I.

THE CONSTITUTION AND PROTECTION TO LABOR

PRINCIPLE OF SOCIAL AND DISTRIBUTIVE JUSTICE

EN BANC

JUANITO A. GARCIA and ALBERTO G.R. No. 164856

J. DUMAGO, Present:
Petitioners,
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- versus - CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
PHILIPPINE AIRLINES, INC., VELASCO, JR.,
Respondent. NACHURA,
LEONARDO-DE CASTRO, and
BRION, JJ.

Promulgated:

January 20, 2009

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

DECISION

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004 Resolution
of the Court of Appeals[1] in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent, Philippine
Airlines, Inc. (PAL), and denied petitioners Motion for Reconsideration, respectively. The dispositive portion of the assailed
Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE
COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public
respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having
been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the
Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise
ANNULLED and SET ASIDE.

SO ORDERED.[2]

The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners[3] after they were
allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL
Technical Centers Toolroom Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of Discipline, [4] prompting
them to file a complaint for illegal dismissal and damages which was, by Decision of January 11, 1999, [5] resolved by the
Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the
decision.
Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange Commission (SEC) placed PAL
(hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim Rehabilitation
Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiters decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000, reversed
said decision and dismissed petitioners complaint for lack of merit.[6]

Petitioners Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of Judgment was
issued on July 13, 2000.[7]

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting the reinstatement
aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of Garnishment

1
(Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the
garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of November
26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor
Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution
nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal
removes the basis for implementing the reinstatement aspect of a labor arbiters decision (the first ground), and (2) the
impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for
the failure to exercise the options under Article 223 of the Labor Code (the second ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the NLRC
Resolutions insofar as it suspended the proceedings, viz:

Since petitioners claim against PAL is a money claim for their wages during the pendency of PALs appeal
to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor
Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners case
for illegal dismissal and should instead have directed them to lodge their claim before PALs receiver.
However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar
circumstances of the case that their dismissal was eventually held valid with only the matter of
reinstatement pending appeal being the issue this Court deems it legally expedient to suspend the
proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are
SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby
DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SO ORDERED.[8] (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order
of September 28, 2007, granted its request to exit from rehabilitation proceedings. [9]
In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining issue for
consideration, which is whether petitioners may collect their wages during the period between the Labor
Arbiters order of reinstatement pending appeal and the NLRC decision overturning that of the Labor
Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes the
basis for implementing the reinstatement aspect of a labor arbiters decision.

On this score, the Courts attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal
or,particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a
line of cases including Air Philippines Corp. v. Zamora,[10] while on the other is the recent case of Genuino v. National
Labor Relations Commission.[11] At the core of the seeming divergence is the application of paragraph 3 of Article 223 of
the Labor Code which reads:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting
of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and
underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court. On the other hand, if
the employee has been reinstated during the appeal period and such reinstatement order is reversed with
finality, the employee is not required to reimburse whatever salary he received for he is entitled to such,
more so if he actually rendered services during the period.[12] (Emphasis in the original; italics and
underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages
pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial
upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply
therewith.[13]
2
The opposite view is articulated in Genuino which states:
If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her
employer under existing laws, collective bargaining agreement provisions, and company
practices. However, if the employee was reinstated to work during the pendency of the appeal, then the
employee is entitled to the compensation received for actual services rendered without need of refund.
Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal
is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of
the September 3, 1994 NLRC Decision.[14] (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to
be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required
to refund the salaries received on payroll reinstatement. In fact, in a catena of cases,[15] the Court did not order the
refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the
reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of
reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the
provisions of the 1987 Constitution on labor and the working man.
xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the
nation's progress and stability.
xxxx
x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx
x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and his family.[16]

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust
enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory
precepts portray the otherwise unjust situation as a condition affording full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the refund
doctrine easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed
employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the
pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a
stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll
reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is
unthinkable for one to refuse payroll reinstatement.In the face of the grim possibilities, the rise of concerned employees
declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a scheme
unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond
posted in installment by the employer. For in the event of a reversal of the Labor Arbiters decision ordering
reinstatement, the employer gets back the same amount without having to spend ordinarily for bond premiums. This
circumvents, if not directly contradicts, the proscription that the posting of a bond [even a cash bond] by the employer
shall not stay the execution for reinstatement.[17]

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the
salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing
doctrine on reinstatement pending appeal vis--vis the effect of a reversal on appeal.
3
 Respondent insists that with the reversal of the Labor Arbiters Decision, there is no more basis to enforce the
reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this argument
and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the present case, the writ
of execution therein was secured prior to the reversal of the Labor Arbiters decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there without
considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the immediately
executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v. NLRC,[18] which was cited
in Panuncillo v. CAP Philippines, Inc.,[19] the Court observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be
immediately executory even pending appeal and the posting of a bond by the employer shall not stay the
execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of
reinstatement immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article
223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were
to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award
contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law,
the legislature is presumed to have ordained a valid and sensible law, one which operates no further than
may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of
the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the
reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered
to be indulging in mere semantic exercise. x x x[20] (Italics in the original; emphasis and underscoring
supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the
period of appeal until reversal by the higher court.[21] It settles the view that the Labor Arbiter's order of reinstatement
is immediately executory and the employer has to either re-admit them to work under the same terms and conditions
prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the
alternative, employer must pay the employees salaries.[22]

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by the
appellate court in the assailed issuances. The Court sustains the appellate courts finding that the peculiar predicament of
a corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the
decision containing an order of reinstatement. The immediacy of its execution needs no further
elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal, if the
law is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay its
execution, as observed in Panuncillo and as what actually transpired
in Kimberly,[23] Composite,[24] Air Philippines,[25] and Roquero,[26] should not be countenanced.

After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal
was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and (2) the delay must not be due to the employers unjustified act or omission. If the delay
is due to the employers unjustified refusal, the employer may still be required to pay the salaries notwithstanding the
reversal of the Labor Arbiters decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury Sales
Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor Arbiters
Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of
Procedure did not lay down a mechanism to promptly effectuate the self-executory order of reinstatement, making it
difficult to establish that the employer actually refused to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC [27] where it was alleged that the
employer was willing to comply with the order and that the employee opted not to pursue the execution of the order, the
Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued from
4
notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered that the
employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario where
the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the
employees motion for the issuance of a writ of execution may no longer adversely affect the cause of the dismissed
employee in view of the self-executory nature of the order of reinstatement.[28]

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to submit a report of
compliance within 10 calendar days from receipt of the Labor Arbiters decision,[29] disobedience to which clearly denotes a
refusal to reinstate. The employee need not file a motion for the issuance of the writ of execution since the Labor
Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly any difficulty in
determining the employers intransigence in immediately complying with the order.
In the case at bar, petitioners exerted efforts [30] to execute the Labor Arbiters order of reinstatement until they were able
to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC of the Labor Arbiters
decision. Technically, there was still actual delay which brings to the question of whether the delay was due to
respondents unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission
was justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal
or board against the corporation shall ipso jure be suspended.[31] As stated early on, during the pendency of petitioners
complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor
Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is
ministerial and mandatory.[32] This injunction or suspension of claims by legislative fiat [33] partakes of the nature of a
restraining order that constitutes a legal justification for respondents non-compliance with the reinstatement
order. Respondents failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus
justified. Such being the case, respondents obligation to pay the salaries pending appeal, as the normal effect of the non-
exercise of the options, did not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the
dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is similarly in
a judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its options,
on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the other hand,
stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as discussed by
Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground of substantial
losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a
competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under
rehabilitation. Respondent was, during the period material to the case, effectively deprived of the alternative choices
under Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim
relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver. Had
there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to
optimize the utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver
may decide otherwise, not to mention the subsistence of the injunction on claims.

In sum, the obligation to pay the employees salaries upon the employers failure to exercise the alternative options under
Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5,
2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and
the Notice of Garnishment are concerned, the Court finds no reversible error.

SO ORDERED.

