2005)
Backwages Php 338,161.9829

The dispositive portion of the CA decision provided:

WHEREFORE, the petition is DENIED, granting to [Mina] substituted by his heirs in addition to the full
retirement benefits at Php275,513.10, the following:

1. backwages in the amount of Php 338,161.98;

2. moral and exemplary damages at Php50,000.00; and

3. attorneys fees at ten percent (10%) of the amount due herein.

SO ORDERED.30

DWCLs motion for reconsideration was denied by the CA in its Resolution31 dated January 13, 2011.

Hence, the present petition, anchored on the following grounds:

I.

The Honorable [CA] erred in upholding [NLRCs] findings that [Mina] was constructively dismissed.

II.

The Honorable [CA] erred in holding [DWCL] liable for moral and exemplary damages and attorneys fees.

III.

Even assuming, without admitting that [Mina] was constructively dismissed, the Honorable [CA] erred in ordering
the payment of his backwages "computed from the time of hiring, 1 June 1979 until the time of his death 18 June
2005."

IV.

Even assuming, without admitting, that [Mina] was constructively dismissed, the Honorable [CA] has no legal basis
in awarding him full retirement benefits since it invalidated Minas retirement for which the retirement benefits were
given to him.32

Ruling of the Court

In a petition for review on certiorari under Rule 45, only questions of law may be raised. The raison dtre is that
the Court is not a trier of facts. 33 The rule, however, admits of certain exceptions, such as when the factual findings
of the LA differ from those of the NLRC, as in the instant case, which opens the door to a review by this Court. 34

The Constitution35 and the Labor Code36 mandate that employees be accorded security of tenure. The right of
employees to security of tenure, however, does not give the employees vested rights to their positions to the extent
of depriving management of its prerogative to change their assignments or to transfer them. 37 In cases of transfer of
an employee, the employer is charged with the burden of proving that its conduct and action are for valid and
legitimate grounds such as genuine business necessity and that the transfer is not unreasonable, inconvenient or
prejudicial to the employee.38 If the employer cannot overcome this burden of proof, the employees transfer shall be
tantamount to unlawful constructive dismissal.39

Constructive dismissal is a dismissal in disguise. 40 There is cessation of work in constructive dismissal because
"continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank
or a diminution in pay and other benefits."41 To be considered as such, an act must be a display of utter
discrimination or insensibility on the part of the employer so intense that it becomes unbearable for the employee to
continue with his employment.42 The law recognizes and resolves this situation in favor of employees in order to
protect their rights and interests from the coercive acts of the employer.43

In this case, Minas transfer clearly amounted to a constructive dismissal. For almost 22 years, he was a high school
teacher enjoying a permanent status in DWCLs high school department. In 2002, he was appointed as an associate
professor at the college department but shortly thereafter, or on June 1, 2003, he was appointed as a college
laboratory custodian, which is a clear relegation from his previous position. Not only that. He was also divested of
his teaching load. His appointment even became contractual in nature and was subject to automatic termination after
one year "without any further notification." 44 Aside from this, Mina was the only one among the high school
teachers transferred to the college department who was divested of teaching load. More importantly, DWCL failed to
show any reason for Minas transfer and that it was not unreasonable, inconvenient, or prejudicial to him. 45

Also, the CA correctly ruled that Minas appointment as laboratory custodian was a demotion. There is demotion
when an employee occupying a highly technical position requiring the use of ones mental faculty is transferred to
another position, where the employee performed mere mechanical work virtually a transfer from a position of
dignity to a servile or menial job. The assessment whether Minas transfer amounted to a demotion must be done in
relation to his previous position, that is, from an associate college professor, he was made a keeper and inventory-
taker of laboratory materials. Clearly, Minas new duties as laboratory custodian were merely perfunctory and a far
cry from his previous teaching job, which involved the use of his mental faculties. And while there was no proof
adduced showing that his salaries and benefits were diminished, there was clearly a demotion in rank. As was stated
in Blue Dairy Corporation v. NLRC,46 "[i]t was virtually a transfer from a position of dignity to a servile or menial
job."47

Given the finding of constructive dismissal, Mina, therefore, is entitled to reinstatement without loss of seniority
rights, and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement.48 The Court notes that aside from full compulsory retirement pay, the NLRC awarded full backwages
and separation pay, in lieu of reinstatement. 49 The CA, however, computed the amount to be awarded as backwages
from the time of Minas hiring on June 1, 1979 until the time of his death on June 18, 2005, apparently
interchanging backwages and separation pay.50 Aside from this, the CA omitted to include a separate award of
separation pay.

The Court has repeatedly stressed that the basis for the payment of backwages is different from that of the award of
separation pay. "The basis for computing separation pay is usually the length of the employees past service, while
that for backwages is the actual period when the employee was unlawfully prevented from working."51Thus, the
Court explained in Bani Rural Bank, Inc. v. De Guzman52 that:

[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed without just
cause and without due process is entitled to backwages and reinstatement or payment of separation pay in lieu
thereof:

xxxx

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.53 (Emphasis and underscoring deleted, and italics ours)

Thus, the computation of Minas backwages should be from the time he was constructively dismissed on June 1,
2003.

Aside from the foregoing, the CA should have also awarded separation pay since reinstatement is no longer viable
due to Minas death in 2005. As stated before, the award of separation pay is distinct from the award of backwages.
The award of separation pay is also distinct from the grant of retirement benefits. These benefits are not mutually
exclusive as "[r]etirement benefits are a form of reward for an employees loyalty and service to an employer and
are earned under existing laws, [Collective Bargaining Agreements], employment contracts and company
policies."54 Separation pay, on the other hand, is that amount which an employee receives at the time of his
severance from employment, designed to provide the employee with the wherewithal during the period that he is
looking for another employment.55 In the computation of separation pay, the Court stresses that it should not go
beyond the date an employee was deemed to have been actually separated from employment, or beyond the
date when reinstatement was rendered impossible.56 The period for the computation of separation pay Mina is
entitled to shall therefore begin to run from June 1, 1979, when he was transferred to DWCL from ASJ, until his
death on June 18, 2005, or for a period of 26 years.
The award of damages was also justified given the CA and NLRCs finding that DWCL acted in a manner wherein
Mina was not treated with utmost good faith. The intention of the school to erase him out of employment is too
apparent.57 The Court upholds the CAs finding that when DWCLs act of unceremoniously demoting and giving
Mina contractual employment for one year and citing him for numerous violations of school regulations when he
rejected the schools offer to voluntarily retire is constitutive of bad faith.58

Lastly, the Court affirms the NLRCs findings that the eight years of service rendered by Mina in ASJ shall not be
included in the computation of his retirement benefits.1wphi1 No adequate proof is shown that he has complied
with the portability clause of the DWEA Retirement Plan. The employee has the burden of proof to show
compliance with the requirements set forth in retirement plans, being in the nature of privileges granted to
employees. Failure to overcome the burden of proof would necessarily result in the employees disqualification to
receive the benefits.

WHEREFORE, the Decision dated July 19, 2010 and Resolution dated January 13, 2011 of the Court of Appeals in
CA-G.R. SP No. 107749 are MODIFIED in that, in addition to the award of attorneys fees, and moral and
exemplary damages, petitioner Divine Word College of Laoag is ORDERED to pay Shirley B. Mina, as heir-
substitute of the late Delfin Mina, the following:

(1) backwages, to be computed from June 1, 2003 until June 18, 2005, or 13,006.23 x 24 (months) =
312,149.52; and

(2) separation pay, to be computed from June 1, 1979 until June 18, 2005, or 13,006.23 x 26 (years) =
338,161.98.

The monetary awards granted shall earn legal interest at the rate of six percent (6%) per annum from the date of the
finality of this Decision until fully paid.

SO ORDERED.
SECOND DIVISION

September 9, 2015

G.R. No. 202090

ICT MARKETING SERVICES, INC. (now known as SYKES MARKETING SERVICES, INC.), Petitioner,
vs.
MARIPHIL L. SALES, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari 1 assails: 1) the Januruy 10, 2012 Decision 2 of the Court of Appeals (CA) in
CA-G.R. SP No. 109860 nullifying and setting aside the February 16, 2009 3 and May 20, 20094 Resolutions of the
National Labor Relations Commission (NLRC) in NLRC LAC CN. 07-002404- 08(7)/(8) and reinstating with
modification the April 30, 2008 Decision5 of the Labor Arbiter in NLRC-NCR Case No. 10-11004-07; and 2) the
CA's May 28, 2012 Resolution6 denying petitioner's Motion for Reconsideration7 of the herein Assailed Decision.

Factual Antecedents

Petitioner ICT Marketing Services, Inc. (ICT) now known as Sykes Marketing Services, Inc. is a duly registered
domestic corporation engaged in the business of providing outsourced customer relations management and business
process outsourcing solutions to various clients in government and in the financial services, insurance,
telecommunications, health care, information technology, media, energy, and hospitality industries.

On February 22, 2006, petitioner hired respondent Mariphil L. Sales as its Customer Service Representative (CSR)
or Telephone Service Representative (TSR), and assigned her to its Capital One account. On August 21, 2006,
respondent became a regular employee, and her monthly base salary was increased to P16,350.00 and she was given
monthly transportation and meal allowances.

On February 21, 2007, respondent was assigned to the Washington Mutual account, where she was awarded with a
certificate for being the "Top Converter/Seller (Second Place)" for the month of April 2007.8

On July 3, 2007, respondent wrote to Glen Odom (Odom) petitioners Vice President complaining about
supposed irregularities in the handling of funds entrusted to petitioner by Washington Mutual which were intended
for distribution to outstanding Washington Mutual CSRs and TSRs as prizes and incentives. However, no action
appears to have been taken on her complaint.

Respondent was then transferred to the Bank of America account on July 30, 2007. Without prior notice to
respondent, petitioner scheduled her for training from July 30 to August 6, 2007 on the very same day of her
transfer. On the third day of training (August 1), respondent was unable to attend. When she reported for training the
next day, respondent was informed that she could not be certified to handle calls for Bank of America due to her
failure to complete the training. From then on, respondent was placed on "floating status" and was not given any
work assignment.

In a September 28, 2007 letter 9 to petitioners Human Resource (HR) Manager, respondent tendered her resignation
from work, effective upon receipt of the letter. Respondent wrote:

I was forced to resign due to the reason that my employment was made on "floating status" effective August 4, 2007
and up to present (almost two months)
I havent receive [sic] any notice from you or the HR department to report for work despite my repeated follow-up
[with] your office thru telephone and mobile phone text messages. Hence, I consider your inaction to my follow-up
as an indirect termination of my work with ICT.

The reason I was placed [on] floating status is that, I was absent during the third day of my training with Bank of
America, the account to which I was transferred from Washington Mutual (WaMu). However, my absence during
such period was justified by the fact that I was sick and I need [sic] to undergo a medical check-up on that date.

Furthermore, I see my transfer from WaMu Account to Bank of America and the continued floating status of my
work was prompted by the fact that I lodged a complaint against managers/supervisors assigned in WaMu account
regarding irregularities in the handling of funds given by ICT clients which were supposed to be distributed as prizes
to TSRs assigned with WaMu. After the filing of the said complaint, through your office, I was transferred to
another account (Bank of America) for no apparent reason. I was not even included in the original list of those who
were supposed to be transferred because my performance record with WaMu is satisfactory as proven by the fact
that I was even awarded with a certificate as "top converter (seller)" for the month of April and was supposed to be
included again in the top three highest converter[s] for the month of May, but unfortunately irregularities were
committed, that is why I filed the aforementioned complaint [with] your office.

On August 1, 2007, a few days after my transfer [to] Bank of America, my coach, angelo [sic], informed me that I
will be having a training on that same day with Bank of America which is really unexpected. I was not given a
notice in advance about the training. My coach informed me only three hours before the said training. Later on
during my training with Bank of America I was [placed on floating status] indefinitely due to a single absence even
though I am a regular employee having worked in ICT for almost two years. Another instance [of] discrimination
[sic] and bad faith on the part of ICT management is that, all my fellow agents who were [placed on floating status]
for the same reason were all ordered to return to work except me [sic]. Moreover, ICT is continuously hiring TSRs
which only shows that there are still accounts open or work available in ICT. However despite the availability of
work, I was still on floating status.

Based on the aforementioned facts and circumstance[s], it is very clear that the harassment, pressure, and indefinite
floating of my employment with ICT are retaliatory acts perpetrated by the company because of my complaint/
request for investigation on the irregularities being committed by certain company officials.

Thus, I can no longer bear the above-mentioned abuses and discrimination committed against me by ICT
management. Therefore, I have no option but to sever my relationship with the company, as my continued floating
status had already prejudiced me emotionally and financially.10

Ruling of the Labor Arbiter

On October 2, 2007, respondent filed a complaint for constructive dismissal against petitioner and Odom before the
NLRC NCR, Quezon City, docketed as NLRC-NCR Case No. 10-11004-07.

In her Position Paper,11 Reply,12 Rejoinder,13 and Surrejoinder,14 respondent claimed that for complaining about the
supposed irregularities in the Washington Mutual account, petitioner discriminated against her and unduly punished
her. Although she was not included in the original list of CSRs/TSRs for program transfer, she was transferred to
another account, and then placed on "floating status," which is tantamount to suspending her indefinitely without
due process, despite her satisfactory performance. Respondent averred that petitioners claim of multiple absences is
not true, because not once was she penalized therefor, assuming such charge is true. Respondent also alleged that her
one-day absence during the training for the Bank of America program cannot justify her being placed on a "floating
status" because the "no-absence during training" requirement cited by petitioner using her employment
contract15 and the "New Hire Training Bay"16 as bases applies only to new hires on probationary status, and not to
regularized employees. In any case, the "New Hire Training Bay" used by petitioner was for the Capital One
program. She also pointed out that during her indefinite suspension or "floating status," petitioner continued to hire
new CSRs, as shown by its newspaper advertisements during the period. 17Finally, she asserted that her resignation
was not voluntary, but was forced upon her by petitioner as a result of its unlawful acts. Thus, respondent prayed for
the recovery of backwages, separation pay, P100,000.00 combined moral and exemplary damages, and attorneys
fees equivalent to 10 per cent (10%) of the total award.

In its Position Paper,18 Reply,19 Rejoinder,20 and Surrejoinder,21 petitioner prayed for the dismissal of the complaint,
arguing that respondent was transferred from the Washington Mutual account as an exercise of management
initiative or prerogative, and due to infractions22 committed by her, as well as attendance and punctuality issues that
arose. It claimed that respondent could not be certified for the Bank of America account for failing to complete the
training. It maintained that respondent was placed on standby status only, and not suspended or constructively
dismissed. In fact, she was directed to report to its HR department, but she did not do so. It also insisted that
respondent resigned voluntarily. It denied committing any act of discrimination or any other act which rendered
respondents employment impossible, unreasonable or unlikely. Finally, it claimed that prior notice of her transfer to
the Bank of America account was made through an electronic mail message sent to her; and that respondent has no
cause of action since she resigned voluntarily, and thus could not have been illegally dismissed.

On April 30, 2008, the Labor Arbiter rendered a Decision 23 finding complainant to have been constructively
dismissed and awarding separation pay, moral and exemplary damages, and attorneys fees to respondent. The Labor
Arbiter held:

x x x Complainant was indeed constructively dismissed from her employment and she quitted [sic] because her
continued employment thereat is rendered impossible, unreasonable or unlikely.

Complainants resignation was sparked by her transfer of assignment and eventual placing her [sic] by the
respondent company of [sic] a "on floating" status.

x x x [T]here was no x x x evidence x x x that complainants transfer was due to the request of a client. Further, if
complainant was indeed remised of [sic] her duties due to her punctuality and attendance problem of committing
twelve (12) absences alone incurred in July 2007 [sic], why was there no disciplinary action taken against her like
reprimand or warning[?]

xxxx

And its effect, complainant is entitled to her claim of separation pay, moral and exemplary damages of P50,000.00
pesos [sic] including an award of attorneys fees.

WHEREFORE, premises considered, judgment is rendered ordering the respondents to pay complainant of [sic] one
month pay per year of service as separation pay in the total amount of P32,700.00, P50,000.00 moral and exemplary
damages plus 10% of the award as attorneys fees, hereunder computed:

I Separation Pay
2/21/06 8/4/07 = 2 yrs.
P16,350.00 x 2 yrs. = P32,700.00
II Damages P50,000.00

P82,700.00
P8,270.00
10% Attorneys Fees
P90,970.00

SO ORDERED.24

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC arguing that the Labor Arbiter erred in ruling that respondent was
constructively dismissed. It also argued that Odom was not personally liable as he was merely acting in good faith
and within his authority as corporate officer.

Respondent likewise interposed an appeal 25 arguing that the award of backwages should be computed from the date
of her dismissal until finality of the Labor Arbiters Decision; and that the proportionate share of her 13th month pay
should be paid to her as well.

On February 16, 2009, the NLRC issued a Resolution,26 declaring as follows:

We reverse.

Upon an examination of the pleadings on file, We find that in the past the complainant had been transferred from
one program to another without any objection on her part. Insofar as the instant case is concerned, it appears that the
complainant, aside from having been given a warning for wrong disposition of a call, had been absent or usually late
in reporting for work, constraining the respondent ICT to transfer her to another program/account. Required of the
complainant was for her to undergo Product Training for the program from July 30 to August 6, 2007, and the
records indicate that she attended only two (2) days of training on July 30 and 31, 2007, did not report on August 1,
2007 and again reported for training on August 2, 2007. It was then that ICTs Operations Subject Matter Expert,
Ms. Suzette Lualhati, informed the complainant that she cannot be certified for the program because she failed to
complete the number of training days, and there was a need for her to report to Human Resources for further
instructions. As the complainant did not report to Human Resources, and due to her derogatory record, the
respondent company could not find another program where the complainant could be transferred.

From what has been narrated above, We come to the conclusion that the respondent company cannot be faulted for
placing the complainant on "floating status." And there does not appear to be any ill will or bad faith that can be
attributed to the respondent.

Finally, it is well to emphasize that the complainant tendered her resignation on October 1, 2007. There is no
evidence that the complainant has presented that would indicate that duress or force has been exerted on her.

All told, We are of the opinion that the findings of the Labor Arbiter are in stark contrast to the evidence on record.

WHEREFORE, in view of the foregoing, the decision appealed from is hereby reversed and set aside. Addordingly
[sic], a new one is entered dismissing the complaint for lack of merit.

SO ORDERED.27

Respondent filed a Motion for Reconsideration,28 but in a May 20, 2009 Resolution,29 the motion was denied.

Ruling of the Court of Appeals

In a Petition for Certiorari30 filed with the CA and docketed as CA-G.R. SP No. 109860, respondent sought a
reversal of the February 16, 2009 and May 20, 2009 Resolutions of the NLRC.

Petitioner filed its Comment,31 to which respondent interposed a Reply.32

On January 10, 2012, the CA issued the assailed Decision containing the following pronouncement:

This Court finds the petition meritorious.

While it is true that management has the prerogative to transfer employees, the exercise of such right should not be
motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient
cause. When the transfer is unreasonable, unlikely, inconvenient, impossible, or prejudicial to the employee, it
already amounts to constructive dismissal. In constructive dismissal, the employer has the burden of proving that the
transfer and demotion of an employee are for just and valid grounds, such as genuine business necessity. Should the
employer fail to overcome this burden of proof, the employees transfer shall be tantamount to unlawful constructive
dismissal.

In the case at bench, private respondent corporation failed to discharge this burden of proof considering the
circumstances surrounding the petitioners July 2007 transfer to another account. Prior to her reassignment,
petitioners annual performance merited increase in her salary effective February 2007 and was also awarded a
certificate of achievement for performing well in April 2007. Her transfer was also abrupt as there was no written
transfer agreement informing her of the same and its requirements unlike her previous transfer from Capital One to
Washington Mutual account. It is therefore difficult to see the reasonableness, urgency, or genuine business
necessity to transfer petitioner to a new account. While it may be true that petitioner has attendance and punctuality
issues, her over-all performance as a CSR/TSR cannot be said to be below par given the annual merit increase and
the certificate of achievement awarded to her. If indeed, private respondent corporation had trouble transferring the
petitioner to another post because of her derogatory record, the corporation could just have dismissed her for cause.

After petitioners unjustified transfer, she was informed by private respondent corporation that she could not be
"certified" or allowed to handle calls for the new account because of her absence during training. She was later
placed on a floating status and was not given another post.

The Court considers placing the petitioner on a floating status as another unjustified action of the private respondent
corporation prejudicial to petitioner as employee. In this case, except for private respondent corporations bare
assertion that petitioner no longer reported to the human resources department as instructed, no proof was offered to
prove that petitioner intended to sever the employer-employee relationship. Private respondent corporation also
offered no credible explanation why it failed to provide a new assignment to petitioner. Its assertion that it is
petitioners derogatory record which made it difficult for the corporation to transfer her to another account despite
its efforts is not sufficient to discharge the burden of proving that there are no posts or no accounts available or
willing to accept her.

In Nationwide Security and Allied Services, Inc. vs. Valderama, 33 the Supreme Court declared that due to the grim
economic consequences to the employee of being placed on a floating status, the employer should bear the burden of
proving that there are no posts available to which the employee temporarily out of work can be assigned.

These acts by the private respondent corporation, of transferring petitioner to another account without sufficient
cause and proper notice and its subsequent failure to provide a new post for her for two months without credible
explanation, constitute unjustified actions prejudicial to the petitioner as an employee, making it unbearable for her
to continue employment.

Thus, petitioner opted to resign, albeit involuntarily. The involuntariness of her resignation is evident in her letter
which states categorically:

"I was forced to resign due to the reason that my employment was made on floating status effective August 4, 2007
and up to the present (almost two months) I havent receive [sic] any notice from you or the HR department to report
for work despite my repeated follow-up to your office thru telephone and mobile phone text
messages.1avvphi1Hence, I consider your inaction to my follow-up as an indirect termination of my work with
ICT."

Further, petitioner immediately filed a complaint for illegal dismissal. Resignation, it has been held, is inconsistent
with the filing of a complaint. Thus, private respondent corporations mere assertion that petitioner voluntarily
resigned without offering convincing evidence to prove it, is not sufficient to discharge the burden of proving such
assertion. It is worthy to note that the fact of filing a resignation letter alone does not shift the burden of proof and it
is still incumbent upon the employer to prove that the employee voluntarily resigned.

Therefore, we believe and so hold that petitioner was constructively dismissed from employment. Constructive
dismissal exists when the resignation on the part of the employee was involuntary due to the harsh, hostile and
unfavorable conditions set by the employer. The test for constructive dismissal is whether a reasonable person in the
employees position would feel compelled to give up his employment under the prevailing circumstances. With the
decision of the private respondent corporation to transfer and to thereafter placed [sic] her on floating status,
petitioner felt that she was being discriminated and this perception compelled her to resign. It is clear from her
resignation letter that petitioner felt oppressed by the situation created by the private respondent corporation, and
this forced her to surrender her position.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.

