G.R. Nos.
L-58674-77 July 11, 1990 The posture of the petitioner is that the private respondent is being
PEOPLE OF THE PHILIPPINES, petitioner,
vs.
HON. DOMINGO PANIS, Presiding Judge of the Court of First Instance
of Zambales & Olongapo City, Branch III and SERAPIO
ABUG, respondents.
CRUZ, J:
The basic issue in this case is the correct interpretation of Article 13(b) of
P.D. 442, otherwise known as the Labor Code, reading as follows:
(b) Recruitment and placement' refers to any act of
canvassing, enlisting, contracting, transporting, hiring, or
procuring workers, and includes referrals, contract
services, promising or advertising for employment, locally
or abroad, whether for profit or not: Provided, That any
person or entity which, in any manner, offers or promises
for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement.
Four informations were filed on January 9, 1981, in the Court of First
Instance of Zambales and Olongapo City alleging that Serapio Abug, private
respondent herein, "without first securing a license from the Ministry of Labor
as a holder of authority to operate a fee-charging employment agency, did
then and there wilfully, unlawfully and criminally operate a private fee
charging employment agency by charging fees and expenses (from) and
promising employment in Saudi Arabia" to four separate individuals named
therein, in violation of Article 16 in relation to Article 39 of the Labor Code. 1
Abug filed a motion to quash on the ground that the informations did not
charge an offense because he was accused of illegally recruiting only one
person in each of the four informations. Under the proviso in Article 13(b), he
claimed, there would be illegal recruitment only "whenever two or more
persons are in any manner promised or offered any employment for a fee. " 2
Denied at first, the motion was reconsidered and finally granted in the Orders
of the trial court dated June 24 and September 17, 1981. The prosecution is
now before us on certiorari. 3
prosecuted under Article 39 in relation to Article 16 of the Labor Code;
hence, Article 13(b) is not applicable. However, as the first two cited articles
penalize acts of recruitment and placement without proper authority, which is
the charge embodied in the informations, application of the definition of
recruitment and placement in Article 13(b) is unavoidable.
The view of the private respondents is that to constitute recruitment and
placement, all the acts mentioned in this article should involve dealings with
two or m•re persons as an indispensable requirement. On the other hand,
the petitioner argues that the requirement of two or more persons is imposed
only where the recruitment and placement consists of an offer or promise of
employment to such persons and always in consideration of a fee. The other
acts mentioned in the body of the article may involve even only one person
and are not necessarily for profit.
Neither interpretation is acceptable. We fail to see why the proviso should
speak only of an offer or promise of employment if the purpose was to apply
the requirement of two or more persons to all the acts mentioned in the basic
rule. For its part, the petitioner does not explain why dealings with two or
more persons are needed where the recruitment and placement consists of
an offer or promise of employment but not when it is done through
"canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring
(of) workers.
As we see it, the proviso was intended neither to impose a condition on the
basic rule nor to provide an exception thereto but merely to create a
presumption. The presumption is that the individual or entity is engaged in
recruitment and placement whenever he or it is dealing with two or more
persons to whom, in consideration of a fee, an offer or promise of
employment is made in the course of the "canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring (of) workers. "
The number of persons dealt with is not an essential ingredient of the act of
recruitment and placement of workers. Any of the acts mentioned in the
basic rule in Article 13(b) win constitute recruitment and placement even if
only one prospective worker is involved. The proviso merely lays down a rule
of evidence that where a fee is collected in consideration of a promise or
offer of employment to two or more prospective workers, the individual or
entity dealing with them shall be deemed to be engaged in the act of
recruitment and placement. The words "shall be deemed" create that
presumption.
This is not unlike the presumption in article 217 of the Revised Penal Code,
for example, regarding the failure of a public officer to produce upon lawful
demand funds or property entrusted to his custody. Such failure shall
be prima facie evidence that he has put them to personal use; in other
words, he shall be deemed to have malversed such funds or property. In the
instant case, the word "shall be deemed" should by the same token be given
the force of a disputable presumption or of prima facie evidence of engaging
in recruitment and placement. (Klepp vs. Odin Tp., McHenry County 40 ND
N.W. 313, 314.)