5
 THIRD DIVISION

CAPITOL MEDICAL CENTER, INC. and G.R. No. 155098

DR. THELMA
NAVARETTE-CLEMENTE, Present:
Petitioners,
PANGANIBAN, Chairman,
SANDOVAL- GUTIERREZ,
CORONA,
- versus - CARPIO MORALES, and
GARCIA, JJ.

Promulgated:
DR. CESAR E. MERIS,
Respondent. September 16, 2005

xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx

DECISION

CARPIO MORALES, J.:

Subject of the present appeal is the Court of Appeals Decision[1] dated February 15, 2002 reversing the NLRC
Resolution[2] dated January 19, 1999 and Labor Arbiter Decision[3] dated April 28, 1998 which both held that the closure
of the Industrial Service Unit of the

Capitol Medical Center, Inc., resulting to the termination of the services of herein respondent Dr. Cesar Meris as Chief
thereof, was valid.

On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar Meris (Dr. Meris), [4] one of its
stockholders,[5] as in charge of its Industrial Service Unit (ISU) at a monthly salary of P10,270.00.

Until the closure of the ISU on April 30, 1992,[6] Dr. Meris performed dual functions of providing medical services to
Capitols more than 500 employees and health workers as well as to employees and workers of companies having retainer
contracts with it.[7]

On March 31, 1992, Dr. Meris received from Capitols president and chairman of the board, Dr. Thelma Navarette-
Clemente (Dr. Clemente), a notice advising him of the managements decision to close or abolish the ISU and the
consequent termination of his services as Chief thereof, effective April 30, 1992.[8] The notice reads as follows:

March 31, 1992

Dr. Cesar E. Meris

Chief, Industrial Service Unit
Capitol Medical Center

Dear Dr. Meris:

Greetings!

Please be formally advised that the hospital management has decided to abolish CMCs Industrial Service Unit as of April 30,
1992 in view of the almost extinct demand for direct medical services by the private and semi-government
corporations in providing health care for their employees. Such a decision was arrived at, after considering the
existing trend of industrial companies allocating their health care requirements to Health Maintenance
Organizations (HMOs) or thru a tripartite arrangement with medical insurance carriers and designated hospitals.

As a consequence thereof, all positions in the unit will be decommissioned at the same time industrial services [are] deactivated. In
that event, you shall be entitled to return to your private practice as a consultant staff of the institution and will
become eligible to receive your retirement benefits as a former hospital employee. Miss Jane Telan on the other hand
will be transferred back to Nursing Service for reassignment at the CSR.

We wish to thank you for your long and faithful service to the institution and hope that our partnership in health care delivery to our
people will continue throughout the future. Best regards.

Very truly yours,

(SGD.) DR. THELMA NAVARETTE-CLEMENTE[9] (Emphasis and underscoring supplied)

Dr. Meris, doubting the reason behind the managements decision to close the ISU and believing that the ISU was not in
fact abolished as it continued to operate and offer services to the client companies with Dr. Clemente as its head and the

1
notice of closure was a mere ploy for his ouster in view of his refusal to retire despite Dr. Clementes previous prodding
for him to do so,[10] sought his reinstatement but it was unheeded.

Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr. Clemente for illegal dismissal and
reinstatement with claims for backwages, moral and exemplary damages, plus attorneys fees. [11]

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the ISU was a valid and lawful exercise
of management prerogatives and there was convincing evidence to show that ISU was being operated at a loss.[12] The
decretal text of the decision reads:

WHEREFORE, judgment is hereby rendered dismissing the complaint. Respondents are however ordered
to pay complainant all sums due him under the hospital retirement plan.

SO ORDERED.[13] (Emphasis supplied)

On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the Labor Arbiters decision. It held
that in the exercise of Capitols management prerogatives, it had the right to close the ISU even if it was not suffering
business losses in light of Article 283 of the Labor Code and jurisprudence.[14]

And the NLRC set aside the Labor Arbiters directive for the payment of retirement benefits to Dr. Meris because he did
not retire. Instead, it ordered the payment of separation pay as provided under Article 283 as he was discharged due to
closure of ISU, to be charged against the retirement fund.[15]

Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for review [16] which, in the interest of
substantial justice, was treated as one for certiorari.[17]

Discrediting Capitols assertion that the ISU was operating at a loss as the evidence showed a continuous trend of increase
in its revenue for three years immediately preceding Dr. Meriss dismissal on April 30, 1992, [18] and finding that the ISUs
Analysis of Income and Expenses which was prepared long after Dr. Meriss dismissal, hence, not yet available, on or
before April 1992, was tainted with irregular entries, the appellate court held that Capitols evidence failed to meet the
standard of a sufficient and adequate proof of loss necessary to justify the abolition of the ISU.[19]

The appellate court went on to hold that the ISU was not in fact abolished, its operation and management having merely
changed hands from Dr. Meris to Dr. Clemente; and that there was a procedural lapse in terminating the services of Dr.
Meris, no written notice to the Department of Labor and Employment (DOLE) of the ISU abolition having been made,
thereby violating the requirement embodied in Article 283.[20]

The appellate court, concluding that Capitol failed to strictly comply with both procedural and substantive due process, a
condition sine qua non for the validity of a case of termination,[21] held that Dr. Meris was illegally dismissed. It
accordingly reversed the NLRC Resolution and disposed as follows:

IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC are hereby set aside, and
another one entered

1 declaring illegal the dismissal of petitioner as Chief of the Industrial Service Unit of respondent Medical
Center;

2 ordering respondents to pay petitioner

a) backwages from the date of his separation in April 1992 until this decision has attained finality;
b) separation pay in lieu of reinstatement computed at the rate of one (1) month salary for every year of
service with a fraction of at least six (6) months being considered as one year;

c) other benefits due him or their money equivalent;

d) moral damages in the sum of P50,000.00;

e) exemplary damages in the sum of P50,000.00; and

f) attorneys fees of 10% of the total monetary award payable to petitioner.

SO ORDERED.[22]

Hence, the present petition for review assigning to the appellate court the following errors:
I

. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF BOTH THE NATIONAL LABOR
RELATIONS COMMISSION (NLRC) AND THE LABOR ARBITER.

2
 II

. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR ARBITER AND THE NATIONAL
LABOR RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS NOT INCURRING LOSSES
AND THAT IT WAS NOT IN FACT ABOLISHED.
III

. . . IN NOT UPHOLDING PETITIONERS MANAGEMENT PREROGATIVE TO ABOLISH THE INDUSTRIAL

SERVICE UNIT (ISU).
IV

. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES AS WELL AS DAMAGES AND

ATTORNEYS FEES.[23]

Capitol questions the appellate courts deciding of the petition of Dr. Meris on the merits, instead of merely determining
whether the administrative bodies acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

The province of a special civil action for certiorari under Rule 65, no doubt the appropriate mode of review by the Court
of Appeals of the NLRC decision,[24] is limited only to correct errors of jurisdiction or grave abuse of discretion amounting
to lack or excess of jurisdiction.[25] In light of the merits of Dr. Meris claim, however, the relaxation by the appellate court
of procedural technicality to give way to a substantive determination of a case, as this Court has held in several
cases,[26] to subserve the interest of justice, is in order.

Capitol argues that the factual findings of the NLRC, particularly when they coincide with those of the Labor Arbiter, as in
the present case, should be accorded respect, even finality.[27]

For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded respect, if not finality, however,
the same must be sufficiently supported by evidence on record. [28] Where there is a showing that such findings are devoid
of support, or that the judgment is based on a misapprehension of facts, [29] the lower tribunals factual findings will not be
upheld.

As will be reflected in the following discussions, this Court finds that the Labor Arbiter and the NLRC overlooked some
material facts decisive of the instant controversy.

Capitol further argues that the appellate courts conclusion that the ISU was not incurring losses is arbitrary as it was
based solely on the supposed increase in revenues of the unit from 1989-1991, without taking into account the Analysis
of Income and Expenses of ISU from July 1, 1990 to July 1, 1991 which shows that the unit operated at a loss; [30] and
that the demand for the services of ISU became almost extinct in view of the affiliation of industrial establishments with
HMOs such as Fortunecare, Maxicare, Health Maintenance, Inc. and Philamcare and of tripartite arrangements with
medical insurance carriers and designated hospitals,[31] and the trend resulted in losses in the operation of the ISU.