As petitioner did not pray for reinstatement but only sought payment of money claims, the labor arbiter is correct in
awarding separation pay equivalent to one month pay for every year of service. We also do not find any cogent
reason to disturb the award of damages and attorneys fees since we have found bad faith on the part of the private
respondent corporation to abruptly [sic] transfer and place the petitioner on floating status. Individual respondent
Glen Odom is however, exonerated from any liability as there was no clear finding that he acted with malice or bad
faith. Backwages and other monetary benefits must also be included in compliance with the above-mentioned
provision of labor law which shall be reckoned from the time her constructive dismissal took effect until the finality
of this decision.

WHEREFORE, premises considered, the Resolutions dated February 16, 2009 and May 20, 2009 respectively,
issued by the public respondent National Labor Relations Commission (NLRC) in NLRC CA No. 07-002404-08 are
REVERSED and SET ASIDE. The decision of the Labor Arbiter dated April 30, 2008 is REINSTATED with
MODIFICATION that the petitioner Mariphil L. Sales, be awarded backwages and other monetary benefits from the
date of her constructive dismissal up to the finality of this Decision.

SO ORDERED.3

Petitioner filed a Motion for Reconsideration, but the same was denied in a May 28, 2012 Resolution. Hence, the
present Petition.

In a November 11, 2013 Resolution,35 this Court resolved to give due course to the Petition.

Issues

Petitioner submits that

A.

THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS TRANSFER WAS
UNJUSTIFIED NOTWITHSTANDING EVIDENCE TO SHOW THAT RESPONDENT WAS NOT DEMOTED
AND WAS EVEN GIVEN THE SAME RANK AND PAY.

B.
THE COURT OF APPEALS ERRED WHEN IT HELD THAT RESPONDENTS PLACEMENT UNDER
FLOATING STATUS WAS TANTAMOUNT TO CONSTRUCTIVE DISMISSAL AS THIS IS CONTRARY TO
NUMEROUS DECISIONS OF THE HONORABLE COURT.

C.

THE COURT OF APPEALS ERRED WHEN IT REINSTATED LABOR ARBITER MACAMS DECISION
DATED 30 APRIL 2008 WHICH DECLARED THAT RESPONDENT WAS CONSTRUCTIVELY DISMISSED,
NOTWITHSTANDING EVIDENCE THAT CLEARLY SHOWS THAT RESPONDENT VOLUNTARILY
RESIGNED.

D.

THE COURT OF APPEALS ERRED IN AWARDING RESPONDENT SEPARATION PAY, BACKWAGES,

MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.36

Petitioners Arguments

Praying that the assailed CA dispositions be set aside and that the NLRCs February 16, 2009 and May 20, 2009
Resolutions be reinstated instead, petitioner maintains in the Petition and Reply 37 that respondents transfer to
another account was done as a valid exercise of management prerogative, which allows it to regulate all aspects of
employment. Her transfer was done in good faith, and without diminution in rank and salary. It contends that
respondent knew very well that any CSR/TSR may be transferred to another program/account anytime for business
reasons; in fact, respondent herself was transferred from Capital One to Washington Mutual, and she did not
complain. Moreover, she knew as well that "schedule adherence" or attendance/punctuality is one of the "metrics" or
standards by which the performance of a CSR is measured, and that she failed to comply in this regard. It claims that
the decision to place her on "floating status" instead of dismissing her was an accommodation and should not be
treated as an illegal or unjustified act; that being on "floating status" is not tantamount to constructive dismissal, and
the failure to place or transfer respondent to another account was due to her derogatory record, and not petitioners
bad faith or inaction. It insists that the placing of an employee on "floating status" for up to six months is allowed in
the event of a bona fide suspension of the operations or undertaking of a business. 38 In any event, respondents
voluntary resignation prior to the expiration of the allowable six-month "floating status" period cannot constitute
constructive dismissal, and her immediate filing of the labor case thereafter is thus premature. Finally, petitioner
posits that since there is no illegal dismissal but rather a voluntary relinquishment of respondents post, then there is
no basis for the pecuniary awards in her favor.

Respondents Arguments

In her Comment39 praying for dismissal of the Petition and the corresponding affirmance of the assailed dispositions,
respondent insists that she was illegally dismissed. She reiterates that her transfer to the Bank of America account
was an undue penalty for her complaining about supposed anomalies in the Washington Mutual account. She avers
that the documentary evidence of her supposed unauthorized absences were manufactured to support petitioners
false allegations and mislead this Court into believing that she was delinquent at work.

She argues that assuming that these absences were true, then they should have merited her dismissal for cause yet
the fact is she was not dismissed nor punished for these supposed absences. She asserts that petitioners claim that
she was transferred on the recommendation of a client is untrue and self-serving, and is unjustified since the client
has no authority to order or recommend her transfer. She maintains that her being placed on "floating status" was
illegal, since a) there is no evidence to prove her alleged "attendance and punctuality issues," and b) there was no
bona fide suspension of petitioners business or undertaking for a period not exceeding six months, as prescribed
under Article 286 of the Labor Code,40 which would justify the suspension of her employment for up to six months.
As enunciated in the Philippine Industrial Security Agency Corp. v. Dapiton 41case which petitioner itself cited,
Article 286 applies only when there is a bona fide suspension of the employers operation or undertaking for a
period not exceeding six months, due to dire exigencies of the business that compel the employer to suspend the
employment of its workers. Respondent points out that petitioner continued with its business, and worse, it in fact
continued to hire new CSRs/TSRs during the period of respondents suspension from work. In fine, respondent
alleges that she was constructively dismissed and forced to resign, rather than continue to subject herself to
petitioners discrimination, insensibility, harassment, and disdain; and that for such illegal acts, she is entitled to
indemnity from petitioner.

Our Ruling

The Court denies the Petition.

Respondents Transfer

Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his
own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the
time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline,
dismissal, and recall of employees. The only limitations to the exercise of this prerogative are those imposed by
labor laws and the principles of equity and substantial justice.

While the law imposes many obligations upon the employer, nonetheless, it also protects the employers right to
expect from its employees not only good performance, adequate work, and diligence, but also good conduct and
loyalty. In fact, the Labor Code does not excuse employees from complying with valid company policies and
reasonable regulations for their governance and guidance.

Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent rank, level or salary without break in the service or a lateral
movement from one position to another of equivalent rank or salary; (b) the employer has the inherent right to
transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes unlawful where it is
motivated by discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient
cause; (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the
employee.42

While the prerogative to transfer respondent to another account belonged to petitioner, it wielded the same unfairly.
The evidence suggests that at the time respondent was transferred from the Washington Mutual account to the Bank
of America program, petitioner was hiring additional CSRs/TSRs. 43 This simply means that if it was then hiring new
CSRs/TSRs, then there should be no need to transfer respondent to the Bank of America program; it could simply
train new hires for that program. Transferring respondent an experienced employee who was already familiar with
the Washington Mutual account, and who even proved to be outstanding in handling the same to another account
means additional expenses for petitioner: it would have to train respondent for the Bank of America account, and
train a new hire to take her place in the Washington Mutual account. This does not make sense; quite the contrary, it
is impractical and entails more expense on petitioners part. If respondent already knew her work at the Washington
Mutual account very well, then it is contrary to experience and logic to transfer her to another account which she is
not familiar with, there to start from scratch; this could have been properly relegated to a new hire.
There can be no truth to petitioners claim either that respondents transfer was made upon request of the client. If
she was performing outstanding work and bringing in good business for the client, there is no reason indeed it is
beyond experience and logic to conclude that the client would seek her transfer. Such a claim could only be
fabricated. Truly, Experience which is the life of the law as well as logic and common sense militates against
the petitioners cause.44

Moreover, as the appellate court correctly observed, even if respondent had attendance and punctuality issues, her
overall performance as a CSR/TSR was certainly far from mediocre; on the contrary, she proved to be a top
performer. And if it were true that respondent suddenly became lax by way of attendance in July 2007, it is not
entirely her fault. This may be attributed to petitioners failure to properly address her grievances relative to the
supposed irregularities in the handling of funds entrusted to petitioner by Washington Mutual which were intended
for distribution to outstanding Washington Mutual CSRs and TSRs as prizes and incentives. She wrote petitioner
about her complaint on July 3, 2007; however, no explanation was forthcoming from petitioner, and it was only
during these proceedings or after a case had already been filed that petitioner belatedly and for no other useful
purpose attempted to address her concerns. This may have caused a bit of disillusionment on the part of respondent,
which led her to miss work for a few days in July 2007. Her grievance should have been addressed by petitioner;
after all, they were serious accusations, and have a bearing on the CSRs/TSRs overall performance in the
Washington Mutual account.

Respondents work as a CSR which is essentially that of a call center agent is not easy. For one, she was made to
work the graveyard shift that is, from late at night or midnight until dawn or early morning. This certainly takes a
toll on anyones physical health. Indeed, call center agents are subjected to conditions that adversely affect their
physical, mental and emotional health; exposed to extreme stress and pressure at work by having to address the
customers needs and insure their satisfaction, while simultaneously being conscious of the need to insure efficiency
at work by improving productivity and a high level of service; subjected to excessive control and strict surveillance
by management; exposed to verbal abuse from customers; suffer social alienation precisely because they work the
graveyard shift while family and friends are at rest, they are working, and when they are at rest, family and friends
are up and about; and they work at a quick-paced environment and under difficult circumstances owing to
progressive demands and ambitious quotas/targets set by management. To top it all, they are not exactly well-paid
for the work they have to do and the conditions they have to endure. Respondents written query about the prizes
and incentives is not exactly baseless and frivolous; the least petitioner could have done was to timely address it, if it
cared about its employees welfare. By failing to address respondents concerns, petitioner exhibited an indifference
and lack of concern for its employees qualities that are diametrically antithetical to the spirit of the labor laws,
which aim to protect the welfare of the workingman and foster harmonious relations between capital and labor. By
its actions, petitioner betrayed the manner it treats its employees.

Thus, the only conceivable reason why petitioner transferred respondent to another account is the fact that she
openly and bravely complained about the supposed anomalies in the Washington Mutual account; it is not her
"derogatory record" or her "attendance and punctuality issues", which are insignificant and thus irrelevant to her
overall performance in the Washington Mutual account. And, as earlier stated, respondents "attendance and
punctuality issues" were attributable to petitioners indifference, inaction, and lack of sensitivity in failing to timely
address respondents complaint. It should share the blame for respondents resultant delinquencies.

Thus, in causing respondents transfer, petitioner clearly acted in bad faith and with discrimination, insensibility and
disdain; the transfer was effected as a form of punishment for her raising a valid grievance related to her work.

Furthermore, said transfer was obviously unreasonable, not to mention contrary to experience, logic, and good
business sense. This being the case, the transfer amounted to constructive dismissal.
The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which
that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable
worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. Should the employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay.

Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer
has become so unbearable to the employee leaving him with no option but to forego with his continued
employment.45(Emphasis and underscoring supplied)

The instant case can be compared to the situation in Veterans Security Agency, Inc. v. Gonzalvo, Jr., 46 where the
employee concerned a security guard who was brave enough to complain about his employers failure to remit its
employees Social Security System premiums was "tossed around" and finally placed on floating status for no
valid reason. Taking the poor employees side, this Court declared:

True, it is the inherent prerogative of an employer to transfer and reassign its employees to meet the requirements of
its business. Be that as it may, the prerogative of the management to transfer its employees must be exercised
without grave abuse of discretion. The exercise of the prerogative should not defeat an employees right to security
of tenure. The employers privilege to transfer its employees to different workstations cannot be used as a subterfuge
to rid itself of an undesirable worker.

Here, riled by respondents consecutive filing of complaint against it for nonpayment of SSS contributions, VSAI
had been tossing respondent to different stations thereafter. From his assignment at University of Santo Tomas for
almost a year, he was assigned at the OWWA main [o]ffice in Pasig where he served for more than three years. After
three years at the OWWA main office, he was transferred to the OWWA Pasay City parking lot knowing that the
security services will end forthwith. VSAI even concocted the reason that he had to be assigned somewhere because
his spouse was already a lady guard assigned at the OWWA main office. Inasmuch as respondent was single at that
time, this was obviously a mere facade to [get] rid of respondent who was no longer in VSAIs good graces.

The only logical conclusion from the foregoing discussion is that the VSAI constructively dismissed the respondent.
This ruling is in rhyme with the findings of the Court of Appeals and the NLRC. Dismissal is the ultimate penalty
that can be meted to an employee. Inasmuch as petitioners failed to adduce clear and convincing evidence to support
the legality of respondents dismissal, the latter is entitled to reinstatement and back wages as a necessary
consequence. However, reinstatement is no longer feasible in this case because of the palpable strained relations,
thus, separation pay is awarded in lieu of reinstatement.

xxxx

Indeed, the Court ought to deny this petition lest the wheels of justice for aggrieved workingmen grind to a halt. We
ought to abate the culture of employers bestowing security of tenure to employees, not on the basis of the latters
performance on the job, but on their ability to toe the line set by their employer and endure in silence the flagrant
incursion of their rights, zealously protected by our labor laws and by the Constitution, no less. 47(Emphasis and
underscoring supplied)

Respondents Floating Status

In placing respondent on "floating status," petitioner further acted arbitrarily and unfairly, making life unbearable for
her. In so doing, it treated respondent as if she were a new hire; it improperly disregarded her experience, status,
performance, and achievements in the company; and most importantly, respondent was illegally deprived of her
salary and other emoluments. For her single absence during training for the Bank of America account, she was
refused certification, and as a result, she was placed on floating status and her salary was withheld. Clearly, this was
an act of discrimination and unfairness considering that she was not an inexperienced new hire, but a promising and
award-winning employee who was more than eager to succeed within the company. This conclusion is not totally
baseless, and is rooted in her outstanding performance at the Washington Mutual account and her complaint
regarding the incentives, which only proves her zeal, positive work attitude, and drive to achieve financial success
through hard work. But instead of rewarding her, petitioner unduly punished her; instead of inspiring her, petitioner
dashed her hopes and dreams; in return for her industry, idealism, positive outlook and fervor, petitioner left her with
a legacy of, and awful examples in, office politicking, intrigue, and internecine schemes.

In effect, respondents transfer to the Bank of America account was not only unreasonable, unfair, inconvenient, and
prejudicial to her; it was effectively a demotion in rank and diminution of her salaries, privileges and other benefits.
She was unfairly treated as a new hire, and eventually her salaries, privileges and other benefits were withheld when
petitioner refused to certify her and instead placed her on floating status. Far from being an "accommodation" as
petitioner repeatedly insists, respondent became the victim of a series of illegal punitive measures inflicted upon her
by the former.

Besides, as correctly argued by respondent, there is no basis to place her on "floating status" in the first place since
petitioner continued to hire new CSRs/TSRs during the period, as shown by its paid advertisements and placements
in leading newspapers seeking to hire new CSRs/TSRs and other employees. 48 True enough, the placing of an
employee on "floating status" presupposes, among others, that there is less work than there are employees; 49 but if
petitioner continued to hire new CSRs/TSRs, then surely there is a surplus of work available for its existing
employees: there is no need at all to place respondent on floating status. If any, respondent with her experience,
knowledge, familiarity with the workings of the company, and achievements should be the first to be given work
or posted with new clients/accounts, and not new hires who have no experience working for petitioner or who have
no related experience at all. Once more, experience, common sense, and logic go against the position of petitioner.

The CA could not be more correct in its pronouncement that placing an employee on floating status presents dire
consequences for him or her, occasioned by the withholding of wages and benefits while he or she is not reinstated.
To restate what the appellate court cited, "[d]ue to the grim economic consequences to the employee, the employer
should bear the burden of proving that there are no posts available to which the employee temporarily out of work
can be assigned."50 However, petitioner has failed miserably in this regard.

Resignation

While this Court agrees with the appellate courts observation that respondents resignation was involuntary as it
became unbearable for her to continue with her employment, expounding on the issue at length is unnecessary.

Because she is deemed constructively dismissed from the time of her illegal transfer, her subsequent resignation
became unnecessary and irrelevant. There was no longer any position to relinquish at the time of her resignation.

Pecuniary Awards

With the foregoing pronouncements, an award of indemnity in favor of respondent should be forthcoming. In case of
constructive dismissal, the employee is entitled to full backwages, inclusive of allowances, and other benefits or
their monetary equivalent, as well as separation pay in lieu of reinstatement. The readily determinable amounts, as
computed by the Labor Arbiter and correspondingly reviewed and corrected by the appellate court, should be
accorded finality and deemed binding on this Court.

Settled is the rule that 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 up to the time of
actual reinstatement. If reinstatement is not possible, however, the award of separation pay is proper.

Backwages and reinstatement are separate and distinct reliefs given to an illegally dismissed employee in order to
alleviate the economic damage brought about by the employees dismissal. "Reinstatement is a restoration to a state
from which one has been removed or separated" while "the payment of backwages is a form of relief that restores
the income that was lost by reason of the unlawful dismissal." Therefore, the award of one does not bar the other.

In the case of Aliling v. Feliciano, citing Golden Ace Builders v. Talde, the Court explained:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.51

WHEREFORE, the Petition is DENIED. The assailed January 10, 2012 Decision and May 28, 2012 Resolution of
the Court of Appeals in CA-G.R. SP No. 109860 are AFFIRMED, with MODIFICATIONS, in that petitioner ICT
Marketing Services, Inc., now known as Sykes Marketing Services, Inc., is ordered to PAY respondent Mariphil L.
Sales the following:

1) Backwages and all other benefits from July 30, 2007 until finality of this Decision;

2) Separation pay equivalent to one (1) month salary for every year of service;

3) Moral and exemplary damages in the amount of P50,000.00;

4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and

5) Interest of twelve per cent (12%) per annum of the total monetary awards, computed from July 30, 2007
up to June 30, 2013, and thereafter, six percent (6%) per annum from July 1, 2013 until their full
satisfaction.

The appropriate Computation Division of the National Labor Relations Commission is hereby ordered to
COMPUTE and UPDATE the award as herein determined WITII DISPATCH.
SO ORDERED.

G.R. No. 185100 July 9, 2014

GIRLY G. ICO, Petitioner,

vs.
SYSTEMS TECHNOLOGY INSTITUTE, INC., MONICO V. JACOB and PETER K.
FERNANDEZ, Respondents.

DECISION

DEL CASTILLO, J.:

When another employee is soon after appointed to a position which the employer claims has been abolished, while
the employee who had to vacate the same is transferred against her will to a position which does not e:x.ist in the
corporate structure, there is evidently a case of illegal constructive dismissal.

Before us is a Petition for Review on Certiorari 1 questioning the October 27, 2008 Decision 2 of the Court of Appeals
(CA) which dismissed the petition in CA-G.R. SP No. 104437, entitled "Girly G. Jco, Petitioner, versus National
Labor Relations Commission (First Division), Systems Technology Institute, Inc., Monico V. Jacob and Peter K
Femandez, Respondents."

Factual Antecedents
Respondent Systems Technology Institute, Inc. (STI) is an educational institution duly incorporated, organized, and
existing under Philippine laws. Respondents Monico V. Jacob (Jacob) and Peter K. Fernandez (Fernandez) are STI
officers, the former being the President and Chief Executive Officer (CEO) and the latter Senior Vice-President.

STI offers pre-school, elementary, secondary and tertiary education, as well as post-graduate courses either through
franchisees or STI wholly-owned schools.3

Petitioner Girly G. Ico,a masteral degree holder with doctorate units earned, 4 was hired as Faculty Member bySTI
College Makati (Inc.), which operates STI College-Makati (STI-Makati). STI College Makati (Inc.) is a wholly-
owned subsidiary of STI.5

At STI, petitioner servedunder contract from June1997 to March 1998. In April 1998, she was recalled to STIs
Makati Central Office orHeadquarters (STIHQ) and promoted to the position of Dean of STI College-Paraaque
(STIParaaque). In November1999, she was again recalled to STI-HQ and STI appointed her as Full-Time Assistant
Professor I reporting directly to STIs Academic Services Division (ASD).

In June 2000, petitioner was promoted to the position of Dean under ASD, and assigned to STI College-Guadalupe
(STI-Guadalupe), where she served as Dean from June 5, 2000 up to October 28, 2002.6

Meanwhile, petitioners position as Deanwas reclassified from "Job Grade 4" to "Job Grade Manager B"with a
monthly salary of P37,483.58 effective April 1, 2002,7 up from the P27,000.00salary petitioner was then receiving.

After petitioners stint as Dean of STI-Guadalupe, she was promoted to the position of Chief Operating Officer
(COO) of STI-Makati, under the same position classification and salary level of "Job Grade Manager B". She
concurrently served as STI-Makati School Administrator.8

Sometime in July 2003,or during petitioners stint as COO and School Administrator of STI-Makati, a Plan of
Merger9 was executed between STI and STI College Makati (Inc.), whereby the latter would be absorbed by STI.
The merger was approved by the Securities and Exchange Commission on November 12, 2003. STI College Makati
(Inc.) thus ceased to exist, and STI-Makati was placed under STIs Education Management Division (EMD). 10

In a March 12, 2004 Memorandum,11 STI "[i]n line with the recently approved organizational structure effective
August 1, 2003"12 updated petitioners appointment as COO, "Job Grade Manager B" witha gross monthly salary
of P37,483.58. She was re-appointed as COO of STI-Makati, under the supervision of the AcademicServices Group
of the EMD and reporting directly to the Head thereof, herein respondent Fernandez. However,petitioner was not
given the salary commensurate to her position as COO, which by this time appeared to be pegged
at P120,000.00.13 It likewise appears that she was not given benefits and privileges which holdersof equivalent
positions were entitled to, such as a car plan.14

Two months after confirming petitioners appointment as STI-Makati COO, another Memorandum 15 dated May 18,
2004 was issued by STI Human Resources Division Head, Yolanda Briones (Briones), signed and approved by STI
Senior Vice-President for Corporate Services Division Jeanette B. Fabul (Fabul), and noted by respondent Jacob

a) Cancelling, effective May 20, 2004, petitioners COO assignment at STI-Makati, citing managements
decision to undertake an "organizational restructuring" in line with the merger of STI and STI-Makati;

b) Ordering petitioner to report to STI-HQ on May 20, 2004 and to turn over her work to one Victoria Luz
(Luz), who shall function as STI-Makatis School Administrator; and

c) Appointing petitioner, effective May 20, 2004, as STIs Compliance Manager with the same "Job Grade
Manager B" rank and salarylevel, reporting directly to SchoolCompliance Group Head Armand Paraiso
(Paraiso).
According to STI, the "organizational re-structuring" was undertaken "in order to streamline operations. In the
process, the positions of Chief Executive Officer and Chief Operating Officer of STI Makati were abolished."16

On May 18, 2004, Fernandez summoned petitioner to his office, where the following conversation which appears
to have been recorded by petitioner with the knowledge and consent of Fernandez took place:

F: (Fernandez) Im sure you know already why you are here.

P: (Petitioner) No, sir. Nanalo ba tayo sa Winners Circle

F: Girly, lets stop this. You will be pulled out [from] STI CollegeMakati[.] x x x [T]urn over toVicky Luz
everything tomorrow.

P: Sir? What have I done? May I know what is the reason of (sic) an immediate transfer and a short period of turn-
over?

F: I dont trust you anymore. Ive beenhearing too many things from [sic] you and as your CEO, you dont submit to
me FSP monthly. Me high school student ka na inenroll para lang makasali sa basketball.

P: Sir, thats not true.

F: Would you like me to call Liezel? ([H]e stood up and called Ms. Liezel Diego)

P: Yes, sir.