It is unfortunate that we can only speculate on the meaning of the

questioned provision for lack of records of debates and deliberations that
would otherwise have been available if the Labor Code had been enacted as
a statute rather than a presidential decree. The trouble with presidential
decrees is that they could be, and sometimes were, issued without previous
public discussion or consultation, the promulgator heeding only his own
counsel or those of his close advisers in their lofty pinnacle of power. The
not infrequent results are rejection, intentional or not, of the interest of the
greater number and, as in the instant case, certain esoteric provisions that
one cannot read against the background facts usually reported in the
legislative journals.

At any rate, the interpretation here adopted should give more force to the
campaign against illegal recruitment and placement, which has victimized
many Filipino workers seeking a better life in a foreign land, and investing
hard- earned savings or even borrowed funds in pursuit of their dream, only
to be awakened to the reality of a cynical deception at the hands of theirown
countrymen.

WHEREFORE, the Orders of June 24, 1981, and September 17, 1981, are
set aside and the four informations against the private respondent reinstated.
No costs.

SO ORDERED.

Teehankee, CJ, Abad Santos, Feria, Yap, Fernan, Narvasa, Melencio-

Herrera, Alampay, Gutierrez, Jr. and Paras, JJ., concur.
G.R. No. 152642 November 13, 2012
HON. PATRICIA A. STO.TOMAS, ROSALINDA BALDOZ and LUCITA
LAZO, Petitioners,
vs.
REY SALAC, WILLIE D. ESPIRITU, MARIO MONTENEGRO, DODGIE
BELONIO, LOLIT SALINEL and BUDDY BONNEVIE, Respondents.
x-----------------------x
G.R. No. 152710
HON. PATRICIA A. STO. TOMAS, in her capacity as Secretary of
Department of Labor and Employment (DOLE), HON. ROSALINDA D.
BALDOZ, in her capacity as Administrator, Philippine Overseas
Employment Administration (POEA), and the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION GOVERNING BOARD, Petitioners,
vs.
HON. JOSE G. PANEDA, in his capacity as the Presiding Judge of
Branch 220, Quezon City, ASIAN RECRUITMENT COUNCIL PHILIPPINE
CHAPTER, INC. (ARCOPHIL), for itself and in behalf of its members:
WORLDCARE PHILIPPINES SERVIZO INTERNATIONALE, INC.,
STEADFAST INTERNATIONAL RECRUITMENT CORP., VERDANT
MANPOWER MOBILIZATION CORP., BRENT OVERSEAS PERSONNEL,
INC., ARL MANPOWER SERVICES, INC., DAHLZEN INTERNATIONAL
SERVICES, INC., INTERWORLD PLACEMENT CENTER, INC., LAKAS
TAO CONTRACT SERVICES LTD. CO., SSC MULTI-SERVICES, DMJ
INTERNATIONAL, and MIP INTERNATIONAL MANPOWER SERVICES,
represented by its proprietress, MARCELINA I.
PAGSIBIGAN, Respondents.
x-----------------------x
G.R. No. 167590
REPUBLIC OF THE PHILIPPINES, represented by the HONORABLE
EXECUTIVE SECRETARY, the HONORABLE SECRETARY OF LABOR
AND EMPLOYMENT (DOLE), the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA), the OVERSEAS WORKERS
WELFARE ADMINISTRATION (OWWA), the LABOR ARBITERS OF THE
NATIONAL LABOR RELATIONS COMMISSION (NLRC), the
HONORABLE SECRETARY OF JUSTICE, the HONORABLE
SECRETARY OF FOREIGN AFFAIRS and the COMMISSION ON AUDIT
(COA), Petitioners,
vs.
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC. (P
ASEI), Respondent.
x-----------------------x
G.R. Nos. 182978-79
BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,
vs.
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of
daughter, Jasmin G. Cuaresma), WHITE FALCON SERVICES, INC., and
JAIME ORTIZ (President of White Falcon Services, Inc.), Respondents.
x-----------------------x
G.R. Nos. 184298-99
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of
deceased daughter, Jasmin G. Cuaresma), Petitioners,
vs.
WHITE FALCON SERVICES, INC. and BECMEN SERVICES EXPORTER
AND PROMOTION, INC., Respondents.
DECISION
ABAD, J.:
These consolidated cases pertain to the constitutionality of certain provisions
of Republic Act 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995.
The Facts and the Case
On June 7, 1995 Congress enacted Republic Act (R.A.) 8042 or the Migrant
Workers and Overseas Filipinos Act of 1995 that, for among other purposes,
sets the Government’s policies on overseas employment and establishes a
higher standard of protection and promotion of the welfare of migrant