Besides, Capitol stresses, the health care needs of the hospital employees had been taken over by other units without
added expense to it;[32] the appellate courts decision is at best an undue interference with, and curtailment of, the
exercise by an employer of its management prerogatives; [33] at the time of the closure of the ISU, Dr. Meris was already
eligible for retirement under the Capitols retirement plan; and the appellate court adverted to the alleged lack of notice to
the DOLE regarding Dr. Meriss dismissal but the latter never raised such issue in his appeal to the NLRC or even in his
petition for review before the Court of Appeals, hence, the latter did not have authority to pass on the matter. [34]

Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor
provisions in the Constitution dictate so.

Employers are also accorded rights and privileges to assure their self-determination and independence and reasonable
return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad
and unlimited in scope, the State has the right to determine whether an employers privilege is exercised in a manner that
complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an
employer is the right to close an establishment or undertaking.

The right to close the operation of an establishment or undertaking is explicitly recognized under the Labor Code as one
of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for
the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

ART. 283. Closure of establishment and reduction of personnel . The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In
3
 case retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis and underscoring supplied)
The phrase closures or cessation of operations of establishment or undertaking includes a partial or total closure or
cessation.[35]

x x x Ordinarily, the closing of a warehouse facility and the termination of the services of employees
there assigned is a matter that is left to the determination of the employer in the good faith exercise of
its management prerogatives. The applicable law in such a case is Article 283 of the Labor Code which
permits closure or cessation of operation of an establishment or undertaking not due to serious business
losses or financial reverses, which, in our reading includes both the complete cessation of
operations and the cessation of only part of a companys business. (Emphasis supplied)

And the phrase closures or cessation x x x not due to serious business losses or financial reverses recognizes the right of
the employer to close or cease his business operations or undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their
length of service.[36]

It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in managements
prerogative to close or cease its business operations just because said business operation or undertaking is not suffering
from any loss.[37] As long as the companys exercise of the same is in good faith to advance its interest and not for
the purpose of defeating or circumventing the rights of employees under the law or a valid agreement, such
exercise will be upheld.[38]

Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business
losses but it cannot be an unbridled prerogative to suit the whims of the employer.

The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in
character.[39]And the burden of proving such falls upon the employer.[40]

In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU was due to the almost extinct
demand for
direct medical service by the private and semi-government corporations in providing health care for their employees; and
that such extinct demand was brought about by the existing trend of industrial companies allocating their health care
requirements to Health Maintenance Organizations (HMOs) or thru a tripartite arrangement with medical insurance
carriers and designated hospitals.

The records of the case, however, fail to impress that there was indeed extinct demand for the medical services rendered
by the ISU. The ISUs Annual Report for the fiscal years 1986 to 1991, submitted by Dr. Meris to Dr. Clemente,
and uncontroverted by Capitol, shows the following:

Fiscal Year No. of Industrial No of No. of Capitol

Patients Companies Employees
1986-1987 466 11 1445
1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 2320[41]

If there was extinct demand for the ISU medical services as what Capitol and Dr. Clemente purport to convey, why the
number of client companies of the ISU increased from 11 to 18 from 1986 to 1991, as well as the number of patients
from both industrial corporations and Capitol employees, they did not explain.

The Analysis of Income and Expenses adduced by Capitol showing that the ISU incurred losses from July 1990 to
February 1992, to wit:

July 1, 1990 to July 1, 1991 to

June 30, 1991 February 29, 1992

INCOME P16, 772.00 P35, 236.00

TOTAL EXPENSES P225, 583.70 P169,244.34

NET LOSS P(208,811.70) P(134,008.34),[42]

4
was prepared by its internal auditor Vicenta Fernandez,[43] a relative of Dr. Clemente, and not by an independent external
auditor, hence, not beyond doubt. It is the financial statements audited by independent external auditors which constitute
the normal method of proof of the profit and loss performance of a company. [44]

At all events, the claimed losses are contradicted by the accounting records of Capitol itself which show that ISU had
increasing revenue from 1989 to 1991.

Year In-Patient Out-Patient Total Income

1989 P230,316.38 P 79,477.50 P309,793.88

1990 P278,438.10 P124,256.65 P402,694.75
1991 P305,126.35 P152,920.15 P458,046.50[45]
The foregoing disquisition notwithstanding, as reflected above, the existence of business losses is not required to justify
the closure or cessation of establishment or undertaking as a ground to terminate employment of employees. Even if the
ISU were not incurring losses, its abolition or closure could be justified on other grounds like that proffered by Capitol
extinct demand. Capitol failed, however, to present sufficient and convincing evidence to support such claim of extinct
demand. In fact, the employees of Capitol submitted a petition [46] dated April 21, 1992 addressed to Dr. Clemente
opposing the abolition of the ISU.

The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on termination of employment.

The termination of the services of Dr. Meris not having been premised on a just or authorized cause, he is entitled to
either reinstatement or separation pay if reinstatement is no longer viable, and to backwages.

Reinstatement, however, is not feasible in case of a strained employer-employee relationship or when the work or
position formerly held by the dismissed employee no longer exists, as in the instant case. [47] Dr. Meris is thus entitled to
payment of separation pay at the rate of one (1) month salary for every year of his employment, with a fraction of at
least six (6) months being considered as one(1) year, [48] and full backwages from the time of his dismissal from April 30,
1992 until the expiration of his term as Chief of ISU or his mandatory retirement, whichever comes first.

The award by the appellate court of moral damages,[49] however, cannot be sustained, solely upon the premise that the
employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to warrant
the grant of moral damages under the Civil Code, such as that the act of dismissal was attended by bad faith or fraud, or
was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy; and of course, that
social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom. [50] Such circumstances, however, do not
obtain in the instant case. More specifically on bad faith, lack of it is mirrored in Dr. Clementes offer to Dr. Meris to be a
consultant of Capitol, despite the abolition of the ISU.

There being no moral damages, the award of exemplary damages does not lie.[51]

The award for attorneys fees, however, remains.[52]

WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is
hereby AFFIRMED with MODIFICATION. As modified, judgment is hereby rendered ordering Capitol Medical Center,
Inc. to pay Dr. Cesar Meris separation pay at the rate of One (1) Month salary for every year of his employment, with a
fraction of at least Six (6) Months being considered as One (1) Year, full backwages from the time of his dismissal from
April 30, 1992 until the expiration of his term as Chief of the ISU or his mandatory retirement, whichever comes first;
other benefits due him or their money equivalent; and attorneys fees.

Costs against petitioners.

SO ORDERED.

5
 CONSTITUTIONAL RIGHTS OF WORKERS

SECOND DIVISION

[G.R. No. 125735. August 26, 1999]

LORLENE A. GONZALES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION,
CAGAYAN DE ORO CITY, and ATENEO DE DAVAO UNIVERSITY, respondents.

DECISION
BELLOSILLO, J.:

By way of certiorari under Rule 65 of the Rules of Court petitioner seeks the nullification of the Decision of public
respondent National Labor Relations Commission, Fifth Division, which reversed and set aside that of Executive Labor
Arbiter Conchita J. Martinez.

Lorlene Gonzales, petitioner, has been a schoolteacher in the Elementary Department of private respondent Ateneo
de Davao University (hereafter ATENEO) since 1974 assigned to teach Reading, Mathematics, Language and Pilipino in
the Grade VI class, while ATENEO is an educational institution, a corporation duly organized under the laws of the
Philippines, with principal address at Jacinto St., Davao City.

Sometime in 1991 Fr. Oscar Millar, S.J., Ateneo Grade School Headmaster, sent a letter dated 11 April 1991
informing petitioner Lorlene A. Gonzales of the complaints of two (2) parents for alleged use of corporal punishment on
her students. Petitioner claimed that she was not informed of the identity of the parents who allegedly complained of the
corporal punishment she purportedly inflicted in school-year 1990-1991. She likewise claimed that she was not confronted
about it by private respondent ATENEO in 1991 and that it was only two (2) years after the complaints were made that
she discovered, through her students and their parents, that ATENEO was soliciting complainants to lodge written
complaints against her.