F: Liezel, how many times did STI College-Makati submitted [sic] to you the FSP?

L: (Liezel Diego) Sir, sa akin po 2 beses peromeron pa po ke Ervie.

Tanong ko lang po ke Ervie kung ilan sa kanya.

P: Sir, can I have one minute to call STI College-Makati to fax the data of the receiving copies of the FSP?

F: Irrelevant! I dont have time.

P: Sir, you will please put that in writing[. It] is a very strong accusation you are making and I think I should defend
myself.

F: No way! You cannot get anything from me. Why? Sothat when I will provide such then you will go toLabor? (in a
shouting manner)

P: Sir, what is this all about? Please tell me the real score. I am honest to you and I believe I am performing well. Is
this what I deserve?

F: Dont talk to me about honesty (again said in a shouting manner and fuming mad). Girly, dont push me to the
limit! Dont let me do things that you will regret later. Dont be like Chito (Salazar, the former STI President) who
have [sic] left STI without proving to everybody whether [sic] he have [sic] done wrong or not. I dont want that to
happen to you!

P: Sir, can I have one minute to go outside. I can no longer bear this?

(begging with both hands [together] as a sign of surrender)

F: No! (still shouting) I dont have time. Heres the letter from HR[.] I want you to sign this.

P: Sir, Im sorry but I will not sign. I think it should be HR who will give this to me.

F: You want me to call HR? You wantme to call Atty. Pascua? You want me to call people outside [to] witness that
you refused to sign? (still shouting) I dont care if you have a tape recorder there with you. After all, that will not be
a [sic] valid evidence in court.

xxxx

F: Ok. Dont make me loose [sic] my temper again (with a soft voice already). You just sign this (giving to me the
[May 18, 2004 Memorandum]). Dont go to Bohol anymore. If ever you will win in the Winners Circle, you can get
the tripjust like what happened to Redger (Agudo, the former COO of STI College-Makati).

P: Sir, what will be the consequence if I will not sign this?

F: I will file a case against you. What do you call this? (pausing for a little while then uttered the word)
Disobedience!

P: Ok, sir, but please I want to know what exactly my violation is (while signing the paper). Now that we will be
parting ways, I am still hoping that you can tell [sic] the violationsthat I made, if there is any.

F: You can have it after 2-3 weeks time. Besides, we are not parting ways (with a sarcastic smile). I am still your
boss in Audit. Audit and Compliance is still under my supervision.

P: Thank you, sir. (I went out in [sic] his room still trembling)17

Incidentally, by this time, petitioner had garnered the following awards and distinctions:

1) Silver Awardee, 2004 STI Winners Circle Awards, 17thSTI Leaders Convention;

2) STI Academic Winners Circle Award as Dean of STI-Guadalupe given at the 2002 STI Leaders
Convention;

3) Academic Head of the Year for 2002, as Dean of STI-Guadalupe; and

4) 2001 STI Winners Circle, as Academic Head, STI-Guadalupe.18

On May 20, 2004, petitioner reported toher new office at STIs School Compliance Group, only to find out that all
members ofthe department had gone to Baguio City for a planning session. Petitioner, who was not apprised of the
official trip, was thus left behind. That same day, an official communication 19 was disseminated throughout STI,
announcing Jacobs appointment as the new STI President and CEO, Fernandez as the new COO of STI-Makati,and
Luz as the new STI-Makati School Administrator; however, petitioners appointment as Compliance Manager was
left out.

In a May 24, 2004 letter20 to Jacob, petitioner took exception to the incidents of May 18 and 20, 2004, claiming that
she became the victim of a series of discriminatory acts and objecting to the manner by which she was transferred,
asserting that she was illegally demoted and that her name was tarnished as a result of the demotion and transfer.
Jacob replied through a June 7, 2004 letter21 advising petitioner that her letter was forwarded to Fernandez for
comment.
Prior to that, on May 25, 2004, during the 17th STI Leaders Convention held in Panglao, Bohol, petitioners
achievement as a Silver Awardee for the 2004 STI Winners Circle Awards was announced, but she did notattend,
claiming that she was too embarrassed to attend owing to the events leading to her transfer, which to her was a
demotion.22 STI withheld petitioners prize a South Korea trip termed "Travel Incentive Award" for the Winners
Circle for STI fiscal year 2003-2004 "pending the final result of the investigations being conducted" by STI
relative to irregularities and violations of company policies allegedly committed by petitioner.23

It appears that from May 28, 2004 up to June 10, 2004, STIs Corporate Auditor/Audit Advisory Group conducted
anaudit of STI-Makati covering the whole period of petitioners stint as COO/School Administrator therein. In a
report (Audit Report) later submitted to Fernandez, the auditors claim to have discovered irregularities, specifically

1. Appointment papers of STI-Makati employees did not have the written approval of Fernandez inhis
capacity as CEO;

2. There were instances where employees became regular after only an abbreviated probationary period,
and in some cases,the employees did not undergo probation;

3. Petitioner failed to fully liquidate cash advances amounting to P60,000.00, relative tothe purchase of
books;

4. There was a lack of internal controlsin regard to cost of planning sessions, liquidation reports, journal
entries, use of petty cash fund, and inventory; and

5. Petitioner and other employees falsified school records in order to enable high school players to play for
STI-Makatis volleyball team.24

In a June 17, 2004 Memorandum25 to Jacob, Fernandez cited the above Audit Report and recommended that an
investigation committee be formed to investigate petitioner for grave abuse of authority, falsification, gross
dishonesty, maligning and causing intrigues, commission of acts tending tocast negativity upon his person
(Fernandez), and other charges. Fernandez recommended that petitioner be placed under preventive suspension
pending investigation. Meanwhile, with respect to petitioners May 24, 2004 letter, it appears that Fernandez did not
submit a comment or answer thereto.

Jacob approved Fernandezs recommendations, and on June 21, 2004, a Memorandum 26 was issued placing
petitioner under preventive suspension and banning her entry to any of STIs premiseseffective June 22, 2004 up to
July 16, 2004, citing "(an) Audit investigation being conducted relative to the offenses" for which petitioner was
charged, namely:

I. FACULTY MANUAL

a) Making malicious, obscene or libelous statements about the person of any member of the academic
community.

b) Threatening, intimidating, coercingor harassing another person within the school premises.

c) Commission of acts inimicalto students [sic] interest.

II. STI-HO POLICY MANUAL

A. Class 3

1. Making false or malicious statements against another employee.

 2. Causing intrigues tending to cast insult, dishonor and discredit to another employee.

3. Reading or gaining access to files,records, memos, correspondence and other classified

documents of the company.

[B] Class 4

1. Concealing errors of omission or commission, thus negatively prejudice [sic] the interest of the
company.

[C] Class 5

1. Falsifying timekeeping reports and records, drawing salary/allowance, in any form, or money
by virtue of falsified timekeeping report of records, vouchers, receipts and the like.

2. Giving false and untruthful statements of [sic] concealing material facts in an investigation
conducted byan authorized representative of the company.

3. Misappropriating or withholding company funds.

4. All acts of dishonesty, which cause [sic] tend to cause prejudice to the company.27

On June 24, 2004, petitioner received another Memorandum 28 from Briones dated June 23, 2004, this time stating
that charges havealready been filed against her allegedly "based on the Audit Findings", yet makingreference to the
June 21, 2004 Memorandum and without informing petitioner of the particulars of the charges or the results of the
audit. Nor was a copy of the said audit findings attached to the memorandum.

In a June 28, 2004 demand letter29 addressed to Jacob,petitioner protested anew her alleged maltreatment, claiming
illegal constructive dismissal and demanding immediate reinstatement to her COO position and the payment of
actual and other damages, under pain of suit.

In a June 30, 2004 letter, petitioner was notified of a hearing scheduled for July 2, 2004 and required to submit her
written explanation to the charges. It appears, however, that petitioner did not receive the said letter. 30 On even date,
petitioner filed with the National Labor Relations Commission (NLRC) a labor case against herein respondents,
Fabul and Briones. Docketed as NLRC NCR Case No. 00-06-07767-04, the Complaint 31 alleged illegal constructive
dismissal and illegal suspension, withclaims for regularization as well as for underpayment of salaries, holiday pay,
service incentive leave, 13th -month pay, moral and exemplary damages, and attorneys fees.

In a July 12, 2004 Memorandum32 to petitioner, STI lifted petitioners suspension and ordered her to return towork
on July 13, 2004, with full salary from the time of her suspension.

In a July 13, 2004 electronic mail message 33 sent by STIs Reuel Virtucio (Virtucio) to petitioner, the latter was
invited to a July 19, 2004 "meeting with the committee formed to act on the complaint filed against (petitioner) by
(Fernandez)."34 The committee was composed ofSTIs officers, namely Amiel Sangalang (Sangalang); Flerdeliza
Catalina Domingo (Domingo); and Virtucio.

On July 19, 2004, during the supposed scheduled meeting with the committee, petitioner was furnished with several
documents; however, no copy of the formal complaint or written chargewas given to her.The meeting was adjourned
without the committee setting another meeting for the submission of petitioners answer; nor was a hearing set for
the presentation of the parties evidence.35

Thereafter, petitioner wenton sanctioned leave of absence. After the lapse of her approved leave, she reported for
workseveral times. After August 9, 2004, however, she no longer reported for work.
On August 17, 2004, STI issued another Memorandum 36 to petitioner, informing her that her South Korea
travelincentive award was being withheld, as the investigation covering her alleged involvement in irregularities and
violations of company policies was still pending.

In a January 13, 2005 letter cumnotice of termination signed by Jacob, petitioner was dismissed from STI effective
January 11, 2005.37

The Labor Arbiter Decision

In her Position Paper,38 petitioner claimed that during her stint as COO of STI-Makati and up to her transfer and
appointment as Compliance Manager, she was discriminated against and unfairly treated by respondents; that she
was denied a) the salary corresponding to the COO position in the amount of P100,000.00 P120,000.00, b) her
prizes as Winners Circle awardee, aswell as c) her benefits such as a car plan and honorarium of P8,500.00
monthly.She likewise contended that her removal as STI-Makati COO and transfer to the School Compliance Group
as Compliance Manager was illegal and constituted a demotion amounting to constructive dismissal, as she was not
given prior notice of the transfer; forced to give her written conformity thereto; placed in an embarrassing situation
thereafter; and never given any task or work while she held such position. She added that the alleged reorganization
which caused her removal as STI-Makati COO was a sham, calculated to ease her out inthe guise of a restructuring;
that she was illegally placed under suspension for alleged offenses which respondents could not substantiate and
which she was not informedabout; that she was not accorded due process during the conduct of the purported
investigation; and that as a consequence of the discrimination and unfair treatment she received from respondents,
she suffered untold injury. Petitioner thus pleaded:

WHEREFORE, complainant respectfully prays that, after due proceedings, judgment be rendered ordering
respondents, jointly and severally, as follows:

1. To reinstate complainant to her former position as COO without loss to [sic] her seniority rights with
backwages and other benefits, such the [sic] monthly P8,500.00 honorarium, among others, to be paid until
fully reinstated with the necessary adjustments to equal the salary and benefits now being received by her
replacement, respondent Peter K. Fernandez.

2. To pay complainant the unpaid salaryand benefits differential due her as COO computed from November
5, 2002 to equal the salary and benefits of respondent Peter K. Fernandez, plus the legal rate of interest
thereon from the same date until fully paid.

3. To pay the money equivalent, plus the legal rate [sic] interest thereon until fully paid, of complainants
awards as a Silver Awardee in its STI 17th Winners Circle, consisting of the tripto Panglao, Bohol from
May 25 to 27, 2004 and Korea from September 21 to 24, 2004.

4. To pay complainant the unpaid Holiday Pay duly adjusted as above [sic] and with legal interest thereon
until fully paid.

5. To pay complainant the proportionate 13th [-]month pay for the current year with legal interestthereon
until fully paid.

6. To pay complainant moral damages in [sic] sum of P3 Million and exemplary damages in the amount
of P2 Million, including attorneys fees, and expenses of litigation.

Complainant prays for such other reliefs just and equitable in the premises.39

In their Position Paper,40 the respondents in NLRC NCR Case No. 00-06-07767-04 claimed that petitioner was
removed as STI-Makati COO pursuant to a reorganization aimed atstreamlining STIs operations after the merger; as
a result, the positions of STI-Makati CEO and COO were abolished. They argued that petitioner was merely
"laterally transferred" to the School Compliance Group as Compliance Manager, and was not demoted in rank; nor
did she suffer a diminution in her salary and benefits, as the positions of STI-Makati COO and Compliance Manager
are equivalent in rank under the STI structure, that is, they both fall under "Job Grade Manager B". They added that
petitioner committed anomalies and irregularities, as stated above, which became the subject of an Audit
Report.41 They asserted that the abolition of a position in STI is a recognized prerogative of management which may
not be interfered with absent malice or bad faith, and more so when done pursuant to a valid corporate restructuring;
the abolition of the CEO, COO, Treasurer, Corporate Secretary, and Director positions in STI-Makati was pursued as
a matterof course because with the merger, STI-Makati ceased to exist as it was absorbed by STI, and consequently
these positions became unnecessary. Petitioners transfer was justified as an exercise of STIs prerogative and right
to transfer its employees when called for, and was done reasonably, without malice or bad faith, and without
unnecessarily inconveniencing petitioner.

Respondents added that petitioners suspension was vital for the protection of sensitive data and to ensure the
smooth conduct of the investigation, and in order that she may not gain access to sensitive information which, if
divulged to government agenciessuch as the Commission on Higher Education (CHED), would result in the
denial/withholding of permits to STI. 42 On petitioners claim for regularization, respondents claimed that this was
unnecessary since petitioner was already a regular employee of STI. Regarding petitioners money claims,
respondents argued that petitioner could not be entitled to them, as she received all her salaries, benefits and
entitlementsduring her stint with STI. Finally, respondents contended that petitioner was not entitled to damages and
attorneys fees, since she was not illegally dismissed and, in carrying out her transfer, they did not act with malice,
bad faith, orin a wanton and oppressive manner.

In her Reply43 to respondents Position Paper, petitioner noted that while STI and STI College Makati (Inc.) merged,
there was in fact no restructuring that took place which required her transfer and demotion; onthe contrary, the
merger created 29 additional vacant positions in STI. Petitioner added that no prior announcement of the
restructuring of STI-Makati was made, which thus renders such reorganization of questionable integrity; instead, the
merger was utilized as a tool to ease her out, through the bogus reorganization. She contended that Fernandez had
prejudged her case even before an investigation into the alleged anomalies could be conducted. Petitioner likewise
notedthat even her appointment as Compliance Manager was a sham, because no such vacant position existed within
the School Compliance Group, as the only two Compliance Manager positions were then occupied by Eddie Musico
(Musico) and Reynaldo Gozum (Gozum); 44 the only other vacant positions in that department were those for lower
level Compliance Officers. In effect, petitioner was in fact made a mere ComplianceOfficer, which meant that she
was effectively demoted. Petitioner claimed as well that her demotion was highlighted by the fact that while she had
a masteral degreeand doctorate units, all the others within the School Compliance Group including her superior,
Paraiso were mere bachelors degree holders.

Finally, petitioner maintained that the multiple charges lodged against her were without basis, and respondents failed
to prove them byadequate evidence.

On the other hand, respondents maintained in their Reply (to Complainants Position Paper) 45 that as to salary and
benefits, petitioner was not discriminated against, and was merely given a compensation package commensurate to
her rank as "Job Grade Manager B", taking into consideration her length of service at STI.Her salary was thus at par
with those of other STI employees of equivalent rank and similar durations ofemployment. They added that
honoraria are not given to its employees,as well as to those who are deployed to company-owned schools such as
STI-Makati. Respondents asserted further that the reorganization was not a ruse to ease petitioner out; it was
necessary as a means toward streamlining STIs operations. Fernandez characterized petitioners account of their
conversation as inaccurate.46 Respondents likewise debunked petitioners claims that she was discriminated against
while she held the position of Compliance Manager, saying that this claim was specious and exaggerated. They
added that even though Fernandez was later appointed COO of STI-Makati after petitioner was appointed
Compliance Manager, his work assuch STI-Makati COO was limited to performance of oversight functions, which
functions he already performs as SeniorVice-President of the Education Management Division of STI. With regard
to the July 19, 2004 meeting, respondents argued that nothing was achieved during said meeting owing to
petitioners and her counsels "quarrelsome attitude" and insistence thatshe be furnished the written charges against
her as well as the supporting evidenceor documents, which would have been unnecessary if she only cooperated
during said meeting and answered the charges against her. They underscored the fact that during said meeting,
petitioner was furnished with a copy of the charges against her, including all other documents, particularlythe Audit
Findings.

On March 31, 2006, LaborArbiter Renaldo O. Hernandez issued a Decision 47 in NLRC Case No. 00-06-07767-04,
decreeing as follows:

WHEREFORE, premises considered, judgment is hereby finding [sic] complainant to have been illegally
constructively and in bad faith dismissed by respondents in her legally acquired status as regular employee thus,
ORDERING respondents SYSTEMS TECHNOLOGY INSTITUTE, INC. and/or MONICO V. JACOB, PETER K.
FERNANDEZ in solido:

1) To reinstate her to her former position, without loss of seniority rights and benefits, allowances, which
reinstatement aspect, actual or in the payroll, is immediately executory, even pending appeal.

2) To pay complainants full back wages, which should legally start from date of her illegal constructive
dismissal/illegal demotion on 05/18/2004, but reckoned from date of the illegal suspension when she was
physically prevented/ barred from working on 06/22/2004, based on her gross monthly salary P37,483.58,
15 days Vacation Leave/yearand 15 days Sick Leave/year, 13th [-] month pay, and other benefits accruingto
her in her regular position as COO until actually reinstated, which as of date amounts to:

Basic P37,483.58 x 21 months = P787,155.18

13th[-]month pay 1/12 thereof = 65,596.26
VL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13
SL 15 days/yr P1,249.45 x 15 x 1.75 years = 32,798.13
Total F/B as of date = P918,347.70

3) To pay her moral and exemplary damages in the combined amount of P1,000,000.00.

4) To pay her the monetary equivalentof the awards due her as her being proclaimed as a Silver Awardee of
US$630.00 for the Korean travel from 09/21-24/2004, and the round trip ticket US$350.00, hotel
accommodation and expenses to be paid, viz. 1. PhilippineTravel Tax P1,620.00, NAIA Terminal
Fee P550.00, Visa Processing Fee P500.00, War Risk Tax US$12.00, Seoul Tax US$15.00, Ticket
Insurance US$3.00, Travel Insurance P420.00, Tour Guide and Drivers Tip US$4.00/day.

5) To pay her 10% of the entire computable award herein as attorneys fees.

SO ORDERED.48

The Labor Arbiter found that petitioner was illegally dismissed, and respondents were guilty of malice and bad faith
in the handling of her case. He held that petitioners transfer which STI claimed was the result of STIs
restructuring was irregular, because at the time of such transfer, the reorganization and restructuring of STI-Makati
had already been effected; STIs March 12, 2004 Memorandum topetitioner which confirmed and renewed her
appointment as STI-Makati COO was precisely issued as a consequence of the merger and reorganization,which
took place as early as November 2003. STIs claim that petitioners lateral transferwas necessary is thus contrived.

In addition, the Labor Arbiter declared that even as petitioner was appointed to the position of Compliance Manager,
such position did not actually exist in STIs new corporate structure; under the Compliance Group, which was
headed by Paraiso, there were only two Compliance Manager positions which were at the time occupied by Musico
and Gozum, and the only other vacant positions in the Compliance Group were for Compliance Officers. In effect,
petitioner was appointed to the position of a mere Compliance Officer, which was lower in rank.
The Labor Arbiter held further that during the process of her illegal transfer, petitioner was harassed, humiliated, and
oppressed, thus:

1. On May 18, 2004, she was subjected to threats and intimidation by Fernandez, the latter bullying and
forcing her toreceive the May 18, 2004 Memorandum while petitioner was inside his office;

2. On the day she reported to her new position as Compliance Manager, the whole ComplianceGroup team
left for a three-day out-of-town planning session, without respondents informing her or including her in the
official event as she should be;

3. On May 20, 2004, an official written announcement was made regarding Jacobs appointment as new
STI President and CEO, Fernandez as new STI-Makati COO, and Luz as new STI-Makati School
Administrator. Adding insult to injury, petitioners appointment as Compliance Manager was intentionally
left out;

4. Petitioner, given her illustrious career in STI having risen from the ranks as a faculty member, to full-
time professor, to Dean, and finally to the position of STI-Makati COO, and having achieved multiple
awards and distinctions was thereafter treated "as a non-entity" by respondents.

The Labor Arbiter added that the purported audit and investigation of petitioners alleged irregularities was a sham,
as the same was conducted without official sanction from STI and without petitioners knowledge; it was founded
on hearsay evidence and based on charges known only to Fernandez; it was conducted merely to conceal
respondents shabby treatment of petitioner, and without apprising petitioner of the writtenformal charges against
her.

Finally, respondents wereadjudged guilty of malice, bad faith, acts oppressive to labor and contrary to morals, good
customs and public policy, which caused upon petitioner suffering and humiliation which entitles her to an award of
moral and exemplary damages, as well as attorneys fees.

Ruling of the National LaborRelations Commission

Respondents interposed an appeal with the NLRC, docketed as NLRC NCR Case No. 050756-06.In an October 31,
2007 Decision,49 the NLRC decreed, thus:

WHEREFORE, the [D]ecision appealed from is VACATED and SET ASIDE and a new one entered dismissingthe
complaint for lack of merit.

SO ORDERED.50

In reversing the Labor Arbiters Decision and finding that there was no illegal constructive dismissal,the NLRC held
that any action taken by STI after the merger can be reasonably concluded as one of the valid consequences thereof;
the regulation of manpower is a management prerogative enjoyed by STI, and it was free to regulate according to its
own discretion and judgment all aspects of petitioners employment. Inthis light, and since no concrete evidence was
presented by petitioner to show that respondents acted with maliceor bad faith, the NLRC held that it may not be
said that the abolition of the position of STI-Makati COO was done to unduly ease her out of STI.

The NLRC added that while it may be conceded that a heated argument between petitioner and Fernandez took
place during their May 18, 2004 meeting, the charged emotional outbreaks were nonetheless occasioned by
extraneous matters injected during such meeting, and consequently, Fernandez may not be faulted for insisting that
petitioner receive the May 18, 2004 Memorandum ordering petitioners transfer.
Moreover, the NLRC declared that petitioners preventive suspension was not done irregularly, as it was based on
charges leveled against her and made pursuant to an administrativeinvestigation then being conducted; likewise, it
held that the pending investigation justified the withholding ofpetitioners Korea travel incentive award.

Finally, the NLRC noted that petitioners failure to report for work after August 9, 2004 should betaken against her,
and on this note it would be unfair to hold respondents liable for illegal constructive dismissal.

Petitioner moved for reconsideration,but in a March 28, 2008 Resolution,51 the NLRC denied the same.