workers, their families, and overseas Filipinos in distress.
G.R. 152642 and G.R. 152710
(Constitutionality of Sections 29 and 30, R.A. 8042)
Sections 29 and 30 of the Act1 commanded the Department of Labor and
Employment (DOLE) to begin deregulating within one year of its passage the
business of handling the recruitment and migration of overseas Filipino
workers and phase out within five years the regulatory functions of the
Philippine Overseas Employment Administration (POEA).
On January 8, 2002 respondents Rey Salac, Willie D. Espiritu, Mario
Montenegro, Dodgie Belonio, Lolit Salinel, and Buddy Bonnevie (Salac, et
al.) filed a petition for certiorari, prohibition and mandamus with application
for temporary restraining order (TRO) and preliminary injunction against
petitioners, the DOLE Secretary, the POEA Administrator, and the Technical
Education and Skills Development Authority (TESDA) Secretary-General
before the Regional Trial Court (RTC) of Quezon City, Branch 96. 2
Salac, et al. sought to: 1) nullify DOLE Department Order 10 (DOLE DO 10)
and POEA Memorandum Circular 15 (POEA MC 15); 2) prohibit the DOLE,
POEA, and TESDA from implementing the same and from further issuing
rules and regulations that would regulate the recruitment and placement of
overseas Filipino workers (OFWs); and 3) also enjoin them to comply with
the policy of deregulation mandated under Sections 29 and 30 of Republic
Act 8042.
On March 20, 2002 the Quezon City RTC granted Salac, et al.’s petition and
ordered the government agencies mentioned to deregulate the recruitment
and placement of OFWs.3 The RTC also annulled DOLE DO 10, POEA MC
15, and all other orders, circulars and issuances that are inconsistent with
the policy of deregulation under R.A. 8042.
Prompted by the RTC’s above actions, the government officials concerned
filed the present petition in G.R. 152642 seeking to annul the RTC’s decision
and have the same enjoined pending action on the petition.
On April 17, 2002 the Philippine Association of Service Exporters, Inc.
intervened in the case before the Court, claiming that the RTC March 20,
2002 Decision gravely affected them since it paralyzed the deployment
abroad of OFWs and performing artists. The Confederated Association of
Licensed Entertainment Agencies, Incorporated (CALEA) intervened for the
same purpose.4
On May 23, 2002 the Court5 issued a TRO in the case, enjoining the Quezon
City RTC, Branch 96, from enforcing its decision.
In a parallel case, on February 12, 2002 respondents Asian Recruitment
Council Philippine Chapter, Inc. and others (Arcophil, et al.) filed a petition
for certiorari and prohibition with application for TRO and preliminary
injunction against the DOLE Secretary, the POEA Administrator, and the
TESDA Director-General,6 before the RTC of Quezon City, Branch 220, to
enjoin the latter from implementing the 2002 Rules and Regulations
Governing the Recruitment and Employment of Overseas Workers and to
cease and desist from issuing other orders, circulars, and policies that tend
to regulate the recruitment and placement of OFWs in violation of the policy
of deregulation provided in Sections 29 and 30 of R.A. 8042.
On March 12, 2002 the Quezon City RTC rendered an Order, granting the
petition and enjoining the government agencies involved from exercising
regulatory functions over the recruitment and placement of OFWs. This
prompted the DOLE Secretary, the POEA Administrator, and the TESDA
Director-General to file the present action in G.R. 152710. As in G.R.
152642, the Court issued on May 23, 2002 a TRO enjoining the Quezon City
RTC, Branch 220 from enforcing its decision.
On December 4, 2008, however, the Republic informed7 the Court that on
April 10, 2007 former President Gloria Macapagal-Arroyo signed into law
R.A. 94228 which expressly repealed Sections 29 and 30 of R.A. 8042 and
adopted the policy of close government regulation of the recruitment and
deployment of OFWs. R.A. 9422 pertinently provides:
xxxx
SEC. 1. Section 23, paragraph (b.1) of Republic Act No. 8042, otherwise
known as the "Migrant Workers and Overseas Filipinos Act of 1995" is
hereby amended to read as follows:
(b.1) Philippine Overseas Employment Administration – The Administration