On 31 March 1993 she wrote a letter to Fr. Oscar Millar, S.J., demanding that she be formally informed of the
complaint and be duly investigated.

On 9 June 1993 petitioner was informed of the composition of an investigative committee organized by Fr. Oscar
Millar, S.J., to look into the alleged use of corporal punishment by petitioner in disciplining her students. It can be gleaned
from the records that she was duly furnished with the rules of procedure, informed of the schedule of the hearings, and
given copies of the affidavits executed by the students who testified against her.

Petitioner refused to take part in the investigation unless the rules of procedure laid down by the Committee be
revised, contending that the same were violative of her right to due process. Petitioner specifically objected to the
provision which stated: x x x 3) Counsel for Ms. Lorlene Gonzales shall not directly participate in the investigation but will
merely advise Ms. Gonzales x x x (par. 3).[1]

But the Committee was steadfast in its resolve to adopt the aforementioned rules. In its letter dated 9 August 1993,
private respondent informed petitioner that the rules of procedure to be applied were substantially the same rules that
were used in the investigation of a former Ateneo employee and therefore we are under legal advice not to change these
rules."[2] Over the objection of petitioner the Committee commenced with its investigation without petitioners
participation. Out of the twenty -two (22) invitations sent out by ATENEO to petitioners students and their parents to
shed light on the matter of corporal punishment allegedly administered by her, eleven (11) appeared and testified before
the committee. The eleven (11) witnesses also executed written statements denominated as affidavits.

On 10 November 1993 private respondent served a Notice of Termination on petitioner pursuant to the findings and
recommendation of the Committee. Thereafter, petitioner received a letter from the president of ATENEO demanding her
voluntary resignation a week from receipt of the letter, otherwise, she would be considered resigned from the service.

On 29 November 1993 petitioner filed a complaint before the Labor Arbiter for illegal dismissal. After trial, Executive
Labor Arbiter Conchita J. Martinez found her dismissal illegal for lack of factual basis and ordered ATENEO to award
petitioner separation pay, back wages and 13th month pay. In her decision, the Executive Labor Arbiter opined that
although petitioner was afforded procedural due process respondent institution failed to establish substantial evidence as
to the guilt of the complainant of the offense charged" [3] thus

x x x the complainant was afforded procedural due process. There is convincing and sufficient evidence x x x showing
respondent complied with the notice and hearing requirement x x x x.[4]

After considering the evidence, arguments and counter-arguments of the parties, this office finds that the respondent
failed to establish substantial evidence as to the guilt of complainant of the offense charged x x x x. [5]

Complainant has sufficiently established that she is a very good teacher. She is equipped with the appropriate educational
qualifications, trainings, seminars and work experiences. Such fact was affirmed by her present and former students, their
parents, colleagues and the former headmaster of the grade school x x x x [6]
1
As a matter of fact, six (6) out of the nine (9) students and their parents/guardians have retracted and withdrawn their
statements x x x x[7]

Both parties appealed to the NLRC which on 25 March 1996 reversed the decision of the Executive Labor Arbiter by
declaring petitioners dismissal valid and legal but added that since ATENEO offered petitioner her retirement benefits it
was but proper that she be extended said benefits. Petitioner now seeks the reversal of the decision; hence, this petition.

The crux of the controversy is whether the NLRC committed grave abuse of discretion in sustaining as valid and legal
the dismissal of petitioner by private respondent ATENEO.

The NLRC, in our view, appears to have skirted several important issues raised by petitioner foremost of which is the
absence of due process. Upon being notified of her termination, she has the right to demand compliance with the basic
requirements of due process. Compliance entails the twin requirements of procedural and substantial due process. Ample
opportunity must be afforded the employee to defend herself either personally and/or with assistance of a representative;
to know the nature of her offense; and, to cross examine and confront face to face the witnesses against her. Likewise,
due process requires that the decision must be based on established facts and on a sound legal foundation.

It is precisely to demand compliance with these requirements that petitioner at the very onset of the investigation
demanded the revision of the rules laid down by the Investigative Committee. The adamant refusal of the Committee to
accede to this demand resulted in her failure to confront and cross-examine her accusers. This is not harping at
technicalities as wrongfully pointed out by the NLRC but a serious violation of petitioner's statutory and constitutional
right to due process that ultimately vitiated the investigation.

Moreover, the failure of ATENEO to refute the contention of petitioner that the joint affidavits executed by the
students and parents were "pre-prepared" raises serious doubts as to the probative value of this evidence. As correctly
pointed out by the Executive Labor Arbiter, there is more reason to disregard it especially where the same was challenged
and has remained unexplained. Hearsay evidence, in the strict sense, has no probative value whether objected to or not.

In the instant case, ATENEO failed to prove by substantial evidence that petitioner had inflicted corporal punishment
on her students. In Ang Tibay v. CIR, the Court set the measure of evidence to be presented in an administrative
investigation when it said, substantial evidence is more than mere scintilla.It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. The evidence of private respondent did not measure
up to this standard. It relied solely on the witnesses affidavits with questionable veracity. Moreover, the affidavit of
recantation executed by some students and their parents all the more weakened the case of private respondent. Failure
in this regard negates the very existence of the ground for dismissal.

On the other hand, petitioner adequately proved, by means of affidavits, letters of petition and manifesto made by
her students and co-teachers, that she was a competent and dedicated teacher having spent seventeen (17) years of her
life in the service of the very institution which is now seeking her dismissal.

In view of the foregoing, the conclusion of the NLRC is unwarranted. Employment is not merely a contractual
relationship; it has assumed the nature of property right. It may spell the difference whether or not a family will have
food on their table, roof over their heads and education for their children. It is for this reason that the State has taken up
measures to protect employees from unjustified dismissals. It is also because of this that the right to security of tenure is
not only a statutory right but, more so, a constitutional right.

WHEREFORE, the assailed Decision of public respondent National Labor Relations Commission dated 25 March
1996 is REVERSED and SET ASIDE, and the decision of Executive Labor Arbiter Conchita J. Martinez declaring the
dismissal of complainant Lorlene A. Gonzales illegal for lack of factual basis and ordering respondent Ateneo de Davao
University to pay complainant separation pay, back wages and 13th month pay in the total amount of TWO HUNDRED
SIXTEEN THOUSAND NINE HUNDRED THIRTY-EIGHT and 70/100 PESOS (P216,938.70) x x x [f]urther, ordering
respondent to pay 10% of the total monetary award as attorney's fees to counsel for complainant x x x [d]ismissing all
other claims for lack of merit, is REINSTATED, AFFIRMED and ADOPTED herein as the decision in the instant case.

SO ORDERED.

2
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.

MELO, J.:

In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a Code of
Discipline among employees is a shared responsibility of the employer and the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code was
circulated among the employees and was immediately implemented, and some employees were forthwith subjected to
the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National
Labor Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the following remarks:

"ULP with arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by
Management" (Rollo, p. 41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the
Code, was guilty of unfair labor practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code.
PALEA alleged that copies of the Code had been circulated in limited numbers; that being penal in nature the Code must
conform with the requirements of sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to
the rights of the employees. It prayed that implementation of the Code be held in abeyance; that PAL should discuss the
substance of the Code with PALEA; that employees dismissed under the Code be reinstated and their cases subjected to
further hearing; and that PAL be declared guilty of unfair labor practice and be ordered to pay damages (pp. 7-14,
Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and regulations
regarding employess' conduct in carrying out their duties and functions, and alleging that by implementing the Code, it
had not violated the collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as
unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements
for negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated.

In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when PAL
unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as defective for,
respectively, running counter to the construction of penal laws and making punishable any offense within PAL's
contemplation. These provisions are the following:
Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and regulations of the
company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures
and standards, including standards of quality, productivity and behaviour, as issued and promulgated by
the company through its duly authorized officials. Any violations thereof shall be punishable with a
penalty to be determined by the gravity and/or frequency of the offense.

Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The penalty for an
offense shall be determined on the basis of his past record of offenses of any nature or the absence
thereof. The more habitual an offender has been, the greater shall be the penalty for the latest offense.
Thus, an employee may be dismissed if the number of his past offenses warrants such penalty in the
judgment of management even if each offense considered separately may not warrant dismissal. Habitual
offenders or recidivists have no place in PAL. On the other hand, due regard shall be given to the length
of time between commission of individual offenses to determine whether the employee's conduct may
indicate occasional lapses (which may nevertheless require sterner disciplinary action) or a pattern of
incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear at the
scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor arbiter considered
the case submitted for decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of PAL in
adopting the Code and ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was
"not totally fault free" considering that while the issuance of rules and regulations governing the conduct of employees is
a "legitimate management prerogative" such rules and regulations must meet the test of "reasonableness, propriety and
fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing provision that makes
punishable any offense one can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it
violates the rule against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp.
38-39, Rollo.)
1
The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that PAL's
assertion that it had furnished all its employees copies of the Code is unsupported by documentary evidence, she stated
that such "failure" on the part of PAL resulted in the imposition of penalties on employees who thought all the while that
the 1966 Code was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no
one from compliance . . . finds application only after it has been conclusively shown that the law was circulated to all the
parties concerned and efforts to disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She
thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand
the same for further hearing; and
3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision.
All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.

SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding
Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice committed
by PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations:

Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall
govern the conduct of its employees would result in the erosion and deterioration of an otherwise
harmonious and smooth relationship between them as did happen in the instant case. There is no dispute
that adoption of rules of conduct or discipline is a prerogative of management and is imperative and
essential if an industry, has to survive in a competitive world. But labor climate has progressed, too. In
the Philippine scene, at no time in our contemporary history is the need for a cooperative, supportive and
smooth relationship between labor and management more keenly felt if we are to survive economically.
Management can no longer exclude labor in the deliberation and adoption of rules and regulations that
will affect them.
The complainant union in this case has the right to feel isolated in the adoption of the New Code of
Discipline. The Code of Discipline involves security of tenure and loss of employment a property right!
It is time that management realizes that to attain effectiveness in its conduct rules, there should be
candidness and openness by Management and participation by the union, representing its members. In
fact, our Constitution has recognized the principle of "shared responsibility" between employers and
workers and has likewise recognized the right of workers to participate in "policy and decision-making
process affecting their rights . . ." The latter provision was interpreted by the Constitutional
Commissioners to mean participation in "management"' (Record of the Constitutional Commission, Vol.
II).
In a sense, participation by the union in the adoption of the code if conduct could have accelerated and
enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the
Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149,
Original Record.)

Respondent Commission thereupon disposed:

WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of
Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions
[.] (T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of
Discipline. The pending cases adverted to in the appealed decision if still in the arbitral level, should be
reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained.

SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in: (a)
directing PAL "to share its management prerogative of formulating a Code of Discipline"; (b) engaging in quasi-judicial
legislation in ordering PAL to share said prerogative with the union; (c) deciding beyond the issue of unfair labor practice,
and (d) requiring PAL to reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)

As stated above, the Principal issue submitted for resolution in the instant petition is whether management may be
compelled to share with the union or its employees its prerogative of formulating a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of
responsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the Labor
Code, that the law explicitly considered it a State policy "(t)o ensure the participation of workers in decision and policy-
making processes affecting the rights, duties and welfare." However, even in the absence of said clear provision of law,
the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565
[1989]) it was held that management's prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's right to
implement a new system of distributing its products, but gave the following caveat:
2
 So long as a company's management prerogatives are exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by
limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice ( University of
Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713
[1987]), it must be duly established that the prerogative being invoked is clearly a managerial one.

A close scrutiny of the objectionable provisions of the Code reveals that they are not purely business-oriented nor do they
concern the management aspect of the business of the company as in the San Miguel case. The provisions of the Code
clearly have repercusions on the employee's right to security of tenure. The implementation of the provisions may result
in the deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on
infringement of constitutional rights, we must uphold the constitutional requirements for the protection of labor and the
promotion of social justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is
doubt, in favor of the worker" (Employees Association of the Philippine American Life Insurance Company vs. NLRC , 199
SCRA 628 [1991] 635).

Verily, a line must be drawn between management prerogatives regarding business operations per se and those which
affect the rights of the employees. In treating the latter, management should see to it that its employees are at least
properly informed of its decisions or modes action. PAL asserts that all its employees have been furnished copies of the
Code. Public respondents found to the contrary, which finding, to say the least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in effect,
recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the functions of
management without having to discuss the same with PALEA and much less, obtain the latter's conformity thereto" (pp.
11-12, Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of the
agreement:
The Association recognizes the right of the Company to determine matters of management it policy and
Company operations and to direct its manpower. Management of the Company includes the right to
organize, plan, direct and control operations, to hire, assign employees to work, transfer employees from
one department, to another, to promote, demote, discipline, suspend or discharge employees for just
cause; to lay-off employees for valid and legal causes, to introduce new or improved methods or facilities
or to change existing methods or facilities and the right to make and enforce Company rules and
regulations to carry out the functions of management.

The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful
manner.

Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights to
participate in the deliberation of matters which may affect their rights and the formulation of policies relative thereto. And
one such mater is the formulation of a code of discipline.

Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of
matters affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442) was amended by Republic Act
No. 6715, it was already declared a policy of the State, "(d) To promote the enlightenment of workers concerning their
rights and obligations . . . as employees." This was, of course, amplified by Republic Act No 6715 when it decreed the
"participation of workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position
that it cannot be saddled with the "obligation" of sharing management prerogatives as during the formulation of the
Code, Republic Act No. 6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be
sustained. While such "obligation" was not yet founded in law when the Code was formulated, the attainment of a
harmonious labor-management relationship and the then already existing state policy of enlightening workers concerning
their rights as employees demand no less than the observance of transparency in managerial moves affecting employees'
rights.

Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of its business
cannot be overemphasized. In fact, its being a local monopoly in the business demands the most stringent of measures to
attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly
implemented in the absence of full cooperation of the employees. Such cooperation cannot be attained if the employees
are restive on account, of their being left out in the determination of cardinal and fundamental matters affecting their
employment.

WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is made as to
costs.

SO ORDERED.

3
 NATURE OF LABOR CONTRACTS

THIRD DIVISION

[G.R. No. 119243. April 17, 1997]

BREW MASTER INTERNATIONAL INC., petitioner, vs. NATIONAL FEDERATION OF LABOR UNIONS (NAFLU),
ANTONIO D. ESTRADA and HONORABLE NATIONAL LABOR RELATIONS COMMISSION (Third
Division), respondents.

DECISION
DAVIDE, JR., J.:

This is a special civil action for certiorari seeking the reversal of the 7 October 1994 decision [1] of the National Labor
Relations Commission (NLRC) in NLRC Case No. 00-06-04136-93 (CA No. L-007370-94), which modified the 11 July 1994
decision[2] of the Labor Arbiter by directing the reinstatement of private respondent Antonio D. Estrada, the complainant,
without loss of seniority rights and benefits.

Private respondent National Federation of Labor Unions (NAFLU), a co-complainant in the labor case, is a labor union
of which complainant is a member.

The factual and procedural antecedents are summarized in the decision of the Labor Arbiter which we quote
verbatim:

Complainant was first employed by respondent on 16 September 1991 as route helper with the latest daily wage
of P119.00. From 19 April 1993 up to 19 May 1993, for a period of one (1) month, complainant went on absent without
permission (AWOP). On 20 May 1993, respondent thru Mr. Rodolfo Valentin, sent a Memo to complainant, to wit:
Please explain in writing within 24 hours of your receipt of this memo why no disciplinary action should be taken against
you for the following offense:

You were absent since April 19, 1993 up to May 19, 1993.
For your strict compliance.
In answer to the aforesaid memo, complainant explained:
Sa dahilan po na ako ay hindi nakapagpaalam sainyo [sic] dahil inuwi ko ang mga anak ko sa Samar dahil ang asawa ko
ay lumayas at walang mag-aalaga sa mga anak ko. Kaya naman hindi ako naka long distance or telegrama dahil wala
akong pera at ibinili ko ng gamot ay puro utang pa.
Finding said explanation unsatisfactory, on 16 June 1993, respondent thru its Sales Manager, Mr. Henry A. Chongco
issued a Notice of Termination which reads:
We received your letter of explanation dated May 21, 1993 but we regret to inform you that we do not consider it
valid. You are aware of the company Rules and Regulations that absence without permission for six (6) consecutive
working days is considered abandonment of work.
In view of the foregoing, the company has decided to terminate your employment effective June 17, 1993 for
abandonment of work.