Ruling of the Court of Appeals

Petitioner went up to the CA via certiorari. On October 27, 2008, the CA issued the assailedDecision, decreeing as
follows:

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.52

According to the CA, the NLRC was correct in finding that as a result of the November 2003 merger of STI and
STI-Makati, petitioners transfer to her new position as Compliance Manager became necessary, as the position of
STIMakati COO which petitioner then held was abolished as a result of a reorganization that was implemented
pursuant to the merger. It noted further that the March 12, 2004 confirmation 53 of petitioners appointment as STI-
Makati COO was done pursuant to an August 2003 reorganization or one that was implemented priorto the
November 2003merger; thus, petitioners transfer and appointment as Compliance Manager days later,per the May
18, 2004 Memorandum, may not be said to be irregular, as it was made in accordance with a newreorganization or
restructuring program implemented in accordance with the November 2003 merger.

The CA held further that petitionerstransfer was made pursuant to the valid exercise of STIs prerogative toabolish
certain positions and transfer/ reassign its employees, for valid reasons and in accordance with the requirements of
its business. Since petitioners transferwas not attended by malice or bad faith, as it was shown to be necessary
following the merger and abolition of the position that she held, and was done without diminution in rank, salary and
benefits, there could be no cause of action against respondents for illegal dismissal.

The appellate court did not give credence to petitioners allegations of discrimination and harassmenteither, as it
found them to be self-serving and unsubstantiated. Regarding her suspension, the CA affirmed the NLRCs view that
the same was not irregularly imposed; the withholding of her travel award was justified as well.

Issues

Petitioner now submits the following issues for the Courts resolution:

THE COURT OF APPEALS ERRED IN DEVIATING FROM THE 18 MAY 2004 EMPLOYMENT UPDATE
CLEARLY ADMITTING AN INVALID ABOLITION OF PETITIONERS POSITION WITH
STISAPPOINTMENT OF HER REPLACEMENT AND RENAMING HER OFFICE AS "SCHOOL
ADMINISTRATOR".

II

AS THERE WAS NO VALID ABOLITION OF PETITIONERS POSITION AS COO, THE COURT OF APPEALS
ERRED IN FRAMING A CASE OF VALID LATERAL TRANSFER INSTEAD OF CONSTRUCTIVE
DISMISSAL DONE IN BAD FAITH.54
Petitioners Arguments

In a nutshell, petitioner argues in her Petition and Reply55 that her appointment as Compliance Manager is illegal,
because the abolition of the STIMakati COO position and the creation of the position of Compliance Manager were
contrived and fabricated. She adds that her appointment to the position of Compliance Manager was in fact a
demotion: she was relegated to a position where she did not have any staff to supervise; her work became merely
mechanical in nature; she became a mere Compliance Officer reporting to the Compliance Group Head; and her
work was severely limited.

Petitioner adds that contrary to the CAs pronouncement, she was subjected to harassment and discrimination,
humiliated and became the victim of STIs fraudulent scheme to illegally oust her from her position as STI-Makati
COO. She cites: 1) the May 18, 2004 incident, noting the treatment accorded her by Fernandez and the manner by
which she was allegedly forced to receive the Memorandum of even date; 2)the investigation into alleged
irregularities, which she characterized as sham; 3) her preventive suspension, which she claims was illegal for being
based on non-existent charges; and 4) the withholding of her travel award.

Petitioner insists that her suspension was illegal, as her new employment as Compliance Manager did not put her in
a position where she would have access to sensitive STI records;thus, she was never a serious threat to such extent
that respondents believed she was. Besides, the investigation into allegations of irregularities committed by her,
which was the cause for her suspension as well, was a sham for violating her rightsto a hearing and due process.
Respondents Arguments

In their Comment,56 respondents maintain that the merger of STI and STIMakati required the abolition of the
Chairman, President/CEO, COO, Treasurer and Corporate Secretary positions in STI-Makati; likewise, it became
necessary to effect a reorganization of STIs corporate structure inorder to streamline its operations. Petitioners
transfer was in line with such merger and reorganization; no bad faith may thus be inferred from their actions, which
were carried out legally and pursuant to STIs rights, prerogatives, and needs at the time.

Respondents argue further that petitioners transfer did not amount to a demotion in rank, as the positions of COO
and Compliance Manager are of equal importance; in fact, the functions of Compliance Manager are much broader
in scope as they involve the conduct of operations and academic audits of allof STIs schools, and not just STI-
Makati. As to salaryand benefits, petitioner as Compliance Manager is given the same salary and benefits which she
received at the time she was STI-Makati COO.

Respondents add that, ascorrectly held by the NLRC and CA, petitioner was never subjected to harassment and
humiliation, thus:

1. Petitioner was not excluded from the Compliance Groups planning session held in Baguio City. At the
timeof petitioners transfer, Briones was not aware of the scheduled Baguio trip, and thus petitioner was not
duly informed thereof. Thus, her inability to attend the official event may not be blamed on respondents;

2. Petitioner was assigned ample work at the Compliance Group, contrary to her claims that she virtually
did nothing in her new position;

3. It is not true that petitioner was not given her own room as Compliance Manager in order to humiliate
her. She could not begiven a room simply on account of office space constraints.

On petitioners suspension, respondents reiterate that petitioners threats to divulge sensitive information and
jeopardize STIs then pending permit applications justified the taking of drastic measures to insure that company
records are kept intact and free from access; the preventive suspension of petitioner thus became necessary.
Moreover, an audit investigation was then being conducted on alleged irregularities committed by petitioner;
preventive suspension as a preliminary step in the investigation is thus authorized.
Our Ruling

The Petition is granted.

As a rule, this Court is not a trier of facts, and thus the findings of fact of the NLRC and CA are final and conclusive
and will not be reviewed on appeal. However, there are well-recognized exceptions to the rule, such as when its
judgment is based on a misapprehension of facts or relevant facts not disputed by the parties were overlooked which,
if properly considered, would justify a different conclusion. Petitioners case falls under these exceptions.

Both the NLRC and CA found thatpetitioner was not constructively dismissed, for the following reasons:

1. Petitioners position as STI-Makati COO was abolished as a necessary result of the merger of STI and
STI-Makati,and the restructuring of STI aimed at streamlining its operations;

2. Petitioner was merely "laterally transferred" to the Compliance Group as Compliance Manager, with no
diminution in rank, salary and benefits; and

3. The reorganization of STI was done in good faith and in the exercise of the management prerogative. In
the same manner, petitioners transfer was a) made in the exercise of the management prerogative to
transfer employees when necessary; b) done in good faith; and c)not unreasonable, inconvenient or
prejudicial to her interests.

It appears, however, that the position of STI-Makati COO was actually never abolished. As a matter of fact, soon
after petitioner was removed from the position, Fernandez was appointed to take her place as STI-Makati COO; his
appointment was even publicly announced via an official communication disseminated company-wide. This thus
belies respondents claim thatthe position of STI-Makati COO became unnecessary and was thus abolished.
Respondents may argue, as they did in their Reply57 to petitioners Position Paper, that Fernandezs appointment as
STI-Makati COO replacing petitioner was merely for oversight purposes. Whatever the reason could be for
Fernandezs appointment as STI-Makati COO, the fact still remains that such position continued to exist.

Next, petitioners appointment as Compliance Manager appears to be contrived as well. At the time of petitioners
appointment, the only two Compliance Manager positions within STIs compliance department the School
Compliance Group were already filled up as they were then occupiedby Musico and Gozum. 58 None of them has
been dismissed or resigned. Nor could petitioner have been appointed head ofthe department, as Paraiso was very
much in charge thereof, as its ComplianceGroup Head. The only positionswithin the department that were at the
time vacant were those of Compliance Officers, which are of lower rank. In other words,petitioner could not have
been validly appointed as Compliance Manager, a position within STI that was then very much occupied; if ever,
petitioner took the position of a mereCompliance Officer, the only vacant position within the department.

Thirdly, even though it isclaimed that from May 28, 2004 up to June 10, 2004, STIs Corporate Auditor/Audit
Advisory Group conducted an audit of STIMakati covering the whole period of petitioners stint as COO/School
Administrator, it appears that even prior to such audit, petitioners superior Fernandez had already prejudged her
case. The May 18, 2004 conversation between petitioner and Fernandez inside the latters office is quite revealing.

The May 18 conversation between petitioner and Fernandez, taken in conjunction with the Courts findings that the
position of STI-Makati COO was never abolished and that petitioners appointment as Compliance Manager was
contrived, confirms the view that petitioner was not transferred to the School Compliance Group as a matter of
necessity, but as punishment for her perceived irregularities. In effect, petitioner was demoted and relegated to a
position of insignificance within STI, there to suffer for what her employer alleged were transgressions committed
by her. To all intents and purposes, petitioner was punished even before she could be tried.

Fernandezs declarations during the May 18 conversation undoubtedly provide the true motive behind petitioners
removal as STI-Makati COO:
 a. After "hearing too many things" about petitioner, Fernandez simply lost confidence in her meaning that
Fernandez had made up his mind about petitioner after hearing rumors about her; b. Fernandez accused
petitioner of specific violations, without the benefit of accurate information and without giving her the
opportunity to refute the accusations;

c. Fernandez has no time to listen to petitioners explanations, despite her pleas to be heard;

d. Fernandez refused to provide petitioner with the evidence or other basis for his accusations, in spite of
petitioners request for him to put the same in writing;

e. Fernandez has prejudged petitioner, and intimated to her that she was dishonest, even before she could be
heard; and

f. Fernandez threatened petitioner, that if she pushed him further, she would suffer the fate of a former
employee who was separated fromSTI without the benefit of clearing his name. In other words, she could
find herself without a job at STI even before her innocence or guilt could be established.

From the May 18 conversation alone, it can be seen that petitioners fate in STI was a foregone conclusion. She was
threatened to accept her fate or else she would find herself without work, either through dismissal or forced
resignation. Evidently, she became the subject of an illegal constructive dismissal in the guise of a transfer.

The supposed audit conducted from May 28, 2004 up to June 10, 2004 by STIs Corporate Auditor/Audit Advisory
Group was a mere afterthought, as it was apparent that as early as May 18, 2004, petitioner has been found guilty of
whatever transgressions she was being charged with, founded or unfounded. The same is true with respect to her
preventive suspension; it was imposed with malice and bad faith, and calculated to harass her further, if not trick her
into believing that respondents were properly addressing her case. Needless to say, all proceedings and actions taken
in regard to petitioners employment and case, beginning on May 18, 2004, were all but a farce, done or carried out
in bad faith, with the objective of harassing and humiliating her, all in the fervent hope that she would fold up and
quit.

Constructive dismissal exists where there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay and other
benefits. Aptly called a dismissal in disguise or anact amounting to dismissal but made to appear as if it were not,
constructive dismissal may, likewise, exist if an act of clear discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee that it could foreclose any choice by him except to forego his
continued employment. In cases of a transfer of an employee, the rule is settled that the employer is charged with the
burden of proving that its conduct and action are for valid and legitimate grounds such as genuine business necessity
and that the transfer is not unreasonable, inconvenient or prejudicial to the employee. If the employer cannot
overcome this burden of proof, the employees transfer shall be tantamount to unlawful constructive dismissal. 59

There is no doubt that petitioner was subjected to indignities and humiliated by the respondents. As correctly
observed by the Labor Arbiter, she was bullied, threatened, shouted at, and treated insolently by Fernandez on May
18, 2004 inside the latters own office. She was shamedwhen, on her very first day at the School Compliance Group,
all of the employees of the department have gone on an official out-of-town event without her and, as a result,she
was left alone at the office for several days. Respondents did not even have the courtesy to offer her the opportunity
to catch up with the group sothat she could makeit to the event, even if belatedly. Then again, on May 20, 2004, STI
made an official companywide announcement of Jacobs appointment as new STI President and CEO, Fernandez as
new STI-Makati COO, and Luz asnew STI-Makati School Administrator, but petitioners appointment as new
Compliance Manager was inconsiderately excluded. Respondents made her go through the rigors of a contrived
investigation, causing her to incur unnecessary legal expenses as a result of her hiring the services of counsel. Her
well-deserved awards and distinctions were unduly withheld in the guise of continuing investigation which
obviously was taking too long to conclude; investigation began formally on May 28, 2004 (start of audit), yet by
August 17 (date of memorandum informing petitioner of the withholding of Korea travel award), the investigation
was still allegedly ongoing. She was deprived of the privilege to attend company events where she would have
received her well-deserved awards with pride and honor, and her colleagues would have been inspired by her in
return. Certainly, respondents made sure that petitioner suffered a humiliating fate and consigned to oblivion.

Indeed, petitioner could not be faulted for taking an indefinite leave of absence, and for altogether failing to report
for work after August 9, 2004. Human nature dictates that petitioner should refuse to subject herself to further
embarrassment and indignitiesfrom the respondents and her colleagues. All told, petitioner was deemed
constructively dismissed as of May 18, 2004. Finally, since the position of STI-Makati COO was never abolished, it
follows that petitioner should bereinstated to the very same position, and there to receive exactly what Fernandez
gets by way of salaries, benefits, privileges and emoluments, without diminution in amount and extent. Petitioner,
multi-awarded, deserving and loyal, is entitled to what Fernandez receives, and is deemed merely to take over the
office from him; moreover, the position of Chief Operations Officer is not merely an ordinary managerial position,
asit is a senior managerial office. In turn, Fernandez or anyone who currently occupies the position of STIMakati
COO must vacatethe office and hand over the same to petitioner.

It is correct for petitioner to have included among the reliefs prayed for in her Complaint that she be paid the salary,
benefits and privileges being enjoyed by Fernandez currently. The Court, in granting said relief, deems it only fair
that she should be entitled to what Fernandez is receiving. Not only that the position requires greater expertise in
many areas,or that it involves great responsibility, or that petitioner deserves it from the point of view of her
qualifications and experience; but it would be to prevent another form of oppressive practice, where an employee is
appointed toa senior management position, there to enjoy only the prestige or title, but not the benefitscommensurate
with the work and responsibility assumed. It would likewise prevent a situation where, as in this case, an employer
obliged by law or the courts to reinstate an "unwanted" employee holding a senior management position is given
an opportunity to retaliate by limiting the employees salary, privileges and benefits to a certain level low or high,
so long as it is within the managerial range that is however 1) not commensurate with the work and responsibility
assumed by the employee, or 2) discriminatory, or 3) indicative of a tendency to favor only one or some employees.

Nonetheless, the Court failsto discern any bad faithor negligence on the part of respondent Jacob. The principal
character that figures prominently in this case is Fernandez; he alone relentlessly caused petitioners hardships and
suffering. He alone is guilty of persecuting petitioner. Indeed, some of his actions were without sanction of STI
itself, and were committedoutside of the authority given to him by the school; they bordered on the personal, rather
than official. His superior, Jacob, may have been, for the most part, clueless of what Fernandez was doing to
petitioner. After all, Fernandez was the Head of the Academic Services Group of the EMD, and petitioner directly
reported to him at the time; his position enabled him to pursue a course of action with petitioner that Jacob was
largely unaware of.

A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred
as a result of the directors and officers acts as corporate agents, are nottheir personal liability but the direct
responsibility of the corporation they represent. As a rule, they are only solidarily liable with the corporation for the
illegal termination of servicesof employees if they acted with malice or bad faith.

To hold a director or officer personally liable for corporate obligations, two requisites must concur: (1) it must be
alleged in the complaint that the director or officer assented to patently unlawful acts of the corporation or that the
officer was guilty of gross negligence or bad faith; and (2) there must be proof that the officer acted in bad faith. 60

WHEREFORE, the Petition is GRANTED. The October 27, 2008 Decision of the Court of Appeals in CA-G.R. SP
No. 104437 is ANNULLED andSET ASIDE. The March 31, 2006 Decision ofLabor Arbiter Renaldo O. Hernandez
in NLRCCase No. 00-06-07767-04 is hereby REINSTATED, WITH MODIFICATIONS, in that:

1. Respondent Systems Technology Institute, Inc., is ordered to REINSTATEpetitioner Girly G. Ico to the
position of STI-Makati College Chief Operating Officer and pay her the exact salary, benefits, privileges,
and emoluments which respondent Peter K. Fernandez is receiving, but not less than what petitioner was
receiving at the time of her illegal constructive dismissal on May 18, 2004;

2. Respondent Monico V. Jacob is ABSOLVED of any liability;

 3. Respondent Peter K. Fernandez is ordered to VACATEthe said office of STI-Makati Chief Operating
Officer and turn over the same to petitioner;

4. The award of backwages shall earn LEGAL INTERESTat the rate of six per cent(6%) per annumfrom
the date of the petitioners illegal dismissal until fully paid;61

5. Finally, the appropriate Computation Division of the NLRC is hereby ordered to COMPUTE AND
UPDATEthe award as herein established WITH DISPATCH.

SO ORDERED.

THIRD DIVISION

January 11, 2016

G.R. No. 214092

ECHO 2000 COMMERCIAL CORPORATION, EDWARD N. ENRIQUEZ, LEONORA K. BENEDICTO

and ATTY. GINA WENCESLAO, Petitioners,
vs.
OBRERO FILIPINO-ECHO 2000 CHAPTER-CLO, ARLO C. CORTES and DAVE SOMIDO, Respondents.

DECISION

REYES, J.:

Before the Court is the petition for review on certiorari1 filed by Echo 2000 Commercial Corporation (Echo) to
assail the Decision2 rendered on September 24, 2013 and Resolution 3 issued on March 28, 2014 by the Court of
Appeals (CA) in CA-G.R. SP No. 121393. The CA affirmed the Decision 4 dated April 15, 2011 of the National
Labor Relations Commission's (NLRC) Fifth Division, which declared that Arlo C. Cortes (Cortes) and Dave
Somido (Somido) (respondents) were illegally dismissed from employment by Echo. Edward N. Enriquez
(Enriquez), Leonora K. Benedicto (Benedicto) and Atty. Gina Wenceslao (Atty. Wenceslao) used to be Echo's
General Manager, Operations and Human Resources Officer, and External Counsel, respectively (Echo and the three
officers are to be referred collectively as the petitioners). The CA and NLRC's rulings reversed the Decision 5of
Labor Arbiter (LA) Renaldo O. Hernandez (Hernandez), who found the respondents' termination from service as
valid.

Antecedents

Echo is a provider of warehousing management and delivery services.

King 8 Commercial Corporation (King 8), Echo's predecessor, initially employed Cortes on September 17, 2002,
and Somido, on October 12, 2004. Echo thereafter absorbed the respondents as employees on April 1, 2005. In 2008,
Somido was made a Warehouse Checker, while Cortes, a Forklift Operator.6

In January of 2009, the respondents and their co-workers formed Obrero Pilipino-Echo 2000 Commercial Chapter
(Union). Cortes was elected as Vice-President while Somido became an active member. The respondents claimed
that the Union's President, Secretary and one of the board members were subsequently harassed, discriminated and
eventually terminated from employment by Echo.7

In May of 2009, Echo received information about shortages in peso value arising from the movement of products to
and from its warehouse. After an immediate audit, Echo suspected that there was a conspiracy among the employees
in the warehouse. Since an uninterrupted investigation was necessary, Echo, in the exercise of its management
prerogative, decided to re-assign the staff. The respondents were among those affected. 8

On July 7, 2009, Enriquez issued a memorandum informing the respondents of their transfer to the Delivery Section,
which was within the premises of Echo's warehouse. The transfer would entail no change in ranks, status and
salaries.9

On July 14, 2009, Somido wrote Echo a letter 10 indicating his refusal to be promoted as a "Delivery Supervisor." He
explained that he was already happy as a Warehouse Checker. Further, he was not ready to be a Delivery Supervisor
since the position was sensitive and required more expertise and training, which he did not have.

Cortes similarly declined Echo's offer of promotion claiming that he was contented in his post then as a Forklift
Operator. He also alleged that he would be more productive as an employee if he remained in his post. He also
lacked prior supervisory experience.11

On July 16, 2009, Enriquez, sans consent of the respondents, informed the latter of their assignments/designations,
effective July 17, 2009, as Delivery Supervisors with the following duties: (a) act as delivery dispatchers of booked
and planned deliveries for the day; (b) ensure the early loading of goods to the delivery trucks to avoid late take-
offs; (c) man delivery teams for the trucks; (d) check the operational and cleanliness conditions of the trucks; (e)
attend to delivery concerns of account specialists of their outlets; and (f) call the attention of other warehouse
personnel and report the same to the Human Resources Department regarding absences/tardiness, incomplete
uniforms, appearances, refusal to accept delivery trips and other matters affecting warehouse productivity.12

Echo alleged that the respondents did not perform the new duties assigned to them. Hence, they were each issued a
memorandum, dated July 16, 2009, requiring them to explain in writing their failure to abide with the new
assignments.13

On July 18, 2009, Echo clarified through a memo that the respondents were designated as "Delivery Coordinators"
and not "Supervisors."14
Thereafter, successive memoranda were issued by Echo to the respondents, who refused to acknowledge receipt and
comply with the directives therein. The Memoranda 15 dated July 20, 2009 suspended them without pay for five days
for their alleged insubordination. The Memoranda16 dated August 8, 2009 informed them of their termination from
employment, effective August 15, 2009, by reason of their repeated refusal to acknowledge receipt of Echo's
memoranda and flagrant defiance to assume the duties of Delivery Coordinators.

The Proceedings Before the LA

On August 17, 2009, the respondents filed before the NLRC a complaint against Echo for unfair labor practice,
illegal dismissal, illegal suspension, illegal deductions and payment of money claims, damages and attorney's
fees.17 The respondents claimed that they were offered promotions, which were mere ploys to remove them as rank-
and-file employees, and oust them as Union members.18

The petitioners, on the other hand, insisted that the respondents were merely transferred, and not promoted. Further,
the respondents arrogantly refused to comply with Enriquez's directives. Their insubordination constituted just cause
to terminate them from employment.19

On April 20, 2010, LA Hernandez dismissed the respondents' complaint for reasons stated below: (a) the claims of
union-busting, harassment and discrimination were not supported by evidence; 20 (b) no promotions occurred as the
duties of the Delivery Supervisors/Coordinators were merely reportorial in nature and not indicative of any authority
to hire, fire or change the status of other employees; 21 and (c) Echo properly exercised its management prerogative
to order the transfer, and this was done without intended changes in the ranks, salaries, status or places of
assignment of the respondents.22

The Proceedings Before the NLRC

The respondents filed an appeal assailing LA Hernandez's ruling. The dispositive portion of the NLRC's Decision
dated April 15, 2011 is quoted below:

WHEREFORE, premises considered, the appeal is GRANTED. The appealed decision of the [LA] dated April 20,
2010 is REVERSED and SET ASIDE and a new one is entered declaring [the petitioners] guilty of unfair labor
practice and illegal dismissal of the [respondents]. [The petitioners] are ordered to immediately reinstate [the
respondents] to their previous positions without loss of seniority rights and other privileges/benefits and to pay [the
respondents] the following:

1. full backwages from the time of their dismissal up to their actual reinstatement;

2. the sum of P20,000.00 as moral damages[;]

3. the sum of P20,000.00 as exemplary damages; and ten [percent (10%)] of the monetary award as
attorney's fees.

All other monetary claims are dismissed for lack of substantiation.

SO ORDERED.23

In sustaining the respondents' arguments, the NLRC explained that at the time of the farmer's dismissal, they had
been employed by Echo for several years since 2002 and 2004, respectively. There were no prior untoward
incidents. However, things changed when the Union was formed. When the two did not agree to be transferred, they
were terminated for insubordination, a mere ploy to lend a semblance of legality to a pre-conceived management
strategy.24

The NLRC denied the petitioners' motion for reconsideration.25

The Proceedings Before the CA

The petitioners thereafter filed a Petition for Certiorari.26 In the herein assailed Decision dated September 24, 2013,
the CA affirmed in toto the NLRC's ruling citing the following as grounds:

A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in
service. Promotion, on the other hand, is the advancement from one position to another with an increase in duties
and responsibilities as authorized by law, and usually accompanied by an increase in salary.

x x x There is no doubt that said position of Delivery Supervisor/Coordinator entails great duties and responsibilities
of overseeing ECHO's business and involves discretionary powers. x x x What is important is the change in the
nature of work which resulted in an upgrade of their work condition and increase of duties and responsibilities
which constitute promotion and not a mere transfer.

A transfer that results in promotion cannot be done without the employee's consent since there is no law that
compels an employee to accept a promotion for the reason that a promotion is in the nature of a gift or reward,
which a person has a right to refuse. When [the respondents] refused to accept their promotion as Delivery
Supervisors/Coordinators, they were exercising a right and they cannot be punished for it. He who uses his own
legal right injures no one. Thus, [the respondents'] refusal to be promoted was not a valid cause for their dismissal.

Anent the award of moral damages, exemplary damages and attorney's fees, We agree with the NLRC that [the
respondents] are entitled to the same.

xxxx

x x x We agree with the NLRC that the dismissal of [the respondents] was tainted with bad faith as they were
dismissed by ECHO for refusing to accept their promotion as Delivery Supervisor[s]/Coordinator[s]. x x x The
NLRC also found that ECHO's act of transferring [the respondents] from Forklift Operator and Warehouse Checker
x x x to Delivery Supervisors/Coordinators was aimed to remove them among the rank-and-file employees which
amounts to union interference. Without the leadership of Cortes, as Vice-President, and Somido, as an active
member, the union would be severely weakened, especially since most of its officers were already terminated by
ECHO. xx x.27 (Citations omitted)

The petitioners filed a motion for reconsideration, which the CA denied through the Resolution 28 dated March 28,
2014.1wphi1

Issues

Unperturbed, the petitioners are now before the Court raising the issues of whether or not:

(1) the respondents were illegally suspended and terminated, hence, entitled to payment of their money
claims, damages and attorney's fees;
 (2) Echo and its officers are guilty of unfair labor practice; and

(3) Echo's officers, who are sued as nominal parties, should be held liable to pay the respondents their
money claims.29

In support thereof, the petitioners claim that the respondents' refusal to comply with the management's transfer order
constitutes just cause to terminate the latter from employment. Echo also points out that before it closed shop on
July 6, 2011, the Union continued existing despite the respondents' dismissal from service. Hence, there is no factual
basis in the NLRC and CA's ruling that the respondents' termination is intertwined with union-busting. 30

The petitioners further argue that the respondents failed to establish by substantial evidence that Echo's officers,
namely, Enriquez, Benedicto and Atty. Wenceslao, acted with malice. Thus, they cannot be held liable as well. 31

Corollarily, the dismissal being valid, there is no ground to grant the respondents' prayer for reinstatement and
payment of money claims and damages.32

In their Comment,33 the respondents reiterate that their transfer/promotion was conceived to pave the way for their
eventual termination from employment. Moreover, even before the respondents could convey their acceptance or
refusal to the transfer/promotion, they were promptly replaced by newly-hired contractual employees.

Ruling of the Court

The Court partially grants the instant petition.

The first two issues, being interrelated, shall be discussed jointly.

The offer of transfer is, in legal contemplation, a promotion, which the respondents validly refused. Such
refusal cannot be the basis for the respondents' dismissal from service. The finding of unfair labor practice
and the award of moral and exemplary damages do not however follow solely by reason of the dismissal.

Article 212(13) of the Labor Code distinguishes from each other as follows the concepts of managerial, supervisory
and rank-and-file employees:

"Managerial employee" is one who is vested with the powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.
All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of
this Book. (Italics ours)

As to the extent of management prerogative to transfer/promote employees, and the differences between transfer on
one hand, and promotion, on the other, Coca-Cola Bottlers Philippines, Inc. v. Del Villar34 is instructive, viz:

[L]abor laws discourage interference in employers' judgment concerning the conduct of their business.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees
from one office or area of operation to another - provided there is no demotion in rank or diminution of salary,
benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a
form of punishment or demotion without sufficient cause. xx x.

x x x In the case of Blue Dairy Corporation v. National Labor Relations Commission, we described in more detail
the limitations on the right of management to transfer employees:

x x x [I]t cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the
employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. xxx.

xxxx

A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in
service. Promotion, on the other hand, is the advancement from one position to another with an increase in duties
and responsibilities as authorized by law, and usually accompanied by an increase in
salary. Conversely, demotion involves a situation where an employee is relegated to a subordinate or less important
position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and
responsibilities, and usually accompanied by a decrease in salary. 35 (Citations omitted and emphasis and
underscoring ours)

For promotion to occur, there must be an advancement from one position to another or an upward vertical movement
of the employee's rank or position. Any increase in salary should only be considered incidental but never
determinative of whether or not a promotion is bestowed upon an employee.36

An employee is not bound to accept a promotion, which is in the nature of a gift or reward. Refusal to be promoted
is a valid exercise of a right. 37 Such exercise cannot be considered in law as insubordination, or willful disobedience
of a lawful order of the employer, hence, it cannot be the basis of an employee's dismissal from service. 38

In the case at bench, a Warehouse Checker and a Forklift Operator are rank-and-file employees. On the other hand,
the job of a Delivery Supervisor/Coordinator requires the exercise of discretion and judgment from time to time.
Specifically, a Delivery Supervisor/Coordinator assigns teams to man the trucks, oversees the loading of goods,
checks the conditions of the trucks, coordinates with account specialists in the outlets regarding their delivery
concerns, and supervises other personnel about their performance in the warehouse. A Delivery
Supervisor/Coordinator's duties and responsibilities are apparently not of the same weight as those of a Warehouse
Checker or Forklift Operator. Hence, despite the fact that no salary increases were effected, the assumption of the
post of a Delivery Supervisor/Coordinator should be considered a promotion. The respondents' refusal to accept the
same was therefore valid.

Notwithstanding the illegality of the respondents' dismissal, the Court finds no sufficient basis to award moral and
exemplary damages.

A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed
employee to moral damages. The award of moral and exemplary damages cannot be justified solely upon the
premise that the employer dismissed his employee without just or authorized cause. 39

In the instant case, the right not to accept an offered promotion pertained to each of the respondents. However, they
exhibited disrespectful behavior by their repeated refusal to receive the memoranda issued by Echo and by their
continued presence in their respective areas without any work output. 40 The Court thus finds that although the
respondents' dismissal from service for just cause was unwarranted, there is likewise no basis for the award of moral
and exemplary damages in their favor. Echo expectedly imposed disciplinary penalties upon the respondents for the
latter's intransigence. Albeit the Court is not convinced of the character and extent of the measures taken by Echo,
bad faith cannot be inferred solely from the said impositions.

Anent the NLRC and CA's conclusion that Echo committed unfair labor practice, the Court disagrees.

Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to
the legitimate interests of both labor and management, including their right to bargain collectively and otherwise
deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations.41

The respondents allege that their transfer/promotion was intended to deprive the Union of leadership and
membership. They claim that other officers were already dismissed. The foregoing, however, lacks substantiation.
Unfair labor practice is a serious charge, and the respondents failed to show that the petitioners conclusively
interfered with, restrained, or coerced employees in the exercise of their right to self-organization.

Enriquez, Benedicto and Atty. Wenceslao cannot be held personally liable for the respondents' money claims.

Lambert Pawnbrokers and Jewelry Corporation, et al. v. Binamira 42 expounds on the liabilities of corporate officers
to illegally dismissed employees. The Court declared:

As a general rule, only the employer-corporation, partnership or association or any other entity, and not its officers,
which may be held liable for illegal dismissal of employees or for other wrongful acts. This is as it should be
because a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its
behalf and, in general, from the people comprising it. A corporation, as a juridical entity, may act only through its
directors, officers and employees. Obligations incurred as a result of the directors' and officers' acts as corporate
agents, are not their personal liability but the direct responsibility of the corporation they represent. It is settled that
in the absence of malice and bad faith, a stockholder or an officer of a corporation cannot be made personally liable
for corporate liabilities. They are only solidarily liable with the corporation for the illegal termination of services of
employees if they acted with malice or bad faith. In Philippine American Life and General Insurance v.
Gramaje, bad faith is defined as a state of mind affirmatively operating with furtive design or with some motive of
self-interest or ill will or for ulterior purpose. It implies a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity.43 (Citations omitted and underlining ours)

In the instant petition, the respondents failed to specify and sufficiently prove the alleged acts of Enriquez,
Benedicto and Atty. Wenceslao from which malice or bad faith can be concluded. Hence, there is no reason to
invoke the exception to the general rule on non-liability of corporate officers.

In lieu of actual reinstatement, the respondents are entitled to separation pay.

"In cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu of reinstatement when
the latter recourse is no longer practical or in the best interest of the parties." 44

The Court notes that the respondents were terminated from service on August 15, 2009, or more than six years ago.
Their reinstatement will not be practical and to the best interest of the parties. The Court thus finds more prudence in
awarding separation pay to the respondents equivalent to one (1) month pay for every year of service, with a fraction
of at least six (6) months considered as one (1) whole year, from the time of their illegal dismissal up to the finality
of this Decision.

An annual interest of six percent (6%) is imposed on the monetary award.

In accordance with Nacar v. Gallery Frames,45 the Court now imposes an interest on the monetary awards at the rate
of six percent (6%) per annum from the date of finality of this Decision until full payment

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 121393, dated September 24, 2013 and March 28, 2014, respectively, are MODIFIED.

The petitioner, Echo 2000 Commercial Corporation, is hereby declared guilty of illegal dismissal. In addition to the
National Labor Relations Commission's award of attorney's fees, Echo 2000 Commercial Corporation is
likewise ORDERED to pay the respondents, Arlo C. Cortes and Dave Somido, the following:

(a) separation pay in lieu of actual reinstatement equivalent to one (1) month pay for every year of service,
with a fraction of at least six (6) months considered as one (1) whole year from the time of the dismissal up
to the finality of this Decision;

(b) full backwages from the time of the illegal dismissal up to the finality of this Decision; and

(c) interest on all monetary awards at the rate of 6% per annum from the finality of this Decision until full
payment.

The amounts awarded as moral and exemplary damages by the National Labor Relations Commission to Arlo C.
Cortes and Dave Somido are however deleted for lack of basis.

The case is REMANDED to the Labor Arbiter, who is hereby DIRECTED to COMPUTE the monetary benefits
awarded in accordance with this Decision.

SO ORDERED.
G.R. No. 178021 January 25, 2012

REPUBLIC OF THE PHILIPPINES, represented by the CIVIL SERVICE COMMISSION, Petitioner,

vs.
MINERVA M.P. PACHEO, Respondent.

DECISION

MENDOZA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner
Republic of the Philippines, represented by the Office of the Solicitor General (OSG), which assails the February 22,
2007 Decision1 and the May 15, 2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 93781. The CA
reversed the November 21, 2005 Resolution of the Civil Service Commission (CSC) declaring the re-assignment of
respondent Minerva M.P. Pacheos (Pacheo) not valid and ordering her reinstatement to her original station but
without backwages under the principle of "no work, no pay."

The Facts

Pacheo was a Revenue Attorney IV, Assistant Chief of the Legal Division of the Bureau of Internal Revenue (BIR)in
Revenue Region No. 7 (RR7), Quezon City.

On May 7, 2002, the BIR issued Revenue Travel Assignment Order (RTAO) No. 25-2002,3 ordering the
reassignment of Pacheo as Assistant Chief, Legal Division from RR7 in Quezon City to RR4 in San Fernando,
Pampanga. The BIR cited exigencies of the revenue service as basis for the issuance of the said RTAO.

Pacheo questioned the reassignment through her Letter dated May 9, 2002 4 addressed to Rene G. Banez, then
Commissioner of Internal Revenue (CIR). She complained that the transfer would mean economic dislocation since
she would have to spend P 200.00 on daily travel expenses or approximately P 4,000.00 a month. It would also
mean physical burden on her part as she would be compelled to wake up early in the morning for her daily travel
from Quezon City to San Fernando, Pampanga, and to return home late at night from San Fernando, Pampanga to
Quezon City. She was of the view that that her reassignment was merely intended to harass and force her out of the
BIR in the guise of exigencies of the revenue service. In sum, she considered her transfer from Quezon City to
Pampanga as amounting to a constructive dismissal.
Due to the then inaction of the BIR, Pacheo filed a complaint 5 dated May 30, 2002, before the CSC- National
Capital Region (CSC-NCR), praying for the nullification of RTAO No. 25-2002. In its July 22, 2002 Order, 6 the
CSC-NCR treated Pacheos Complaint as an appeal and dismissed the same, without prejudice, for failure to comply
with Sections 73 and 74 of Rule V(b) of the Uniform Rules on Administrative Cases in the Civil Service. 7

In its Letter-reply8 dated September 13, 2002, the BIR, through its Deputy Commissioner for Legal and Inspection
Group, Edmundo P. Guevara (Guevara), denied Pacheos protest for lack of merit. It contended that her
reassignment could not be considered constructive dismissal as she maintained her position as Revenue Attorney IV
and was designated as Assistant Chief of Legal Division. It emphasized that her appointment to the position of
Revenue Attorney IV was without a specific station. Consequently, she could properly be reassigned from one
organizational unit to another within the BIR. Lastly, she could not validly claim a vested right to any specific
station, or a violation of her right to security of tenure.

Not in conformity with the ruling of the BIR, Pacheo appealed her case before the CSC.

On November 21, 2005, the CSC issued Resolution No. 051697 9 granting Pacheos appeal, the dispositive portion of
which reads:

WHEREFORE, the instant appeal of Minerva M.P. Pacheo is hereby GRANTED. The Bureau of Internal Revenue
Revenue Travel Assignment Order No. 25-2002 dated May 7, 2002, on the reassignment of Pacheo to the Legal
Division Revenue Region No. 4 San Fernanado, Pampanga, is hereby declared NOT VALID. ACCORDINGLY,
Pacheo should now be recalled to her original station. This Commission, however rules and so holds that the
withholding by the BIR of Pacheos salary for the period she did not report to work is justified.

The CSCRO No. III is directed to monitor the implementation of this Resolution.

In granting Pacheos appeal, the CSC explained:

On the second issue, this Commission finds merit in appellants contention that her reassignment in not valid.

Of pertinent application thereto is Rule III, Section 6 of CSC Memorandum Circular No. 40, series of 1998, dated
December 14, 1998, which provides:

Section 6. Other Personnel Movements. The following personnel movements which will not require issuance of an
appointment shall nevertheless require an office order by duly authorized official.

a. Reassignment Movement of an employee from one organizational unit to another in the same department or
agency which does not involve reduction in rank, status or salary. If reassignment is done without consent of the
employee being reassigned it shall be allowed for a maximum period of one year. Reassignment is presumed to be
regular and made in the interest of public service unless proven otherwise or it constitutes constructive dismissal.

No assignment shall be undertaken if done indiscriminately or whimsically because the law is not intended as a
convenient shield for the appointing/ disciplining authority to harass or oppress a subordinate on the pretext of
advancing and promoting public interest.

Reassignment of small salaried employee is not permissible if it causes significant financial dislocation.
Although reassignment is a management prerogative, the same must be done in the exigency of the service without
diminution in rank, status and salary on the part of the officer or employee being temporarily reassigned.
Reassignment of small salaried employees, however is not allowed if it will cause significant financial dislocation
to the employee reassigned. Otherwise the Commission will have to intervene.

The primary purpose of emphasizing small salaried employees in the foregoing rule is to protect the rank and file
employees from possible abuse by the management in the guise of transfer/reassignment. The Supreme Court in
Alzate v. Mabutas, (51 O.G. 2452) ruled:

x x x [T]he protection against invalid transfer is especially needed by lower ranking employees. The Court
emphasized this need when it ruled that officials in the unclassified service, presidential appointees, men in the
government set up occupy positions in the higher echelon should be entitled to security of tenure, unquestionablea
lesser sol[ci]itude cannot be meant for the little men, that great mass of Common underprivileged employees-
thousand there are of them in the lower bracket, who generally are without connections and who pin their hopes of
advancement on the merit system instituted by our civil service law.

In other words, in order to be embraced in the term small-salaried employees, the latter must belong to the rank
and file; and, his/her salary would be significantly reduced by virtue of the transfer/reassignment. Rank and file
was categorized as those occupying the position of Division Chief and below, pursuant to CSC Resolution No. 1,
series of 1991, dated January 28, 1991.

The facts established on record show that Pacheo belongs to the rank and file receiving an average monthly salary of
Twenty Thousand Pesos (P 20,000.00) under the salary standardization law and a monthly take home pay of
Fourteen Thousand Pesos (P 14,000.00). She has to spend around Four Thousand Pesos (P 4,000.00) a month for her
transportation expenses as a consequence of her reassignment, roughly twenty eight percent (28%) of her monthly
take home pay. Clearly, Pacheos salary shall be significantly reduced as a result of her reassignment.

In ANORE, Ma. Theresa F., this Commission ruled:

Anore, a lowly salaried employee, was reassigned to an isolated island 15 kilometers away from her original place
of assignment. She has to travel by boat with only one trip a day to report to her new place of assignment in an
office without any facilities, except its bare structure. Worst, the municipality did not provide her with transportation
allowance. She was forced to be separated from her family, look for a boarding house where she can stay while in
the island and spend for her board and lodging. The circumstances surrounding Anores reassignment is exactly the
kind of reassignment that is being frowned upon by law.

This Commission, however, rules and so holds that the withholding by the BIR of her salaries is justified as she is
not entitled thereto since she is deemed not to have performed any actual work in the government on the principle of
no work no pay.

Accordingly, Pacheo should now be reinstated to her original station without any right to claim back salary as she
did not report to work either at her new place of assignment or at her original station.10 [Emphases in the original]

Still not satisfied, Pacheo moved for reconsideration. She argued that the CSC erred in not finding that she was
constructively dismissed and, therefore, entitled to back salary.

On March 7, 2006, the CSC issued Resolution No. 06039711 denying Pacheos motion for reconsideration.
Undaunted, Pacheo sought recourse before the CA via a petition for review.

In its February 22, 2007 Decision, the CA reversed the CSC Resolution and ruled in favor of Pacheo, the fallo of
which states:

WHEREFORE, the petition is GRANTED. Resolution nos. 051697 and 060397 dated November 21, 2005 and
March 7, 2006, respectively, of the Civil Service Commission are REVERSED and SET ASIDE. A new judgment is
hereby entered finding petitioner to have been constructively dismissed and ordering her immediate reinstatement
with full backwages and benefits.

SO ORDERED.12

In setting aside CSC Resolution Nos. 051697 and 060397, the CA held that:

While this Court agrees that petitioners reassignment was not valid considering that a diminution in salary is
enough to invalidate such reassignment, We cannot agree that the latter has not been constructively dismissed as a
result thereof.

It is well to remember that constructive dismissal does not always involve forthright dismissal or diminution in rank,
compensation, benefits and privileges. For an act of clear discrimination, insensibility, or disdain by an employer
may become so unbearable on the part of the employee that it could foreclose any choice by him except to forgo his
continued employment.

The management prerogative to transfer personnel must be exercised without grave abuse of discretion and putting
to mind the basic elements of justice and fair play. The employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee.

In this case, petitioners reassignment will result in the reduction of her salary, not to mention the physical burden
that she would suffer in waking up early in the morning to travel daily from Quezon City to San Fernando,
Pampanga and in coming home late at night.

Clearly, the insensibility of the employer is deducible from the foregoing circumstances and petitioner may have no
other choice but to forego her continued employment.

Moreover, it would be inconsistent to hold that the reassignment was not valid due to the significant reduction in
petitioners salary and then rule that there is no constructive dismissal just because said reduction in salary will not
render petitioner penniless if she will report to her new place of assignment. It must be noted that there is
constructive dismissal when the reassignment of an employee involves a diminution in pay.

Having determined that petitioner has been constructively dismissed as a result of her reassignment, We shall
resolve whether or not she is entitled to backwages.

In denying petitioners claim for backwages, the CSC held:

This Commission, however, rules and so holds that the withholding by the BIR of her salaries is justified as she is
not entitled thereto since she is deemed not to have performed any actual work in the government on the principle of
no work no pay.
Accordingly, Pacheo should now be reinstated to her original station without any right to claim back salary as she
did not report for work either at her new place of assignment or at her original station."

Pacheo, while belonging to the rank-and-file employees, is holding a responsible position as an Assistant Division
Chief, who could not just abandon her duties merely because she protested her re-assignment and filed an appeal
afterwards.

We do not agree.

If there is no work performed by the employee there can be no wage or pay, unless of course the laborer was able,
willing and ready to work but was illegally locked out, dismissed or suspended. The "No work, no pay" principle
contemplates a "no work" situation where the employees voluntarily absent themselves.

In this case, petitioner was forced to forego her continued employment and did not just abandon her duties. In fact,
she lost no time in protesting her reassignment as a form of constructive dismissal. It is settled that the filing of a
complaint for illegal dismissal is inconsistent with a charge of abandonment. The filing of the complaint is proof
enough of his desire to return to work, thus negating any suggestion of abandonment.

Neither do we agree with the OSG when it opined that:

No one in the Civil Service should be allowed to decide on whether she is going to accept or not any work dictated
upon by the exigency of the service. One should consider that public office is a public trust and that the act of
respondent CIR enjoys the presumption of regularity. To uphold the failure of respondent to heed the RTAO would
result in chaos. Every employee would put his or her vested interest or personal opinion over and above the smooth
functioning of the bureaucracy.

Security of tenure is a right of paramount value as recognized and guaranteed under Sec. 3, Art. XIII of the 1987
Constitution.

The State shall afford full protection to labor, xxx and promote full employment and equality of employment
opportunities for all. It shall guarantee the rights of all workers to xxx security of tenure xxx

Such constitutional right should not be denied on mere speculation of any similar unclear and nebulous basis.

In Garcia, et al. v. Lejano, et al., the Supreme Court rejected the OSGs opinion that when the transfer is motivated
solely by the interest of the service of such act cannot be considered violative of the Constitution, thus:

"We do not agree to this view. While temporary transfers or assignments may be made of the personnel of a bureau
or department without first obtaining the consent of the employee concerned within the scope of Section 79 (D) of
the Administrative Code which party provides that The Department Head also may, from time to time, in the
interest of the service, change the distribution among the several Bureaus and offices of his Department of the
employees or subordinates authorized by law, such cannot be undertaken when the transfer of the employee is with
a view to his removal. Such cannot be done without the consent of the employee. And if the transfer is resorted to as
a scheme to lure the employee away from his permanent position, such attitude is improper as it would in effect
result in a circumvention of the prohibition which safeguards the tenure of office of those who are in the civil
service. It is not without reason that this Court made the following observation:
To permit circumvention of the constitutional prohibition in question by allowing removal from office without
lawful cause, in the form or guise of transfers from one office to another, or from one province to another, without
the consent of the transferee, would blast the hopes of these young civil service officials and career men and women,
destroy their security and tenure of office and make for a subservient, discontented and inefficient civil service force
that sways with every political wind that blows and plays up to whatever political party is in the saddle. That would
be far from what the framers of our Constitution contemplated and desired. Neither would that be our concept of a
free and efficient Government force, possessed of self-respect and reasonable ambition."