Hence, this complaint.

Complainants contend that individual complainants dismissal was done without just cause; that it was not sufficiently
established that individual complainants absence from April 19, 1993 to June 16, 1993 are unjustified; that the penalty of
dismissal for such violation is too severe; that in imposing such penalty, respondent should have taken into consideration
complainants length of service and as a first offender, a penalty less punitive will suffice such as suspension for a definite
period, (Position Paper, complainants).

Upon the other hand, respondent contends that individual complainant was dismissed for cause allowed by the company
Rules and Regulations and the Labor Code; that the act of complainant in absenting from work for one (1) month without
official leave is deleterious to the business of respondent; that it will result to stoppage of production which will not only
destructive to respondents interests but also to the interest of its employees in general; that the dismissal of complainant
from the service is legal, (Position Paper, respondent).[3]

The Labor Arbiter dismissed the complaint for lack of merit, citing the principle of managerial control, which
recognizes the employers prerogative to prescribe reasonable rules and regulations to govern the conduct of his
employees. The principle allows the imposition of disciplinary measures which are necessary for the efficiency of both the
employer and the employees. In complainant's case, he persisted in not reporting for work until 16 June 1993
notwithstanding his receipt of the memorandum requiring him to explain his absence without approval. The Labor Arbiter,
relying on Shoemart, Inc. vs. NLRC,[4] thus concluded:

Verily, it is crystal clear that individual complainant has indeed abandoned his work. The filing of the complaint on 25
June 1993 or almost two (2) months from the date complainant failed to report for work affirms the findings of this Office
and therefore, under the law and jurisprudence which upholds the right of an employer to discharge an employee who
incurs frequent, prolonged and unexplained absences as being grossly remiss in his duties to the employer and is
therefore, dismissed for cause, (Shoemart, Inc. vs. NLRC, 176 SCRA 385). An employee is deemed to have abandoned his
position or to have resigned from the same, whenever he has been absent therefrom without previous permission of the
1
employer for three consecutive days or more. This justification is the obvious harm to employers interest, resulting
from [sic] the non-availability of the workers services, (Supra). (underscoring supplied)[5]
and ruled that complainants termination from his employment was legal, the same with just or authorized cause and due
process.[6]
Complainant appealed to the NLRC, alleging that the immediate filing of a complaint for illegal dismissal verily
indicated that he never intended to abandon his work, then cited Policarpio v. Vicente Dy Sun, Jr.,[7] where the NLRC
ruled that prolonged absence does not, by itself, necessarily mean abandonment. Accordingly, there must be a
concurrence of intention and overt acts from which it can be inferred that the employee is no longer interested in
working. Complainant likewise invoked compassion in the application of sanctions, as dismissal from employment brings
untold hardship and sorrows on the dependents of the wage earners. In his case, a penalty less punitive than dismissal
could have sufficed.

In the assailed decision[8] of 7 October 1994, the NLRC modified the Labor Arbiter's decision and held that
complainants dismissal was invalid for the following reasons:

Complainant-appellants prolonged absences, although unauthorized, may not amount to gross neglect or abandonment of
work to warrant outright termination of employment. Dismissal is too severe a penalty. For one, the mere fact that
complainant-appellant is a first offender must be considered in his favor. Besides, it is generally impossible for an
employee to anticipate when he would be ill or compelled to attend to some family problems or emergency like in the
case at bar.

Reliance on the ruling enunciated in the cited case of Shoemart Inc. vs. National Labor Relations, 176 SCRA 385, is quite
misplaced because of the obvious dissimilarities of the attendant circumstances in the said case vis-a-vis those obtaining
in the case at bar. Unlike in the aforecited Shoemart Case, herein complainant-appellant was not dismissed for
unauthorized absences and eventually reinstated anterior to his second dismissal for the same offense nor was he given a
second chance which he could have ignored.

Otherwise stated, the difference between the two cases greatly lies [in] the fact that complainant in the Shoemart Case in
the language of the Supreme Court was an inveterate absentee who does not deserve reinstatement compared to herein
complainant-appellant who is a first offender[9]

The NLRC then decreed as follows:

PREMISES CONSIDERED, and [sic] the Decision of the Labor Arbiter, dated 11 July 1994 is hereby MODIFIED, by
directing the reinstatement of complainant-appellant to his former position without loss of seniority rights and other
benefits, but without backwages. The other findings in the appealed decision stand AFFIRMED.[10]

Petitioners motion for the reconsideration[11] was denied by the NLRC in its 7 December 1994 resolution.[12] Petitioner
thus filed this special civil action contending that the NLRC committed grave abuse of discretion in ordering complainant's
reinstatement, which in effect countenances the reinstatement of an employee who is found guilty of excessive absences
without prior approval. It further argued that the NLRC failed to consider the rationale behind petitioners Rules and
Regulations; that it was deprived of its prerogative to enforce them; and that complainant's reinstatement would
adversely affect its business and send the wrong signals to its employees.

In its comment[13] for public respondent NLRC, the Office of the Solicitor General maintained that dismissal from
employment was too severe a penalty for a first time offender like complainant. Although he violated petitioners rules and
regulations, his absences were justified:he had to bring his children to Samar, his home province, as his wife deserted
him. While that by itself might not excuse the failure to seek permission, the Office of the Solicitor General submitted,
however, that it would be at [sic] the height of callousness if one, considering his plight under the circumstance[s], would
not give due consideration to [complainants] explanation. There has to be an exception.[14]

Applying Itogon-Suyoc Mines, Inc. v. NLRC,[15] the Office of the Solicitor General recommended complainants
reinstatement, which would be more harmonious to the dictates of social justice and equity. It further emphasized that
the reinstatement should not be considered a condonation of complainants irresponsible behavior, rather, it must be
viewed as a mitigation of the severity of the penalty of dismissal.Accordingly, it prays that this petition be dismissed.

In its reply,[16] petitioner disputed the application of Itogon-Suyoc because: (1) the employee involved therein had
been in the service for twenty-three years while complainant herein had served petitioner for only two years; and (2) the
offense in Itogon-Suyoc was limited to a single act of high grading while complainant herein committed a series
of unexcused absences.

We gave due course to the petition and dispensed with complainants comment.

The sole issue to be resolved is whether the NLRC committed grave abuse of discretion in modifying the decision of
the Labor Arbiter.

The answer must be in the negative.

2
 A scrutiny of the facts discloses that complainants absence was precipitated by a grave family problem as his wife
unexpectedly deserted him and abandoned the family. Considering that he had a full-time job, there was no one to whom
he could entrust the children and he was thus compelled to bring them to the province. It would have been extremely
difficult for him to have been husband and wife/father and mother at the same time to the children in the metropolis. He
was then under emotional, psychological, spiritual and physical stress and strain. The reason for his absence is, under
these circumstances, justified. While his failure to inform and seek petitioner's approval was an omission which must be
corrected and chastised, he did not merit the severest penalty of dismissal from the service.
Petitioners finding that complainant was guilty of abandonment is misplaced. Abandonment as a just and valid
ground for dismissal requires the deliberate, unjustified refusal of the employee to resume his employment. Two elements
must then be satisfied: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear
intention to sever the employer-employee relationship. The second element is the more determinative factor and must be
evinced by overt acts.[17] Likewise, the burden of proof is on the employer to show the employees clear and deliberate
intent to discontinue his employment without any intention of returning, [18] mere absence is not sufficient.[19] These
elements are not present here. First, as held above, complainant's absence was justified under the circumstances. As to
the second requisite, we are not convinced that complainant ever intended to sever the employer-employee
relationship. Complainant immediately complied with the memo requiring him to explain his absence, and upon
knowledge of his termination, immediately sued for illegal dismissal. These plainly refuted any claim that he was no
longer interested in returning to work.[20] Without doubt, the intention is lacking.