Clearly, the principle of "no work, no pay" does not apply in this case. As held in Neeland v. Villanueva, Jr:

"We also cannot deny back salaries and other economic benefits on the ground that respondent Clerk of Court did
not work. For the principle of "no work, no pay" does not apply when the employee himself was forced out of job.
Xxx Indeed, it is not always true that back salaries are paid only when work is done. Xxx For another, the poor
employee could offer no work since he was forced out of work. Thus, to always require complete exoneration or
performance of work would ultimately leave the dismissal uncompensated no matter how grossly disproportionate
the penalty was. Clearly, it does not serve justice to simply restore the dismissed employee to his position and deny
him his claim for back salaries and other economic benefits on these grounds. We would otherwise be serving justice
in halves."

An illegally dismissed government employee who is later ordered reinstated is entitled to back wages and other
monetary benefits from the time of his illegal dismissal up to his reinstatement. This is only fair and sensible
because an employee who is reinstated after having been illegally dismissed is considered as not having left his
office and should be given a comparable compensation at the time of his reinstatement.

When a government official or employee in the classified civil service had been illegally dismissed, and his
reinstatement had later been ordered, for all legal purposes he is considered as not having left his office, so that he is
entitled to all the rights and privileges that accrue to him by virtue of the office that he held. 13

The CSC moved for reconsideration but its motion was denied by the CA in its May 15, 2007 Resolution.

Hence, this petition.

THE ISSUES

WHETHER OR NOT THE ASSAILED DECISION IS LEGALLY CORRECT IN DECLARING THAT

RESPONDENT WAS CONSTRUCTIVELY DISMISED AND ENTITLED TO BACK WAGES,
NOTWITHSTANDING RESPONDENTS REFUSAL TO COMPLY WITH BIR RTAO No. 25-2002
WHICH IS IMMEDIATELY EXECUTORY PURSUANT TO SECTION 24 (F) OF P.D. 807.

WHETHER OR NOT RESPONDENT SUFFERED A DIMINUTION IN HER SALARY IN RELATION

TO SECTION 6, RULE III OF CSC MEMORANDUM CIRCULAR No. 40, SERIES OF 1998, DATED
DECEMBER 14, 1998, AS A RESULT OF THE ISSUANCE [OF] BIR RTAO No. 25-2002 ORDERING
HER REASSIGNMENT FROM BIR RR No. 7 IN QUEZON CITY TO BIR RR No. 4 IN SAN
FERNANDO, PAMPANGA.14

In her Memorandum,15 Pacheo asserts that RTAO No. 25-2002, on the pretense of the exigencies of the revenue
service, was solely meant to harass her and force her to resign. As a result of her invalid reassignment, she was
constructively dismissed and, therefore, entitled to her back salaries and monetary benefits from the time of her
illegal dismissal up to her reinstatement.

In its own Memorandum,16 the CSC, through the OSG, argues that constructive dismissal is not applicable in this
case because it was Pacheo herself who adamantly refused to report for work either in her original station or new
place of assignment in clear violation of Section 24 (f) of Presidential Decree (PD) No. 807.17 Citing
jurisprudence,18 the CSC avers that the RTAO is immediately executory, unless otherwise ordered by the CSC.
Therefore, Pacheo should have first reported to her new place of assignment and then appealed her case to the CSC
if she indeed believed that there was no justification for her reassignment. Since Pacheo did not report for work at
all, she is not entitled to backwages following the principle of "no work, no pay."

THE COURTS RULING

The petition fails to persuade.

It appears undisputed that the reassignment of Pacheo was not valid. In its memorandum, the OSG initially argues
for the validity of RTAO No. 25-2002 authorizing Pacheos reassignment from Quezon City to San Fernando,
Pampanga. Later, however, it specifically prays for the reinstatement of CSC Resolution Nos. 051697 and 060397,
which categorically declared RTAO No. 25-2002 as not valid. In seeking such relief, the OSG has effectively
accepted the finding of the CSC, as affirmed by the CA, that Pacheos reassignment was indeed invalid. Since the
issue of Pacheos reassignment is already settled, the Court finds it futile to pass upon the same at this point.

The question that remains to be resolved is whether or not Pacheos assignment constitutes constructive dismissal
and, thus, entitling her to reinstatement and backwages. Was Pacheo constructively dismissed by reason of her
reassignment?

The Court agrees with the CA on this point.

While a temporary transfer or assignment of personnel is permissible even without the employee's prior consent, it
cannot be done when the transfer is a preliminary step toward his removal, or a scheme to lure him away from his
permanent position, or when it is designed to indirectly terminate his service, or force his resignation. Such a
transfer would in effect circumvent the provision which safeguards the tenure of office of those who are in the Civil
Service.19

Significantly, Section 6, Rule III of CSC Memorandum Circular No. 40, series of 1998, defines constructive
dismissal as a situation when an employee quits his work because of the agency heads unreasonable, humiliating, or
demeaning actuations which render continued work impossible. Hence, the employee is deemed to have been
illegally dismissed. This may occur although there is no diminution or reduction of salary of the employee. It may be
a transfer from one position of dignity to a more servile or menial job.

The CSC, through the OSG, contends that the deliberate refusal of Pacheo to report for work either in her original
station in Quezon City or her new place of assignment in San Fernando, Pampanga negates her claim of constructive
dismissal in the present case being in violation of Section 24 (f) of P.D. 807 [now Executive Order (EO) 292, Book
V, Title 1, Subtitle A, Chapter 5, Section 26 (6)]. 20 It further argues that the subject RTAO was immediately
executory, unless otherwise ordered by the CSC. It was, therefore, incumbent on Pacheo to have reported to her new
place of assignment and then appealed her case to the CSC if she indeed believed that there was no justification for
her reassignment.
Anent the first argument of CSC, the Court cannot sustain the proposition. It was legally impossible for Pacheo to
report to her original place of assignment in Quezon City considering that the subject RTAO No. 25-2002 also
reassigned Amado Rey B. Pagarigan (Pagarigan) as Assistant Chief, Legal Division, from RR4, San Fernando,
Pampanga to RR7, Quezon City, the very same position Pacheo formerly held. The reassignment of Pagarigan to the
same position palpably created an impediment to Pacheos return to her original station.

The Court finds Itself unable to agree to CSCs argument that the subject RTAO was immediately executory. The
Court deems it necessary to distinguish between a detail and reassignment, as they are governed by different rules.

A detail is defined and governed by Executive Order 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (6),
thus:

(6) Detail. A detail is the movement of an employee from one agency to another without the issuance of an
appointment and shall be allowed, only for a limited period in the case of employees occupying professional,
technical and scientific positions. If the employee believes that there is no justification for the detail, he may appeal
his case to the Commission. Pending appeal, the decision to detail the employee shall be executory unless otherwise
ordered by the Commission. [Underscoring supplied]

On the other hand, a reassignment is defined and governed by E.O. 292, Book V, Title 1, Subtitle A, Chapter 5,
Section 26 (7), thus:

(7) Reassignment.An employee may be reassigned from one organizational unit to another in the same
agency; Provided, That such reassignment shall not involve a reduction in rank, status or salaries. [Underscoring
supplied]

The principal distinctions between a detail and reassignment lie in the place where the employee is to be moved and
in its effectivity pending appeal with the CSC. Based on the definition, a detail requires a movement from one
agency to another while a reassignment requires a movement within the same agency. Moreover, pending appeal
with the CSC, an order to detail is immediately executory, whereas a reassignment order does not become
immediately effective.1wphi1

In the case at bench, the lateral movement of Pacheo as Assistant Chief, Legal Division from Quezon City to San
Fernando, Pampanga within the same agency is undeniably a reassignment. The OSG posits that she should have
first reported to her new place of assignment and then subsequently question her reassignment. It is clear, however,
from E.O. 292, Book V, Title 1, Subtitle A, Chapter 5, Section 26 (7) that there is no such duty to first report to the
new place of assignment prior to questioning an alleged invalid reassignment imposed upon an employee. Pacheo
was well within her right not to report immediately to RR4, San Fernando, Pampanga, and to question her
reassignment.

Reassignments involving a reduction in rank, status or salary violate an employees security of tenure, which is
assured by the Constitution, the Administrative Code of 1987, and the Omnibus Civil Service Rules and
Regulations. Security of tenure covers not only employees removed without cause, but also cases of unconsented
transfers and reassignments, which are tantamount to illegal/constructive removal. 21

The Court is not unaware that the BIR is authorized to assign or reassign internal revenue officers and employees as
the exigencies of service may require. This authority of the BIR, however, should be prudently exercised in
accordance with existing civil service rules.
Having ruled that Pacheo was constructively dismissed, is she entitled to reinstatement and back wages? The Court
agrees with the CA that she is entitled to reinstatement, but finds Itself unable to sustain the ruling that she is entitled
to full back wages and benefits. It is a settled jurisprudence22 that an illegally dismissed civil service employee is
entitled to back salaries but limited only to a maximum period of five (5) years, and not full back salaries from his
illegal dismissal up to his reinstatement.

WHEREFORE, the petition is DENIED. The assailed February 22, 2007 Decision and May 15, 2007 Resolution of
the Court of Appeals, in CA-G.R. SP No. 93781, are hereby AFFIRMED with MODIFICATION that respondent
Minerva M.P. Pacheo is hereby ordered reinstated without loss of seniority rights but is only entitled to the payment
of back salaries corresponding to five (5) years from the date of her invalid reassignment on May 7, 2002.

SO ORDERED.

G.R. No. 208451, February 03, 2016

MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D. LLUZ, NORMAN CORRAL,
ERWIN FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN MARK APLICADOR, MICHAEL
CURIOSO, JUNLIN ESPARES, GAVINO FARINAS, AND WARD TRADING AND
SERVICES, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari 1 assailing the Decision2 dated 21 January 2013 and the Resolution3 dated
17 July 2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.chanRoblesvirtualLawlibrary

The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of
Services with respondent Ward Trading and Services (Ward Trading). The Contract of Services provided that Ward
Trading, as an independent contractor, will render interment and exhumation services and other related work to
Manila Memorial in order to supplement operations at Manila Memorial Park, Paranaque City.

Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents Ezard
Lluz, Norman Corral, Erwm Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso,
Junlin Espares, and Gavino Farinas (respondents). They worked six days a week for eight hours daily and were paid
P250 per day.

On 26 June 2007, respondents filed a Complaint 4 for regularization and Collective Bargaining Agreement benefits
against Manila Memorial; Enrique B. Lagdameo, Manila Memorial's Executive Vice-President and Director in
Charge for Overall Operations, and Ward Trading. On 6 August 2007, respondents filed an amended complaint to
include illegal dismissal, underpayment of 13 th month pay, and payment of attorney's fees.

Respondents alleged that they asked Manila Memorial to consider them as regular workers within the appropriate
bargaining unit established in the collective bargaining agreement by Manila Memorial and its union, the Manila
Memorial Park Free Workers Union (MMP Union). Manila Memorial refused the request since respondents were
employed by Ward Trading, an independent labor contractor. Thereafter, respondents joined the MMP Union. The
MMP Union, on behalf of respondents, sought their regularization which Manila Memorial again declined.
Respondents then filed the complaint. Subsequently, respondents were dismissed by Manila Memorial. Thus,
respondents amended the complaint to include the prayer for their reinstatement and payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no
employer-employee relationship. Manila Memorial argued that respondents were the employees of Ward Trading.

In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the existence of
an employer-employee relationship. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for
complainants' lack of employer-employee relationship with respondent Manila Memorial Park Cemetery, Inc.

SO ORDERED.6chanroblesvirtuallawlibrary
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Labor
Arbiter's findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of Manila
Memorial. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor Arbiter
Geobel A. Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to the benefits provided for under the
CBA between the latter and the Manila Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as
follows:ChanRoblesVirtualawlibrary
1. Ezard D. Lluz - P43,982.79
2. Norman Corral - P29,765.67
3. Erwin Fugaban - P28,634.67
4. Valdimar Balisi - P20,310.33
5. Emilio Fabon - P43,982.79
6. John Mark Aplicador
P43,982.79
-
7. Michael Curioso - P43,982.79
8. Ju[n]lin Espares - P43,982.79
9. Gavino Farinas - P43,982.79
9
SO ORDERED. chanroblesvirtuallawlibrary
Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution 10 dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed the
ruling of the NLRC. The CA found the existence of an employer-employee relationship between Manila Memorial
and respondents. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated
September 30, 2010 and the Resolution, dated January 31, 2011, rendered by the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.

SO ORDERED.11chanroblesvirtuallawlibrary
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17 July
2013.

Hence, the instant petition.chanRoblesvirtualLawlibrary

The Issue
The main issue for our resolution is whether or not an employer-employee relationship exists between Manila
Memorial and respondents for the latter to be entitled to their claim for wages and other
benefits.chanRoblesvirtualLawlibrary

The Court's Ruling

The petition lacks merit.

Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward Trading's
financial statements for the year 2006, proving that it has sufficient capitalization to qualify as a legitimate
independent contractor. Manila Memorial insists that nowhere is it provided in the Contract of Services that Manila
Memorial controls the manner and means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the latter's employees to abide by company rules
and regulations.

Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward Trading
cannot qualify as an independent contractor but should be treated as a mere labor-only contractor. Respondents state
that (1) there is enough proof that Ward Trading does not have substantial capital, investment, tools and the like; (2)
the workers recruited and placed by the alleged contractors performed activities that were related to Manila
Memorial's business; and (3) Ward Trading does not exercise the right to control the performance of the work of the
contractual employees.

As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case
may be. This Court is obliged to resolve an issue of fact due to the conflicting findings of the Labor Arbiter on one
hand, and the NLRC and the CA on the other.

In order to determine whether there exists an employer-employee relationship between Manila Memorial and
respondents, relevant provisions of the labor law and rules must first be reviewed. Article 106 of the Labor Code
states:ChanRoblesVirtualawlibrary
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

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

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

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him. (Emphasis supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only contracting and
assume the existence of an employer-employee relationship if found to be engaged in labor-only contracting. The
provisions state:ChanRoblesVirtualawlibrary
xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the
contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently
undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or
subcontractor to accomplish the job, work or service.

xxxx

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For
this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following
elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.

xxxx

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarity liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by
a competent authority:ChanRoblesVirtualawlibrary
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
(Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or services under
the law and its implementing rules are allowed. However, contracting must be made to a legitimate and independent
job contractor since labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal and any of the following elements are present:

1) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work
or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor
 are performing activities which are directly related to the main business of the principal; or

2) The contractor does not exercise the right to control the performance of the work of the contractual
employee.13

In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single proprietorship
owned by Emmanuel Mayor Ward with business address in Las Pias City on 23 February 2006. In the Contract of
Services, it was provided that Ward Trading, as the contractor, had adequate workers and substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials which were necessary in
the conduct of its business.

However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital or
investment in the form of tools, equipment, machinery, work premises and other materials since it is Manila
Memorial which owns the equipment used in the performance of work needed for interment and exhumation
services. The pertinent provision in the Contract of Services which shows that Manila Memorial owns the equipment
states:ChanRoblesVirtualawlibrary
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION
FOUR HUNDRED THOUSAND PESOS ONLY (Php 1,400,000.00) payable in two (2) years or a monthly payment
of FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php 58,335.00) to be deducted
from the CONTRACTOR'S billing.14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties.
However, Manila Memorial did not present any evidence to show that the sale actually pushed through or that
payments were made by Ward Trading to prove an ordinary arms length transaction. We agree with the NLRC in its
findings:ChanRoblesVirtualawlibrary
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject
equipment to Ward at some future time, the former failed to present any contract of sale as proof that, indeed, it
actually sold said equipment to Ward. Likewise, respondent MMPCI failed to present any "CONTRACTOR'S
billing" wherein the purported monthly installment of P58,335.00 had been deducted, to prove that Ward truly paid
the same as they fell due. In a contract to sell, title is retained by the vendor until full payment of the price.

Moreover, the Contract of Service provides that:ChanRoblesVirtualawlibrary

"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event the
COMPANY requires the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment,
considering that its right to do so is subject to respondent MMPCI's use thereof at any time the latter requires it.
Such provision is contrary to Article 428 of the Civil Code, which provides that "The owner has the right to enjoy
and dispose of a thing, without other limitation than those established by law." It is plain to see that Ward is not the
owner of the equipment worth P1,400,000.00 that is being actually and directly used in the performance of the
services contracted out.

Further, the Service Contract states that:ChanRoblesVirtualawlibrary

"For its part, the COMPANY agrees to provide the following:

a) Area to store CONTRACTOR'S equipment and materials

b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the performance of
the services contracted out is owned by respondent MMPCI.15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen in
Ward Trading's financial statements for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by Manila Memorial without any certification that
these financial statements were actually audited by an independent certified public accountant. Ward Trading's
Balance Sheet16 as of 31 December 2005 showed that it had assets in the amount of P441,178.50 and property and
equipment with a net book value of P86,026.50 totaling P534,705. A year later, Ward Trading's Balance
Sheet17 ending in 31 December 2006 showed that it had assets in the amount of P57,084.70 and property and
equipment with a net book value of Pl,426,468 totaling P1,491,052.70. Ward Trading, in its Income Statements 18for
the years 2005 and 2006, only earned a net income of P53,800 in the year ending 2005 and P68,141.50 in 2006.
Obviously, Ward Trading could not have raised a substantial capital of P1,400,000.00 from its income alone without
the inclusion of the equipment owned and allegedly sold by Manila Memorial to Ward Trading after they signed the
Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents performed
various interment services at its Sucat, Paranaque branch which were directly related to Manila Memorial's business
of developing, selling and maintaining memorial parks and interment functions. Manila Memorial even retained the
right to control the performance of the work of the employees concerned. As correctly observed by the
CA:ChanRoblesVirtualawlibrary
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control as it
specifically provides that although Ward shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of petitioner Memorial Park,
particularly:ChanRoblesVirtualawlibrary
"It is also agreed that:

a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to ensure
compliance with the COMPANY'S interment schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and
Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S schedule of
interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its
operation, which must be restored to its/their original condition without delay and at the expense of
CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel if it finds
any part or aspect of the work or service provided to be unsatisfactory, thus:ChanRoblesVirtualawlibrary
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT and its
sole determination, the COMPANY may take over the performance of any of the functions mentioned in Paragraph I
above, in any of the following cases:chanRoblesvirtualLawlibrary

xxx

c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works
or other services provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial Park as
the contract states that the latter may take over if it finds any part of the services to be below its expectations,
including the manner of its performance. x x x.19chanroblesvirtuallawlibrary

The NLRC also found that Ward Trading's business documents fell short of sound business practices. The relevant
portion in the NLRC's Decision states:ChanRoblesVirtualawlibrary
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the Department of
Trade and Industry on October 24, 2003 and valid up to October 24, 2008, the same expressly states that it is not a
license to engage in any kind of business, and that it is valid only at the place indicated therein, which is Las Pias
City. Hence, the same is not valid in Paranaque City, where Ward assigned complainants to perform interment
services it contracted with respondent MMPCI. It is also noted that the Permit, which was issued to Ward by the
Office of the Mayor of Las Pias City on October 28, 2003, was valid only up to December 31, 2003. Likewise, the
Sanitary Permit to Operate, which was issued to Ward by the Office of the City Health Officer of the Las Pias City
Health Office on October 28, 2003, expired on December 31, 2003. While respondents MMPCI and Lagdameo were
able to present copies of the above-mentioned documents, they failed to present any proof that Ward is duly
registered as [a] contractor with the Department of Labor and Employment. 20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with the
DOLE, states:ChanRoblesVirtualawlibrary
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration system
to govern contracting arrangements and to be implemented by the Regional Office is hereby established.
The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor
market information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless the
contractor overcomes the burden of proving that it has substantial capital, investment, tools and the
like.21chanroblesvirtuallawlibrary

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any substantial
capital, investment or assets to perform the work contracted for. Thus, the presumption that Ward Trading is a labor-
only contractor stands. Consequently, Manila Memorial is deemed the employer of respondents. As regular
employees of Manila Memorial, respondents are entitled to their claims for wages and other benefits as awarded by
the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution
dated 17 July 2013 of the Court of Appeals in CA-G.R. SP No. 119237.

G.R. Nos. 173254-55 & 173263

DIAMOND FARMS, INC., Petitioner,

vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES MULTI-
PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICIO
CAPRECHO, REY DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI,
PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO, JOSISIMO GOMEZ and MANUEL
MOSQUERA, Respondents.

DECISION

JARDELEZA, J.:

We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among Diamond
Farms, Inc. ("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO")
and the individual contractors2 ("respondent-contractors") is the employer of the 400 employees ("respondent-
workers").

DFI challenges the March 31, 2006 Decision 3 and May 30, 2006 Resolution4 of the Court Appeals, Special Twenty-
Second Division, Cagayan De Oro City for being contrary to law and jurisprudence. The Decision dismissed DFIs
Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted DARBMUPCOs Petition for Certiorari
in C.A.-G.R. SP No. 59958. It declared DFI as the statutory employer of the respondent-workers.

The Facts

DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. 5 Pursuant to Republic
Act No. 6657 or the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject to
compulsory acquisition and distribution,6 thus the original plantation was covered by the law. However, the
Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to continue agricultural operations until
1998.7 Due to adverse marketing problems and observance of the so-called "lay-follow" or the resting of a parcel of
land for a certain period of time after exhaustive utilization, DFI closed some areas of operation in the original
plantation and laid off its employees. 8 These employees petitioned the DAR for the cancellation of DFIs deferment
privilege alleging that DFI already abandoned its area of operations. 9 The DAR Regional Director recalled DFIs
deferment privilege resulting in the original plantations automatic compulsory acquisition and distribution under the
CARL.10 DFI filed a motion for reconsideration which was denied. It then appealed to the DAR Secretary.11

In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original plantation in
favor of the government by way of a Voluntary Offer to Sell. 12 The DAR accepted DFIs offer to sell the original
plantation. However, out of the total 800 hectares, the DAR only approved the disposition of 689.88 hectares.
Hence, the original plantation was split into two: 689.88 hectares were sold to the government ("awarded
plantation") and the remaining 200 hectares, more or less, were retained by DFI ("managed area"). 13 The managed
area is subject to the outcome of the appeal on the cancellation of the deferment privilege before the DAR Secretary.

On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries ("ARBs")
under the CARL. These ARBs are the same farmers who were working in the original plantation. They subsequently
organized themselves into a multi-purpose cooperative named "DARBMUPCO," which is one of the respondents in
this case.14

On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA") 15 with
DFI.16 Under the BPPA, DARBMUPCO and its members as owners of the awarded plantation, agreed to grow and
cultivate only high grade quality exportable bananas to be sold exclusively to DFI. 17 The BPPA is effective for 10
years.18

On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement"
("SMA").19 The SMA stated that DFI shall take care of the labor cost arising from the packaging operation, cable
maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall conduct for DFIs
account under the BPPA.20

From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the
BPPA because some of its members were not willing to work. 21 Hence, to assist DARBMUPCO in meeting its
production obligations under the BPPA, DFI engaged the services of the respondent-contractors, who in turn
recruited the respondent-workers.22

The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among
DARBMUPCO, DFI and the respondent-contractors.