Moreover, petitioner failed to discharge the burden of proof that complainant was guilty of abandonment. No
evidence other than complainants letter explaining his absence was presented. Needless to state, the letter did not
indicate, in the least, that complainant was no longer interested in returning to work. On the contrary, complainant
sought petitioners understanding. In declaring him guilty of abandonment, petitioner merely relied on its Rules and
Regulations which limited its application to a six-day continuous absence, contrary to the purpose of the law. While the
employer is not precluded from prescribing rules and regulations to govern the conduct of his employees, these rules and
their implementation must be fair, just and reasonable. It must be underscored that no less than our Constitution looks
with compassion on the workingman and protects his rights not only under a general statement of a state policy, [21] but
under the Article on Social Justice and Human Rights,[22] thus placing labor contracts on a higher plane and with greater
safeguards. Verily, relations between capital and labor are not merely contractual. They are impressed with public interest
and labor contracts must, perforce, yield to the common good.[23]

We then conclude that complainants "prolonged" absence without approval does not fall within the definition of
abandonment and that his dismissal was unjustified. While we do not decide here the validity of petitioner's Rules and
Regulations on continuous, unauthorized absences, what is plain is that it was wielded with undue haste resulting in a
deprivation of due process, thus not allowing for a determination of just cause or abandonment. In this light, petitioner's
dismissal was illegal. This is not to say that his absence should go unpunished, as impliedly noted by the NLRC in
declining to award back wages. In the absence of the appropriate offense which defines complainants infraction in the
companys Rules and Regulations, equity dictates that a penalty commensurate to the infraction be imposed.

WHEREFORE, the petition is hereby DISMISSED and the decision of the National Labor Relations Commission in
NLRC Case No. 06-04136-93 is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

3
 FIRST DIVISION

[G.R. No. 118506. April 18, 1997]

NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.

DECISION

KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations Commission dated
April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation of the constitutionally enshrined
rights of the working class. Without the protection accorded by our laws and the tempering of courts, the natural and
historical inclination of capital to ride roughshod over the rights of labor would run unabated.

The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the Hotel
Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's compliance
with minimum wage and other labor standard provisions of law.[1] The instrument provides:[2]

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA NONOG, NORMA
MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and residents of Baguio City,
under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave., Baguio City;
2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly and that we
are treated well.
5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of informing the
authorities concerned and to dispute the alleged report of the Labor Inspector of the Department of Labor and
Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON

SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and contents
of the affidavit as instructed by management. The affidavit was nevertheless submitted on the same day to the Regional
Office of the Department of Labor and Employment in Baguio City.

As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings of the
Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2, 1991) apparently adverse to the
private respondent.[3]

After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was submitted to the
Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the hotel management to turn over the keys
to her living quarters and to remove her belongings from the hotel premises.[4] According to her, respondent strongly
chided her for refusing to proceed to the City Prosecutor's Office to attest to the affidavit. [5] She thereafter reluctantly
filed a leave of absence from her job which was denied by management. When she attempted to return to work on May
10, 1991, the hotel's cashier, Margarita Choy, informed her that she should not report to work and, instead, continue with
her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt to return to work, petitioner
filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission - CAR
Baguio City.In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-payment of holiday
pay, service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.

Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent Peter
Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without notice to the
management"[6] and that she actually abandoned her work. He maintained that there was no basis for the money claims
4
for underpayment and other benefits as these were paid in the form of facilities to petitioner and the hotel's other
employees.[7] Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his employees actually have
no problems with management. In a supplemental answer submitted eleven (11) months after the original complaint for
illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio against petitioner on July 4,
1991.[8]

On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground of loss of
confidence. His disquisitions in support of his conclusion read as follows:

It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN, December 1,
1992).

In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for
qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed the
crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit '4'
for respondent and Exhibit 'B-7' for complainant). As a consequence, complainant was charged in court for the
said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the complainant).

With these pieces of evidence, complainant committed serious misconduct against her employer which is one of
the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code as
amended).[9]

On April 28, 1994, respondent NLRC promulgated its assailed Resolution [10] affirming the Labor Arbiter's decision.
The resolution substantially incorporated the findings of the Labor Arbiter. [11] Unsatisfied, petitioner instituted the instant
special civil action for certiorariunder Rule 65 of the Rules of Court on the following grounds:[12]

1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ITS FAILURE TO
CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND AN AFTERTHOUGHT
ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL
OF THE COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN ADOPTING THE
RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF WAGES AND BENEFITS
ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION PREPARED BY
ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN
EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED A
PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN FAILING TO
CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS CONSTITUTING UNFAIR
LABOR PRACTICE COMMITTED BY THE RESPONDENT.

The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private respondent's
principal claims and defenses and urges this Court to set aside the public respondent's assailed resolution. [13]

We agree.

It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is for just
cause, the failure of which would mean that the dismissal is not justified and the employee is entitled to reinstatement. [14]

In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to
return to work on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient cause for
the termination of petitioner, he belatedly included a complaint for loss of confidence, supporting this with charges that
petitioner had stolen a blanket, a bedsheet and two towels from the hotel. [15] Appended to his last complaint was a suit
for qualified theft filed with the Baguio City prosecutor's office.

From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored his
claim that petitioner "abandoned" her job were not enough to constitute just cause to sanction the termination of her
services under Article 283 of the Labor Code. For abandonment to arise, there must be concurrence of two things: 1) lack
of intention to work;[16] and 2) the presence of overt acts signifying the employee's intention not to work. [17]

In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when she
learned that the hotel management was displeased with her refusal to attest to the affidavit. The fact that she made this
attempt clearly indicates not an intention to abandon but an intention to return to work after the period of her leave of
absence, had it been granted, shall have expired.

5
 Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances, mere
absence of one or two days would not be enough to sustain such a claim. The overt act (absence) ought to unerringly
point to the fact that the employee has no intention to return to work, [18] which is patently not the case here. In fact,
several days after she had been advised to take an informal leave, petitioner tried to resume working with the hotel, to
no avail. It was only after she had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate
against the private respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation
observed:
Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see her in
the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she was prevented from working by private
respondents.[19]

We now come to the second cause raised by private respondent to support his contention that petitioner was validly
dismissed from her job.

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal
of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of security of
tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees occupying positions
of trust and confidence or to those situations where the employee is routinely charged with the care and custody of the
employer's money or property. To the first class belong managerial employees, i.e., those vested with the powers or
prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees or effectively recommend such managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions, regularly handle
significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out for linen and other
hotel property from the property custodian each day and who has to account for each and every towel or bedsheet
utilized by the hotel's guests at the end of her shift would not fall under any of these two classes of employees for which
loss of confidence, if ably supported by evidence, would normally apply. Illustrating this distinction, this Court, in Marina
Port Services, Inc. vs. NLRC,[20] has stated that:

To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one
reason why he was employed in the first place. One certainly does not employ a person he distrusts. Indeed,
even the lowly janitor must enjoy that trust and confidence in some measure if only because he is the one who
opens the office in the morning and closes it at night and in this sense is entrusted with the care or protection of
the employer's property. The keys he holds are the symbol of that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is charged
with its care and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that
property. The employer's trust and confidence in him is limited to that ministerial function. He is not entrusted,
in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company policies, management
instructions, and company secrets such as operation devices.' He is not privy to these confidential matters,
which are shared only in the higher echelons of management. It is the persons on such levels who, because
they discharge these sensitive duties, may be considered holding positions of trust and confidence. The security
guard does not belong in such category.[21]

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what
would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a subterfuge for causes
which are illegal, improper and unjustified.It must be genuine, not a mere afterthought to justify an earlier action taken in
bad faith."[22]

In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner long
after the latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) by her act of filing
illegal dismissal charges against the private respondent would hardly warrant serious consideration of loss of confidence
as a valid ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent
and has observed that:

If petitioner had really committed the acts charged against her by private respondents (stealing supplies of
respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against petitioner,
in an obvious attempt to build a case against her.

The manipulations of private respondents should not be countenanced. [23]

6
 Clearly, the efforts to justify petitioner's dismissal - on top of the private respondent's scheme of inducing his
employees to sign an affidavit absolving him from possible violations of the Labor Code - taints with evident bad faith and
deliberate malice petitioner's summary termination from employment.