C.A. G.R. SP No. 53806

On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor
organization with a local chapter in the awarded plantationfiled a petition for certification election in the Office of
the Med-Arbiter in Davao City.23 SPFL filed the petition on behalf of some 400 workers (the respondent-workers in
this petition) "jointly employed by DFI and DARBMUPCO" working in the awarded plantation.

DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that
the respondent-workers are the employees of the respondent-contractors.24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It directed the
conduct of certification election and declared that DARBMUPCO was the employer of the respondent-workers. The
Order stated that "whether the said workers/employees were hired by independent contractors is of no moment.
What is material is that they were hired purposely to work on the 689.88 hectares banana plantation [the awarded
plantation] now owned and operated by DARBMUPCO."26

DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February 18,
1999,27 the SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager and
personnel, supervised and directed the performance of the work of the respondentcontractors. The SOLE thus
declared DFI as the employer of the respondent-workers.28

DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999. 29

On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari30 under Rule 65
of the Rules of Court. The case was raffled to the CAs former Twelfth Division and was docketed as C.A.-G.R. SP
No. 53806.

C.A.-G.R. SP. No. 59958

Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers, filed a case
for underpayment of wages, non-payment of 13th month pay and service incentive leave pay and attorneys fees
against DFI, DARBMUPCO and the respondent-contractors before the National Labor Relations Commission
("NLRC") in Davao City. DARBMUPCO averred that it is not the employer of respondent-workers; neither is DFI.
It asserted that the money claims should be directed against the true employerthe respondent-contractors. 33

In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that the respondent-contractors are "labor-
only contractors." The LA gave credence to the affidavits of the other contractors 35 of DFI (who are not party-
respondents in this petition) asserting that DFI engaged their services, and supervised and paid their laborers. The
affidavits also stated that the contractors had no dealings with DARBMUPCO, except that their work is done in the
awarded plantation.36

The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers. 37 The LA
dismissed the case against DARBMUPCO and the respondent-contractors. 38

DFI appealed to the NLRC. In a Resolution dated May 24, 1999, 39 the NLRC Fifth Division modified the Decision
of the LA and declared that DARBMUPCO and DFI are the statutory employers of the workers rendering services in
the awarded plantation and the managed area, respectively.40 It adjudged DFI and DARBMUPCO as solidarily liable
with the respondent-contractors for the monetary claims of the workers, in proportion to their net planted area. 41

DARBMUPCO filed a motion for reconsideration which was denied. 42 It filed a second motion for reconsideration
in the NLRC, which was also denied for lack of merit and for being barred under the NLRC Rules of
Procedure.43Hence, DARBMUPCO elevated the case to the CA by way of a Petition for Certiorari.44 The case was
docketed as C.A.-G.R. SP. No. 59958.

The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No. 53806 in a
Resolution dated January 27, 2001.45

C.A.-G.R. SP No. 61607

Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the Department
of Labor and Employment ("DOLE") conducted a certification election on October 1, 1999. 46 On even date, DFI
filed an election protest47 before the Med-Arbiter arguing that the certification election was premature due to the
pendency of a petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions of
the SOLE (previously discussed in C.A.-G.R. SP No. 53806).

In an Order dated December 15, 1999, 48 the Med-Arbiter denied DFIs election protest, and certified SPFL-Workers
Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative of the
respondent-workers. DFI filed a Motion for Reconsideration 49 which the Med-Arbiter treated as an appeal, and
which the latter elevated to the SOLE.

In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the May 4, 1999
Resolution directing the conduct of certification election is already final and executory on June 4, 1999. It pointed
out that the filing of the petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999
Resolutions does not stay the conduct of the certification election because the CA did not issue a restraining
order.51 DFI filed a Motion for Reconsideration but the motion was denied. 52

On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No. 61607.

In a Resolution dated August 2, 2005, 54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with
C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.

The Assailed CA Decision and Resolution

The CA was confronted with two issues:55

(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these
petitions; and

(2) Whether or not a certification election may be conducted pending the resolution of the petition
for certiorari filed before this Court, the main issue of which is the identity of the employer of the
[respondent-workers] in these petitions."

On the first issue, the CA agreed with the ruling of the SOLE 56 that DFI is the statutory employer of the respondent-
workers. It noted that the DFI hired the respondent-contractors, who in turn procured their own men to work in the
land owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors worked under the direction
and supervision of DFIs managers and personnel. DFI also paid for the respondent-contractors services. 57 The CA
said that the fact that the respondent-workers worked in the land owned by DARBMUPCO is immaterial.
"Ownership of the land is not one of the four (4) elements generally considered to establish employer-employee
relationship."58

The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are
not independent contractors.59 The CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the CA,
DFI revealed that DARBMUPCO lacks manpower to fulfill the production requirements under the BPPA. This
impelled DFI to hire contractors to supply labor enabling DARBMUPCO to meet its quota. The CA observed that
while the various agencies involved in the consolidated petitions sometimes differ as to who the statutory employer
of the respondent-workers is, they are uniform in finding that the respondent-contractors are labor-only contractors. 60
On the second issue, the CA reiterated the ruling of the SOLE 61 that absent an injunction from the CA, the pendency
of a petition for certiorari does not stay the holding of the certification election. 62 The challenged Resolution of the
SOLE is already final and executory as evidenced by an Entry of Judgment dated July 14, 1999; hence, the merits of
the case can no longer be reviewed.63

The CA thus held in its Decision dated March 31, 2006:

WHEREFORE, premises considered, this Court hereby ORDERS:

(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and

(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed
resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000, respectively.

SO ORDERED.64

DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30, 2006. 65

DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be declared the true
employer of the respondent-workers.

DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of the
respondent-workers.

Respondent-contractors filed a Verified Explanation and Memorandum 67 asserting that they were labor-only
contractors; hence, they are merely agents of the true employer of the respondent-workers.

SPFL did not file any comment or memorandum on behalf of the respondent-workers.68

The Issue

The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer of
the respondent-workers.

Our Ruling

We deny the petition.

This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting is
an arrangement whereby a principal (or employer) agrees to put out or farm out with a contractor or subcontractor
the performance or completion of a specific job, work or service within a definite or predetermined period,
regardless of whether such job, work or service is to be performed or completed within or outside the premises of
the principal.69 It involves a trilateral relationship among the principal or employer, the contractor or subcontractor,
and the workers engaged by the contractor or subcontractor.70

Article 106 of the Labor Code of the Philippines 71 (Labor Code) explains the relations which may arise between an
employer, a contractor, and the contractors employees,72 thus:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

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

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

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him.

The Omnibus Rules Implementing the Labor Code 73 distinguishes between permissible job contracting (or
independent contractorship) and labor-only contracting. Job contracting is permissible under the Code if the
following conditions are met:

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

(b) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.74

In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a person
who undertakes to supply workers to an employer:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to
the principal business or operations of the employer in which workers are habitually employed. 75

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the
burden of proving that it has the substantial capital, investment, tools and the like.76

Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only
contractors.
There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors,
DFI, and DARBMUPCO did not offer any proof that respondent-contractors were not engaged in labor-only
contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:

"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's own
testimony that he was an independent contractor who undertook to construct a railway line between Maropadlusan
and Mantalisay, but as far as the record shows, Nasol did not testify that the defendant company had no control over
him as to the manner or methods he employed in pursuing his work. On the contrary, he stated that he was not
bonded, and that he only depended upon the Manila Railroad for money to be paid to his laborers. As stated by
counsel for the plaintiffs, the word independent contractor means 'one who exercises independent employment and
contracts to do a piece of work according to his own methods and without being subject to control of his employer
except as to result of the work.' Furthermore, if the employer claims that the workmen is an independent contractor,
for whose acts he is not responsible, the burden is on him to show his independence.

Tested by these definitions and by the fact that the defendant has presented practically no evidence to determine
whether Venancio Nasol was in reality an independent contractor or not, we are inclined to think that he is
nothing but an intermediary between the defendant and certain laborers. It is indeed difficult to find that
Nasol is an independent contractor; a person who possesses no capital or money of his own to pay his obligations
to them, who files no bond to answer for any fulfillment of his contract with his employer and specially subject to
the control and supervision of his employer, falls short of the requisites or conditions necessary for the common and
independent contractor."78 (Citations omitted; emphasis supplied.)

To support its argument that respondent-contractors are the employers of respondent-workers, and not merely labor-
only contractors, DFI should have presented proof showing that respondent-contractors carry on an independent
business and have sufficient capitalization. The record, however, is bereft of showing of even an attempt on the part
of DFI to substantiate its argument.

DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are independent
contractors. Nowhere in the NLRC Resolution does it say that the respondent-contractors are independent
contractors. On the contrary, the NLRC declared that "it was not clearly established on record that said
[respondent-]contractors are independent, xxx."79

Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will be
seen below, respondent-contractors made the admissions and declarations on two occasions: first was in their Formal
Appearance of Counsel and Motion for Exclusion of Individual Party-Respondents filed before the LA;
and second was in their Verified Explanation and Memorandum filed before this Court.

Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have been
engaged by DFI and DARBMUPCO.80 They admitted that they do not have substantial capital or investment in the
form of tools, equipment, machineries, work premises and other materials, and they recruited workers to perform
activities directly related to the principal operations of their employer.81

Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated that:

1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner,
Diamond Farms, Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers]
(as represented by Southern Philippines Federation of Labor (SPFL) in this appeal by certiorari), in
order to perform specific farm activities, such as pruning, deleafing, fertilizer application, bud inject, stem
 spray, drainage, bagging, etc., on banana plantation lands awarded to private respondent, Diamond Farms
Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) and on banana planted lands
owned and managed by petitioner, DFI.

2. All farm tools, implements and equipment necessary to performance of such farm activities were
supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et.
al. Herein respondents Voltaire Lopez, Jr. et. al. had no adequate capital to acquire or purchase such
tools, implements, equipment, etc.

3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were being
directly supervised, controlled and managed by petitioner DFI farm managers and supervisors,
specifically on work assignments and performance targets. DFI managers and supervisors, at their sole
discretion and prerogative, could directly hire and terminate any or all of the respondents-SPFL, et. al.,
including any or all of the herein respondents Voltaire Lopez, Jr., et. al.

4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents Voltaire
Lopez, Jr., et. al., and correspondingly submitted to petitioner DFI. Payment of wages to respondents-
SPFL, et. al. were being paid for by petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et. al. The
latter were also receiving their wages/salaries from petitioner DFI for monitoring/leading/recruiting the
respondents-SPFL, et. al.

5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al.,
nor to herein respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly intervene
much less supervise any or all of [the] respondents-SPFL, et. al. including herein respondents Voltaire
Lopez, Jr., et. al.82 (Emphasis supplied.)

The foregoing admissions are legally binding on respondent-contractors. 83 Judicial admissions made by parties in the
pleadings, or in the course of the trial or other proceedings in the same case are conclusive and so does not require
further evidence to prove them.84 Here, the respondent-contractors voluntarily pleaded that they are labor-only
contractors; hence, these admissions bind them.

A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-
employee relationship between the principal, and the workers of the labor-only contractor; the labor-only contractor
is deemed only as the agent of the principal. 85 Thus, in this case, respondent-contractors are the labor-only
contractors and either DFI or DARBMUPCO is their principal.

We hold that DFI is the principal.

Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an agreement with
a job contractor, either for the performance of a specified work or for the supply of manpower. 86 In this regard, we
quote with approval the findings of the CA, to wit:

The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their
own men to work in the 689.88 hectares land of DARBMUPCO as well as in the managed area of the
plantation. DFI admits [that] these [respondent-contractors] worked under the direction and supervision of the DFI
managers and personnel. DFI paid the [respondent-contractors] for the services rendered in the plantation and the
[respondent-contractors] in turn pay their workers after they [respondent-contractors] received payment from DFI.
xxx DARBMUPCO did not have anything to do with the hiring, supervision and payment of the wages of the
workers-respondents thru the contractors-respondents. xxx87 (Emphasis supplied.)

DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of
respondent-contractors that they sent their billing to DFI for payment; and that DFIs managers and personnel are in
close consultation with the respondent-contractors.88

DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO)
owns the awarded plantation where respondent-contractors and respondent-workers were working; 89 and therefore
DARBMUPCO is the ultimate beneficiary of the employment of the respondent-workers. 90

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were
working is immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the
principal, hired the respondent-contractors and the latter, in turn, engaged the services of the respondent-
workers.91 This was also the unanimous finding of the SOLE, 92 the LA,93 and the NLRC.94 Factual findings of the
NLRC, when they coincide with the LA and affirmed by the CA are accorded with great weight and respect and
even finality by this Court.95

Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of control on
the part of the principal over the workers of the contractor, under the facts, prove the employer-employee
relationship between the former and the latter, thus:

[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employer-
employee relationship between the principal and the employees of the supposed contractor." In this case, the
employer-employee relationship between Petron and petitioners becomes all the more apparent due to the
presence of the power of control on the part of the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee
relationship between the parties.1wphi1 The four elements of an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the
employees conduct.

Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded.

Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not
detract from the conclusion that there exists an employer-employee relationship between the parties due to Petrons
power of control over the petitioners. One manifestation of the power of control is the power to transfer employees
from one work assignment to another. Here, Petron could order petitioners to do work outside of their regular
"maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk plant, observe an
8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety
and security measures being implemented within the bulk plant. All these imply control. In an industry where safety
is of paramount concern, control and supervision over sensitive operations, such as those performed by the
petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and
flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to property and
the environment. Naturally, supervision by Petron is essential in every aspect of its product handling in order not to
compromise the integrity, quality and safety of the products that it distributes to the consuming public. 97 (Citations
omitted; emphasis supplied)

That DFI is the employer of the respondent-workers is bolstered by the CAs finding that DFI exercises control over
the respondent-workers.98 DFI, through its manager and supervisors provides for the work assignments and
performance targets of the respondent-workers. The managers and supervisors also have the power to directly hire
and terminate the respondent-workers.99 Evidently, DFI wields control over the respondent-workers.

Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under the
BPPA,100 and that under the terms of the BPPA, no employer-employee relationship exists between DFI and the
respondent-workers,101 to wit:

UNDERTAKING OF THE FIRST PARTY

xxx

3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general
welfare of its members working in the plantation and specifically render free and harmless the SECOND PARTY
[DFI] of any expense, liability or claims arising therefrom. It is clearly recognized by the FIRST PARTY that its
members and other personnel utilized in the performance of its function under this agreement are not
employees of the SECOND PARTY.102 (Emphasis supplied)

In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and
the workers of the labor-only contractor.103

Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers are not
employees of DFI is not controlling, as the proven facts show otherwise. The law prevails over the stipulations of
the parties. Thus, in Tabas v. California Manufacturing Co., Inc.,104 we held that:

The existence of an employer-employees relation is a question of law and being such, it cannot be made the
subject of agreement.1wphi1 Hence, the fact that the manpower supply agreement between Livi and California
had specifically designated the former as the petitioners' employer and had absolved the latter from any liability as
an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise
exists between the workers and either firm. xxx105 (Emphasis supplied.)

Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI. Under
Article 106 of the Labor Code, DFI shall be solidarily liable with the respondent-contractors for the rightful claims
of the respondent-workers, to the same manner and extent as if the latter are directly employed by DFI. 106

WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006
Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
G.R. No. 171664 March 6, 2013

BANKARD, INC., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION- FIRST DIVISION, PAULO
BUENCONSEJO,BANKARD EMPLOYEES UNION-AWATU, Respondents.

DECISION

MENDOZA, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to review, reverse and set aside the
October 20, 2005 Decision1 and the February 21, 2006 Resolution2 of the Court of Appeals {CA), in CA-G.R. SP
No. 68303, which affirmed the May 31, 2001 Resolution 3 and the September 24, 2001 Order4 of the National Labor
Relations Commission (NLRC) in Certified Cases No. 000-185-00 and 000-191-00.

The Facts

On June 26, 2000, respondent Bankard Employees Union-AWATU (Union) filed before the National Conciliation
and Mediation Board (NCMB) its first Notice of Strike (NOS), docketed as NS-06-225-00, 5 alleging commission of
unfair labor practices by petitioner Bankard, Inc. (Bankard), to wit: 1) job contractualization; 2)
outsourcing/contracting-out jobs; 3) manpower rationalizing program; and 4) discrimination.

On July 3, 2000, the initial conference was held where the Union clarified the issues cited in the NOS. On July 5,
2000, the Union held its strike vote balloting where the members voted in favor of a strike. On July 10, 2000,
Bankard asked the Office of the Secretary of Labor to assume jurisdiction over the labor dispute or to certify the
same to the NLRC for compulsory arbitration. On July 12, 2000, Secretary Bienvenido Laguesma (Labor Secretary)
of the Department of Labor and Employment (DOLE) issued the order certifying the labor dispute to the NLRC. 6

On July 25, 2000, the Union declared a CBA bargaining deadlock. The following day, the Union filed its second
NOS, docketed as NS-07-265-00,7 alleging bargaining in bad faith on the part of Bankard. Bankard then again asked
the Office of the Secretary of Labor to assume jurisdiction, which was granted. Thus, the Order, dated August 9,
2000, certifying the labor dispute to the NLRC, was issued.8

The Union, despite the two certification orders issued by the Labor Secretary enjoining them from conducting a
strike or lockout and from committing any act that would exacerbate the situation, went on strike on August 11,
2000.9

During the conciliatory conferences, the parties failed to amicably settle their dispute. Consequently, they were
asked to submit their respective position papers. Both agreed to the following issues:

1. Whether job contractualization or outsourcing or contracting-out is an unfair labor practice on the part of
the management.

2. Whether there was bad faith on the part of the management when it bargained with the Union.10

As regards the first issue, it was Bankards position that job contractualization or outsourcing or contracting-out of
jobs was a legitimate exercise of management prerogative and did not constitute unfair labor practice. It had to
implement new policies and programs, one of which was the Manpower Rationalization Program (MRP) in
December 1999, to further enhance its efficiency and be more competitive in the credit card industry. The MRP was
an invitation to the employees to tender their voluntary resignation, with entitlement to separation pay equivalent to
at least two (2) months salary for every year of service. Those eligible under the companys retirement plan would
still receive additional pay. Thereafter, majority of the Phone Center and the Service Fulfilment Division availed of
the MRP. Thus, Bankard contracted an independent agency to handle its call center needs. 11

As to the second issue, Bankard denied that there was bad faith on its part in bargaining with the Union. It came up
with counter-offers to the Unions proposals, but the latters demands were far beyond what management could give.
Nonetheless, Bankard continued to negotiate in good faith until the Memorandum of Agreement (MOA) re-
negotiating the provisions of the 1997-2002, Collective Bargaining Agreement (CBA) was entered into between
Bankard and the Union. The CBA was overwhelmingly ratified by the Union members. For said reason, Bankard
contended that the issue of bad faith in bargaining had become moot and academic. 12

On the other hand, the Union alleged that contractualization started in Bankard in 1995 in the Records
Communications Management Division, particularly in the mailing unit, which was composed of two (2) employees
and fourteen (14) messengers. They were hired as contractual workers to perform the functions of the regular
employees who had earlier resigned and availed of the MRP.13 According to the Union, there were other departments
in Bankard utilizing messengers to perform work load considered for regular employees, like the Marketing
Department, Voice Authorizational Department, Computer Services Department, and Records Retention
Department. The Union contended that the number of regular employees had been reduced substantially through the
management scheme of freeze-hiring policy on positions vacated by regular employees on the basis of cost-cutting
measures and the introduction of a more drastic formula of streamlining its regular employees through the MRP.14

With regard to the second issue, the Union averred that Bankards proposals were way below their demands,
showing that the management had no intention of reaching an agreement. It was a scheme calculated to force the
Union to declare a bargaining deadlock.15

On May 31, 2001, the NLRC issued its Resolution 16 declaring that the management committed acts considered as
unfair labor practice (ULP) under Article 248(c) of the Labor Code. It ruled that:

The act of management of reducing its number of employees thru application of the Manpower Rationalization
Program and subsequently contracting the same to other contractual employees defeats the purpose or reason for
streamlining the employees. The ultimate effect is to reduce the number of union members and increasing the
number of contractual employees who could never be members of the union for lack of qualification. Consequently,
the union was effectively restrained in their movements as a union on their rights to self-organization. Management
had successfully limited and prevented the growth of the Union and the acts are clear violation of the provisions of
the Labor Code and could be considered as Unfair Labor Practice in the light of the provisions of Article 248
paragraph (c) of the Labor Code.17

The NLRC, however, agreed with Bankard that the issue of bargaining in bad faith was rendered moot and academic
by virtue of the finalization and signing of the CBA between the management and the Union.18

Unsatisfied, both parties filed their respective motions for partial reconsideration.1wphi1 Bankard assailed the
NLRC's finding of acts of ULP on its part. The Union, on the other hand, assailed the NLRC ruling on the issue of
bad faith bargaining.

On September 24, 2001, the NLRC issued the Order19 denying both parties' motions for lack of merit.
On December 28, 2001, Bankard filed a petition for certiorari under Rule 65 with the CA arguing that the NLRC
gravely abused its discretion amounting to lack or excess of jurisdiction when:

1. It issued the Resolution, dated May 31, 2001, particularly in finding that Bankard committed acts of
unfair labor practice; and,

2. It issued the Order dated September 24, 2001 denying Bankard's partial motion for reconsideration.20

The Union filed two (2) comments, dated January 22, 2002, through its NCR Director, Cornelio Santiago, and
another, dated February 6, 2002, through its President, Paulo Buenconsejo, both praying for the dismissal of the
petition and insisting that Bankard's resort to contractualization or outsourcing of contracts constituted ULP. It
further alleged that Bankard committed ULP when it conducted CBA negotiations in bad faith with the Union.

Ruling of the Court of Appeals

The CA dismissed the petition, finding that the NLRC ruling was supported by substantial evidence.

The CA agreed with Bankard that job contracting, outsourcing and/or contracting out of jobs did not per se
constitute ULP, especially when made in good faith and for valid purposes. Despite Bankard's claim of good faith in
resorting to job contractualization for purposes of cost-efficient operations and its non-interference with the
employees' right to self-organization, the CA agreed with the NLRC that Bankard's acts impaired the employees
right to self-organization and should be struck down as illegal and invalid pursuant to Article 248(c) 21 of the Labor
Code. The CA thus, ruled in this wise:

We cannot agree more with public respondent. Incontrovertible is the fact that petitioner's acts, particularly its
promotion of the program enticing employees to tender their voluntary resignation in exchange for financial
packages, resulted to a union dramatically reduced in numbers. Coupled with the management's policy of "freeze-
hiring" of regular employees and contracting out jobs to contractual workers, petitioner was able to limit and prevent
the growth of the Union, an act that clearly constituted unfair labor practice.22

In its assailed decision, the CA affirmed the May 31, 2001 Resolution and the September 24, 2001 Order of the
NLRC.