Having said this, we turn to the important question of whether or not the dismissal by the private respondent of
petitioner constitutes an unfair labor practice.

The answer in this case must inevitably be in the affirmative.

The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or not
the employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right to
institute concerted action for better terms and conditions of employment. Without doubt, the act of compelling employees
to sign an instrument indicating that the employer observed labor standards provisions of law when he might have not,
together with the act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes
unfair labor practice. The first act clearly preempts the right of the hotel's workers to seek better terms and conditions of
employment through concerted action.

We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is analogous to the
situation envisaged in paragraph (f) of Article 248 of the Labor Code" [24] which distinctly makes it an unfair labor practice
"to dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give
testimony"[25] under the Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved
not only her right to dispute the claim and proffer evidence in support thereof but also to work for better terms and
conditions of employment.

For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an example to
all of the hotel's employees, that they could only cause trouble to management at great personal inconvenience. Implicit
in the act of petitioner's termination and the subsequent filing of charges against her was the warning that they would
not only be deprived of their means of livelihood, but also possibly, their personal liberty.

This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same are ably
supported by the evidence on record. However, where such conclusions are based on a misperception of facts or where
they patently fly in the face of reason and logic, we will not hesitate to set aside those conclusions. Going into the issue
of petitioner's money claims, we find one more salient reason in this case to set things right: the labor arbiter's evaluation
of the money claims in this case incredibly ignores existing law and jurisprudence on the matter. Its blatant one-
sidedness simply raises the suspicion that something more than the facts, the law and jurisprudence may have influenced
the decision at the level of the Arbiter.

Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary
benefits received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not
factor in the meals, lodging, electric consumption and water she received during the period in her
computations.[26] Granting that meals and lodging were provided and indeed constituted facilities, such facilities could not
be deducted without the employer complying first with certain legal requirements. Without satisfying these requirements,
the employer simply cannot deduct the value from the employee's wages. First, proof must be shown that such facilities
are customarily furnished by the trade. Second, the provision of deductible facilities must be voluntarily accepted in
writing by the employee. Finally, facilities must be charged at fair and reasonable value. [27]

These requirements were not met in the instant case. Private respondent "failed to present any company policy or
guideline to show that the meal and lodging . . . (are) part of the salary;"[28] he failed to provide proof of the employee's
written authorization; and, he failed to show how he arrived at the valuations.[29]

Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures
furnished by the private respondent's own accountant, without corroborative evidence. On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to produce payroll records, receipts and other
relevant documents, where he could have, as has been pointed out in the Solicitor General's manifestation, "secured
certified copies thereof from the nearest regional office of the Department of Labor, the SSS or the BIR." [30]

More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities
but supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a facility. The
criterion in making a distinction between the two not so much lies in the kind (food, lodging) but the
purpose.[31] Considering, therefore, that hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in the operations of a small hotel, such as the
private respondent's hotel.

It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to
the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.

Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance,
night differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent has never
been able to adduce proof that petitioner was paid the aforestated benefits.
7
 However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are
barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out of
employer-employee relationship to three (3) years from the time the cause of action accrues. [32]

We depart from the settled rule that an employee who is unjustly dismissed from work normally should be reinstated
without loss of seniority rights and other privileges. Owing to the strained relations between petitioner and private
respondent, allowing the former to return to her job would only subject her to possible harassment and future
embarrassment. In the instant case, separation pay equivalent to one month's salary for every year of continuous service
with the private respondent would be proper, starting with her job at the Belfront Hotel.

In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission,[33] petitioner is entitled to full backwages from the time of
her illegal dismissal up to the date of promulgation of this decision without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be terminated
from employment with two written notices before the same may be legally effected. The first is a written notice
containing a statement of the cause(s) for dismissal; the second is a notice informing the employee of the employer's
decision to terminate him stating the basis of the dismissal. During the process leading to the second notice, the
employer must give the employee ample opportunity to be heard and defend himself, with the assistance of counsel if he
so desires.

Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy that the
private respondent never even bothered to inform petitioner of the charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only almost two months after petitioner had filed a complaint for
illegal dismissal, as an afterthought, that the loss was reported to the police and added as a supplemental answer to
petitioner's complaint. Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her
termination violated her constitutional right to due process. Under the circumstances, an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would be proper.

WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April 24,
1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are hereby
summarized as follows:

1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the private
respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to the
date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.[34]
5) P1.000.00.

SO ORDERED.

8
 FIRST DIVISION
[G.R. No. 128845. June 1, 2000]
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO
in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as
the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos,
cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course,
beside the point. The point is that employees should be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold
today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of foreign diplomatic personnel and other temporary
residents.[1] To enable the School to continue carrying out its educational program and improve its standard of
instruction, Section 2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either locally or abroad, from
Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and
regulations attending their employment, except laws that have been or will be enacted for the protection
of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be
classified as a foreign-hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and was the School responsible for
bringing that individual to the Philippines?[2]
Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation, shipping
costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more
than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path-all for the purpose of pursuing his
profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic
realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his
term: that he will eventually and inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international education. [3]
When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members"[4] of
the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the
parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to
bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction
over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the
parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently
denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the
grant of higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities
other than Filipino, who have been hired locally and classified as local hires.[5]The Acting Secretary of Labor found that
these non-Filipino local-hires received the same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are
foreigners who have been hired locally and who are paid equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the present case. The international
character of the School requires the hiring of foreign personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired
personnel which system is universally recognized. We agree that certain amenities have to be provided to
9
 these people in order to entice them to render their services in the Philippines and in the process remain
competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would
also require parity in other terms and conditions of employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the discretion to
recruit and hire expatriate teachers from abroad, under terms and conditions that are
consistent with accepted international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS)
salary schedule. The 25% differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as differentiated from the tenured status
of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two
types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A classification is reasonable if it is
based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial
distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation package in order to
attract them to join the teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy
against these evils. The Constitution[8] in the Article on Social Justice and Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of
his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and
good faith."
International law, which springs from general principles of law,[9] likewise proscribes discrimination. General principles of
law include principles of equity,[10] i.e., the general principles of fairness and justice, based on the test of what is
reasonable.[11] The Universal Declaration of Human Rights,[12] the International Covenant on Economic, Social, and
Cultural Rights,[13] the International Convention on the Elimination of All Forms of Racial Discrimination, [14] the Convention
against Discrimination in Education,[15] the Convention (No. 111) Concerning Discrimination in Respect of Employment
and Occupation[16] - all embody the general principle against discrimination, the very antithesis of fairness and justice.
The Philippines, through its Constitution, has incorporated this principle as part of its national laws.
In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work." These conditions are not
restricted to the physical workplace - the factory, the office or the field - but include as well the manner by which
employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor
Code[19] provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of
employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and
penalizes[21] the payment of lesser compensation to a female employee as against a male employee for work of equal
value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to
encourage or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and
favourable conditions of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of equal value without distinction of any
kind, in particular women being guaranteed conditions of work not inferior to those
enjoyed by men, with equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.[22]This rule applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-
hires.[23] The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the
presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If
the employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the

10
others receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is
for the employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25%
more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they
perform under similar working conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary
rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly,
the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering
of services." In Songco v. National Labor Relations Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are
adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing,
transportation, shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their welfare," [25] "to afford labor full
protection."[26] The State, therefore, has the right and duty to regulate the relations between labor and capital. [27] These
relations are not merely contractual but are so impressed with public interest that labor contracts, collective bargaining
agreements included, must yield to the common good.[28]Should such contracts contain stipulations that are contrary to
public policy, courts will not hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary
rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between the services
rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of
employees, consistent with equity to the employer indicate to be the best suited to serve the reciprocal rights and duties
of the parties under the collective bargaining provisions of the law."[29] The factors in determining the appropriate
collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees'
interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions
(Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.[30] The
basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining rights.[31]
It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of
collective bargaining. The collective bargaining history in the School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to
local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include
foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective
bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE
insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-hires.
SO ORDERED.

11