Aggrieved, Bankard filed a motion for reconsideration. The CA subsequently denied it for being a mere repetition of
the grounds previously raised. Hence, the present petition bringing up this lone issue:

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER BANKARD, INC. COMMITTED ACTS
OF UNFAIR LABOR PRACTICE WHEN IT DISMISSED THE PETITION FOR CERTIORARI AND DENIED
THE MOTION FOR RECONSIDERATION FILED BY PETITIONER.23

Ruling of the Court

The Court finds merit in the petition.

Well-settled is the rule that "factual findings of labor officials, who are deemed to have acquired expertise in matters
within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by
substantial evidence."24 Furthermore, the factual findings of the NLRC, when affirmed by the CA, are generally
conclusive on this Court.25 When the petitioner, however, persuasively alleges that there is insufficient or
insubstantial evidence on record to support the factual findings of the tribunal or court a quo, then the Court,
exceptionally, may review factual issues raised in a petition under Rule 45 in the exercise of its discretionary
appellate jurisdiction.26

This case involves determination of whether or not Bankard committed acts considered as ULP. The underlying
concept of ULP is found in Article 247 of the Labor Code, to wit:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor practices violate
the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both
labor and management, including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable
labor-management relations. x x x

The Court has ruled that the prohibited acts considered as ULP relate to the workers right to self-organization and to
the observance of a CBA. It refers to "acts that violate the workers right to organize." 27 Without that element, the
acts, even if unfair, are not ULP.28 Thus, an employer may only be held liable for unfair labor practice if it can be
shown that his acts affect in whatever manner the right of his employees to self-organize. 29

In this case, the Union claims that Bankard, in implementing its MRP which eventually reduced the number of
employees, clearly violated Article 248(c) of the Labor Code which states that:

Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following
unfair labor practice:

xxxx

(c) To contract out services or functions being performed by union members when such will interfere with, restrain
or coerce employees in the exercise of their rights to self-organization;

xxxx

Because of said reduction, Bankard subsequently contracted out the jobs held by former employees to other
contractual employees. The Union specifically alleges that there were other departments in Bankard, Inc. which
utilized messengers to perform work load considered for regular employees like the Marketing Department, Voice
Authorizational Department, Computer Services Department, and Records Retention Department. 30 As a result, the
number of union members was reduced, and the number of contractual employees, who were never eligible for
union membership for lack of qualification, increased.

The general principle is that the one who makes an allegation has the burden of proving it.1avvphi1 While there are
exceptions to this general rule, in ULP cases, the alleging party has the burden of proving the ULP; 31 and in order to
show that the employer committed ULP under the Labor Code, substantial evidence is required to support the
claim.32 Such principle finds justification in the fact that ULP is punishable with both civil and/or criminal
sanctions.33

Aside from the bare allegations of the Union, nothing in the records strongly proves that Bankard intended its
program, the MRP, as a tool to drastically and deliberately reduce union membership. Contrary to the findings and
conclusions of both the NLRC and the CA, there was no proof that the program was meant to encourage the
employees to disassociate themselves from the Union or to restrain them from joining any union or organization.
There was no showing that it was intentionally implemented to stunt the growth of the Union or that Bankard
discriminated, or in any way singled out the union members who had availed of the retirement package under the
MRP. True, the program might have affected the number of union membership because of the employees voluntary
resignation and availment of the package, but it does not necessarily follow that Bankard indeed purposely sought
such result. It must be recalled that the MRP was implemented as a valid cost-cutting measure, well within the ambit
of the so-called management prerogatives. Bankard contracted an independent agency to meet business exigencies.
In the absence of any showing that Bankard was motivated by ill will, bad faith or malice, or that it was aimed at
interfering with its employees right to self-organize, it cannot be said to have committed an act of unfair labor
practice.34

"Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds equally reasonable might conceivably
opine otherwise."35 Unfortunately, the Union, which had the burden of adducing substantial evidence to support its
allegations of ULP, failed to discharge such burden.36

The employers right to conduct the affairs of its business, according to its own discretion and judgment, is well-
recognized.37 Management has a wide latitude to conduct its own affairs in accordance with the necessities of its
business.38 As the Court once said:

The Court has always respected a company's exercise of its prerogative to devise means to improve its operations.
Thus, we have held that management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, supervision and transfer of employees, working methods, time,
place and manner of work.

This is so because the law on unfair labor practices is not intended to deprive employers of their fundamental right
to prescribe and enforce such rules as they honestly believe to be necessary to the proper, productive and profitable
operation of their business.39

Contracting out of services is an exercise of business judgment or management prerogative. Absent any proof that
management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by
an employer.40Furthermore, bear in mind that ULP is punishable with both civil and/or criminal sanctions. 41 As such,
the party so alleging must necessarily prove it by substantial evidence. The Union, as earlier noted, failed to do this.
Bankard merely validly exercised its management prerogative. Not shown to have acted maliciously or arbitrarily,
no act of ULP can be imputed against it.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 68303, dated
October 20, 2005, and its Resolution, dated February 21, 2006, are REVERSED and SET ASIDE. Petitioner
Bankard, Inc. is hereby declared as not having committed any act constituting Unfair Labor Practice under Article
248 of the Labor Code.

SO ORDERED.

SECOND DIVISION

G.R. No. 181719 April 21, 2014

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F. PUNZALAN,
FREDDIE M. MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB FINANCE
EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF FREE WORKERS), Petitioners,
vs.
JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari 1 the challenge to the March 23, 2007 decision 2 and the February
11, 2008 resolution3 of the Court of Appeals (CA) in CA G.R. SP No. 91952. These assailed CA rulings annulled and
set aside the December 1, 2004 decision 4 and the July 21, 2005 resolution5 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 029753-01 (NLRC NCR Case No. 06-06112-99). The NLRC rulings,
in turn, fully affirmed the September 29, 2000 decision 6 of Labor Arbiter (LA) Jovencio LL Mayor, Jr. The LA's
decision ordered the petitioners Eugene S. Arabit, Edgardo C. Sadsad, Lowell C. Funtanoz, Gerardo F. Punzalan,
Freddie M. Mendoza, Emilio B. Belen and Violeta C. Diumanos reinstatement to their former positions without loss
of seniority rights and the payment of full backwages, computed from the time of their dismissal on May 30, 1999.

Factual Antecedents

Petitioners were former regular employees of respondent Jardine Pacific Finance, Inc. (formerly MB Finance)
(Jardine). The petitioners were also officers and members of MB Finance Employees Association-FFW Chapter (the
Union), a legitimate labor union and the sole exclusive bargaining agent of the employees of Jardine. The table
below shows the petitioners previously occupied positions, as well as their total length of service with Jardine
before their dismissal from employment.

Petitioner Position Number of

Years of
Service
Eugene S. Arabit Field Collector 20 years
Edgardo C. Sadsad Field Collector 3 years
Lowell C. Funtanoz Field Collector 7 years
Gerardo F. Punzalan Field Collector 16 years
Freddie M. Mendoza Field Collector 20 years
Emilio B. Belen Senior Credit Investigator/Field 18 years
Collector- San Pablo Branch
Violeta C. Diumano Senior Accounting 19 years
Clerk/Documentation Clerk-San Pablo Branch

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy program among its
employees. The petitioners were among those affected by the redundancy program. Jardine thereafter hired
contractual employees to undertake the functions these employees used to perform.

The Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB), questioning the
termination of employment of the petitioners who were also union officers. The Union alleged unfair labor practice
on the part of Jardine, as well as discrimination in the dismissal of its officers and members.
Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both parties eventually
reached an amicable settlement. In the settlement, the petitioners accepted their redundancy pay without prejudice to
their right to question the legality of their dismissal with the NLRC. Jardine paid the petitioners a separation package
composed of their severance pay, plus their grossed up transportation allowance.7

On June 1, 1999, the petitioners and the Union filed a complaint against Jardine with the NLRC for illegal dismissal
and unfair labor practice.

The Labor Arbitration Rulings

Before the LA, the parties decided to limit the issues to two, namely: (a) whether the separation of the petitioners
was valid or not; and (b) whether Jardine committed an unfair labor practice against the Union.

The petitioners alleged before the LA that their dismissal was illegal and was tainted with bad faith as their positions
were not superfluous. They argued that if their positions had really been redundant, then Jardine should have not
hired contractual workers to replace them.8

The petitioners also argued that Jardine was guilty of unfair labor practice for contracting out services that the
petitioners previously held. Unfair labor practice took place under Article 248 of the Labor Code as the petitioners
were union officers.9

The petitioners likewise claimed that Jardines act of hiring contractual employees as replacements was a restraint
on the Unions right to self-organization. The petitioners also pointed out that they were Union officers and panel
members in the scheduled collective bargaining agreement (CBA) negotiations between Jardine and the Union. The
petitioners particularly found the company action objectionable as their employment was terminated when their
CBA negotiations were about to commence.10

Jardine argued in its defense that the company had been incurring substantial business losses from 1996 to 1998.
According to Jardine, its audited financial statements reflect that for 1996, it suffered a net loss of P5,538,960.00;
for 1997,11 a net loss in the amount of P57,274,018.00;12 and a net loss of P95,529,527.00 for 1998.13

Because of these serious business losses, Jardine asserted that it had to lay-off some of its employees and reorganize
its ranks to eliminate positions that were in excess of what its business required. 14

Jardine, however, admitted that it hired contractual employees to replace petitioners in their previous posts. Jardine
reasoned out that no bad faith took place since the hiring of contractual employees was a valid exercise of its
management prerogative.15 Jardine argued that the distinction between redundancy and retrenchment is not material;
an employer resorts to retrenchment or redundancy for the same reason, namely the economics of business. 16 Since
Jardine successfully established that it incurred serious business losses, then termination of employment of the
petitioners was valid for all intents and purposes.17

In reply to the petitioners allegation of unfair labor practice, Jardine argued that had it intended to commit union
busting, then it should not have merely dismissed the seven petitioners; it should have also dismissed other
employees who were union officers and members. 18 According to Jardine, the termination of the petitioners services
did not interfere with the Union and its remaining members right to self-organization since Jardine continuously
dealt with the Union and recognized it as the sole and exclusive bargaining representative of its rank-and-file
employees.19

The LA ruled in the petitioners favor. In its decision 20 dated September 29, 2000, the LA held that the hiring of
contractual employees to replace the petitioners directly contradicts the concept of redundancy which involves the
trimming down of the workforce because a task is being carried out by too many people. 21 The LA explained that the
companys action was a circumvention of the right of the petitioners to security of tenure.22
The LA further held that it was not enough for Jardine to simply focus on its losses. According to the LA, it was
error for Jardine to simply lump together the seven petitioners as employees whose positions have become
redundant without explaining why their respective positions became superfluous in relation to the other positions
and employees of the company.23

On the petitioners allegation of unfair labor practice, the LA held that not enough evidence was presented to prove
the claim against Jardine.

Both parties appealed the LAs decision to the NLRC. In its decision 24 dated December 1, 2004, the NLRC
dismissed the appeals and affirmed the LAs decision in its entirety.25

Jardine moved for the reconsideration of the NLRCs decision, which motion the NLRC also denied in its
resolution26 of July 21, 2005. Jardine thereafter sought recourse with the CA via a petition for certiorari under Rule
65.27

The CAs Ruling

In its decision28 dated March 23, 2007, the CA reversed the LAs and the NLRCs rulings, and granted Jardines
petition for certiorari.

The CA found that Jardines act of hiring contractual employees in replacement of the petitioners does not run
counter to the argument that their positions are already superfluous. 29 According to the CA, the hiring of contractual
employees is a management prerogative that Jardine has the right to exercise. 30 In the absence of any showing of
malice or arbitrariness on the part of Jardine in implementing its redundancy program, the courts must not interfere
with the companys exercise of a bona fide management decision. 31 The CA cited for this purpose the case of De
Ocampo v. National Labor Relations Commission32 which explains:

The reduction of the number of workers in a company made necessary by the introduction of the services of Gemac
Machineries in the maintenance and repair of its industrial machinery is justified. There can be no question as to the
right of the company to contract the services of Gemac Machineries to replace the services rendered by the
terminated mechanics with a view to effecting more economic and efficient methods of production.

In the same case, We ruled that "(t)he characterization of (petitioners) services as no longer necessary or
sustainable, and therefore properly terminable, was an exercise of business judgment on the part of (private
respondent) company. The wisdom or soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or
merely arbitrary and malicious action is not shown" (ibid, p. 673).

In contracting the services of Gemac Machineries, as part of the company's 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.33

The CA further held that Jardine successfully established that for the years 1996 to 1998, the company incurred
serious losses.34 The appellate court also observed that the reduction in the number of workers, made necessary by
the introduction of the services of an independent contractor, is justified when undertaken to implement more
economic and efficient methods of production.35

These justifications led to the CAs ruling which annulled and set aside the December 1, 2004 decision and the July
21, 2005 resolution of the NLRC and to its own ruling that the petitioners had not been illegally dismissed.
The CA denied the petitioners subsequent motion for reconsideration. The petitioners are now before this Court on a
petition for review on certiorari under Rule 45 of the Rules of Court.

The Petition

In their petition, the petitioners maintain that the CA gravely abused its discretion and that its ruling is not in
conformity with the law and jurisprudence.

The petitioners argue that there is a difference between financial loss and decline of earnings. They posit that what
Jardine actually experienced was a decline in capital and not substantial financial losses for the years 1996 to 1998. 36

The petitioners also assert that Jardine did not take any remedial measure before it implemented its redundancy
program. It simply hastily terminated the petitioners from the service. 37 In support of this argument, the petitioners
cited the case of Golden Thread Knitting Industries, Inc. v. NLRC 38 where the Court laid down guidelines to be
considered in selecting employees who would be dismissed from the service in case of redundancy. 39 The petitioners
contend that the records show that Jardine did not lay down any basis or criteria in choosing the petitioners for
inclusion in the program.40

According to the petitioners, they are all regular employees whose years of service range from three (3) to twenty
(20) years. Since Jardine immediately terminated their services without evaluating their performance in relation with
those of the other employees and without considering other relevant factors, then Jardines decision was arbitrary
and in disregard of the guidelines set by this Court in Golden Thread.41

Finally, the petitioners also reiterate the findings of the LA and of the NLRC that Jardines act of hiring contractual
employees as their replacements is contrary to Jardines claim that there was redundancy. 42 They also contend that
the hiring of new employees negates Jardines argument that it was suffering from substantial losses. 43Based on
these premises, the petitioners posit that the CA erred in annulling and setting aside the NLRCs decision, and pray
instead for its reinstatement.

The Courts Ruling

We resolve to GRANT the petition.

Procedural consideration: the nature
of a Rule 45 petition

We emphasize at the outset that the current petition was brought under Rule 45 of the Rules of Court. As a rule, only
questions of law may be raised on appeal under this remedy.44 This is in contrast with a petition for certiorari
brought under Rule 65 where the review centers on the jurisdictional errors the lower court or tribunal may have
committed.45

We thus limit our review to errors of law which the CA might have committed. A question of law arises when there
is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to
the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of
the probative value of the evidence presented by the litigants or any of them.46

"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?"47
In this context, the primary question we confront is: did the CA correctly rule that the NLRC committed grave abuse
of discretion when it found that Jardine validly terminated the petitioners employment because of redundancy?

Redundancy in contrast with retrenchment

Jardine, in its petition for certiorari with the CA, posited that the distinction between redundancy and retrenchment
is not material.48 It contended that employers resort to these causes of dismissal for purely economic
considerations.49 Jardine further argued that the immateriality of the distinction between these two just causes for
dismissal is shown by the fact that redundancy and retrenchment are found and lumped together in just one single
provision of the Labor Code (Article 283 thereof).

We cannot accept Jardines shallow understanding of the concepts of redundancy and retrenchment in determining
the validity of the severance of an employer-employee relationship. The fact that they are found together in just one
provision does not necessarily give rise to the conclusion that the difference between them is immaterial. This Court
has already ruled before that retrenchment and redundancy are two different concepts; they are not synonymous;
thus, they should not be used interchangeably.50 The clear distinction between these two concepts was discussed in
Andrada, et al., v. NLRC,51 citing the case of Sebuguero v. NLRC,52 where this Court clarified:

Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. A position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as over hiring of workers, decreased volume of business,
or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of
employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted
to by management during periods of business recession, industrial depression, or seasonal fluctuations, or during
lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery, or of automation. Simply put, it is an act of the employer
of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction
on the volume of his business, a right consistently recognized and affirmed by this Court.

These rulings appropriately clarify that redundancy does not need to be always triggered by a decline in the
business. Primarily, employers resort to redundancy when the functions of an employee have already become
superfluous or in excess of what the business requires. Thus, even if a business is doing well, an employer can still
validly dismiss an employee from the service due to redundancy if that employees position has already become in
excess of what the employers enterprise requires.

From this perspective, it is illogical for Jardine to terminate the petitioners employment and replace them with
contractual employees. The replacement effectively belies Jardines claim that the petitioners positions were
abolished due to superfluity. Redundancy could have been justified if the functions of the petitioners were
transferred to other existing employees of the company.

To dismiss the petitioners and hire new contractual employees as replacements necessarily give rise to the sound
conclusion that the petitioners services have not really become in excess of what Jardines business requires. To
replace the petitioners who were all regular employees with contractual ones would amount to a violation of their
right to security of tenure. For this, we affirm the NLRCs ruling, citing the LAs decision, when it ruled:

In the case at bench, respondents did not dispute that after laying-off complainants herein, they engaged the services
of an agency to perform the tasks use (sic) to be done by complainants. This is [in direct] contradiction to the
concept of redundancy which precisely requires the trimming down of the [workforce] because a task is being
carried out by just too many people. The subsequent contracting out to an agency the functions or duties that used to
be the domain of individual complainants herein is a circumvention of their constitutional rights to security of
tenure, and therefore illegal.53
Guidelines in implementing redundancy

We recognize that management has the prerogative to characterize an employees services as no longer necessary or
sustainable, and therefore properly terminable.54

The CA also correctly cited De Ocampo, et al., v. NLRC 55 when it discussed that Jardines decision to hire
contractual employees as replacements is a management prerogative which the company has the right to undertake
to implement a more economic and efficient operation of its business.56

In De Ocampo, this Court held that, in the absence of proof that the management abused its discretion or acted in a
malicious or arbitrary manner in replacing dismissed employees with contractual ones, judicial intervention should
not be made in the companys exercise of its management prerogative.57

The employers exercise of its management prerogative, however, is not an unbridled right that cannot be subjected
to this Courts scrutiny. The exercise of management prerogative is subject to the caveat that it should not performed
in violation of any law and that it is not tainted by any arbitrary or malicious motive on the part of the employer.58

This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to dismiss
employees due to redundancy. These guidelines aim to ensure that the dismissal is not implemented arbitrarily and is
not tainted with bad faith against the dismissed employees.

In Golden Thread Knitting Industries, Inc. v. NLRC, 59 this Court laid down the principle that the employer must use
fair and reasonable criteria in the selection of employees who will be dismissed from employment due to
redundancy. Such fair and reasonable criteria may include the following, but are not limited to: (a) less preferred
status (e.g. temporary employee); (b) efficiency; and (c) seniority. The presence of these criteria used by the
employer shows good faith on its part and is evidence that the implementation of redundancy was painstakingly
done by the employer in order to properly justify the termination from the service of its employees. 60

As the petitioners pointed out, the records are bereft of indications that Jardine employed clear criteria when it
decided who among its employees, who held similar positions as the petitioners, should be removed from their posts
because of redundancy. Jardine never bothered to explain how and why the petitioners were the ones dismissed.
Jardines acts became more suspect given that the petitioners were all union officers and some of them were panel
members in the scheduled CBA negotiations between Jardine and the Union.

Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian Alcohol Corp.
v. NLRC,61 also laid down guidelines for redundancy to be characterized as validly undertaken by the employer. The
Court ruled:

For the implementation of a redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the Department of Labor and Employment at least
one month prior to the intended date of retrenchment; (2) payment of separation pay equivalent to at least one month
pay or at least one month pay for every year of service, whichever is higher; (3) good faith in abolishing the
redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant
and accordingly abolished.62

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine informed the
Department of Labor and Employment of the petitioners separation from the service due to redundancy on April 30,
1999, one month before their terminations effectivity. Also, the petitioners were given their individual separation
packages, composed of their severance pay, plus their grossed up transportation allowance.

Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are interrelated to
ensure good faith in abolishing redundant positions; the employer must clearly show that it used fair and reasonable
criteria in ascertaining what positions are to be declared redundant.
In this cited case, the employer took pains to discuss and elaborate on the reasons why the position of the private
respondent was the one chosen by the employer to be abolished. We quote the Courts ruling:

In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was terminated.
Also, the water from the wells had become salty due to extensive prawn farming nearby and could no longer be used
by Asian Alcohol for its purpose.1awp++i1 The wells had to be closed and needless to say, the services of Carias,
Martinez and Sendon had to be terminated on the twin grounds of redundancy and retrenchment.

xxxx

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site. At
their current production level, the new management found that it was more cost efficient to maintain only nine (9)
mechanics. In choosing whom to separate among the ten (10) mechanics, the management examined employment
records and reports to determine the least efficient among them. It was private respondent Amacio who appeared the
least efficient because of his poor health condition.63

Jardine never undertook what the employer in Asian Alcohol did.1wphi1 Jardine was never able to explain in any
of its pleadings why the petitioners positions were redundant. It never even attempted to discuss the attendant facts
and circumstances that led to the conclusion that the petitioners positions had become superfluous and unnecessary
to Jardines business requirements. Thus, we can only speculate on what actually happened.

As the LA correctly found, Jardine lumped together the seven petitioners into one group whose positions had
become redundant. This move was despite the fact that not all of them occupied the same positions and performed
the same functions.64 Under the circumstances of the case, Jardines move was thus illegal. We affirm the LAs ruling
that fair play and good faith require that where one employee will be chosen over the others, the employer must be
able to clearly explain the merit of the choice it has taken.65

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian Alcohol, we find that at
two levels, Jardine failed to set the required fair and reasonable criteria in the termination of the petitioners
employment, leading to the conclusion that the termination from the service was arbitrary and in bad faith.

The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per position basis. At this
level, Jardine failed to explain why among all of the existing positions in its organization, Jardine chose the
petitioners posts as the ones which have already become redundant and terminable.1wphi1

The second level, derived from Golden Thread, is more specific. Here the distinction narrows down to the particular
employees occupying the same positions which were already declared to be redundant. At this level, Jardines lapse
is shown by its failure to explain why among all of its employees whose positions were determined to be redundant,
the petitioners were the ones selected to be dismissed from the service.

Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was not valid
because Jardine hired contractual employees as replacements, thus, contradicting underlying reasons of redundancy.
The CA significantly chose to disregard these coherent labor findings without fully justifying its move. At the very
least, this was an indicator that something was wrong somewhere in these dismissals. It was clear legal error for the
CA to recognize grave abuse of discretion when none occurred.

WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007 and the
resolution dated February 11, 2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold the decision dated
December 1, 2004 and the resolution dated July 21, 2005 of the National Labor Relations Commission which
affirmed in its entirety the September 29, 2000 decision of the Labor Arbiter.

SO ORDERED.