shall regulate private sector participation in the recruitment and overseas
placement of workers by setting up a licensing and registration system. It
shall also formulate and implement, in coordination with appropriate entities
concerned, when necessary, a system for promoting and monitoring the
overseas employment of Filipino workers taking into consideration their
welfare and the domestic manpower requirements.
In addition to its powers and functions, the administration shall inform
migrant workers not only of their rights as workers but also of their rights as
human beings, instruct and guide the workers how to assert their rights and
provide the available mechanism to redress violation of their rights.
In the recruitment and placement of workers to service the requirements for
trained and competent Filipino workers of foreign governments and their
instrumentalities, and such other employers as public interests may require,
the administration shall deploy only to countries where the Philippines has
concluded bilateral labor agreements or arrangements: Provided, That such
countries shall guarantee to protect the rights of Filipino migrant workers;
and: Provided, further, That such countries shall observe and/or comply with
the international laws and standards for migrant workers.
SEC. 2. Section 29 of the same law is hereby repealed.
SEC. 3. Section 30 of the same law is also hereby repealed.
xxxx
On August 20, 2009 respondents Salac, et al. told the Court in G.R. 152642
that they agree9 with the Republic’s view that the repeal of Sections 29 and
30 of R.A. 8042 renders the issues they raised by their action moot and
academic. The Court has no reason to disagree. Consequently, the two
cases, G.R. 152642 and 152710, should be dismissed for being moot and
academic.
G.R. 167590
(Constitutionality of Sections 6, 7, and 9 of R.A. 8042)
On August 21, 1995 respondent Philippine Association of Service Exporters,
Inc. (PASEI) filed a petition for declaratory relief and prohibition with prayer
for issuance of TRO and writ of preliminary injunction before the RTC of
Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for being
unconstitutional. (PASEI also sought to annul a portion of Section 10 but the
Court will take up this point later together with a related case.)
Section 6 defines the crime of "illegal recruitment" and enumerates the acts
constituting the same. Section 7 provides the penalties for prohibited acts.
Thus:
SEC. 6. Definition. – For purposes of this Act, illegal recruitment shall mean
any act of canvassing, enlisting, contracting, transporting, utilizing, hiring,
procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when
undertaken by a non-license or non-holder of authority contemplated under
Article 13(f) of Presidential Decree No. 442, as amended, otherwise known
as the Labor Code of the Philippines: Provided, That such non-license or
non-holder, who, in any manner, offers or promises for a fee employment
abroad to two or more persons shall be deemed so engaged. It shall likewise
include the following acts, whether committed by any person, whether a non-
licensee, non-holder, licensee or holder of authority:
xxxx
SEC. 7. Penalties. –
(a) Any person found guilty of illegal recruitment shall suffer the
penalty of imprisonment of not less than six (6) years and one (1)
day but not more than twelve (12) years and a fine not less than
two hundred thousand pesos (₱200,000.00) nor more than five
hundred thousand pesos (₱500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five
hundred thousand pesos (₱500,000.00) nor more than one million
pesos (₱1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if the
person illegally recruited is less than eighteen (18) years of age or
committed by a non-licensee or non-holder of authority.10
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising
from "illegal recruitment" before the RTC of the province or city where the
offense was committed or where the offended party actually resides at the
time of the commission of the offense.
The RTC of Manila declared Section 6 unconstitutional after hearing on the
ground that its definition of "illegal recruitment" is vague as it fails to
distinguish between licensed and non-licensed recruiters11 and for that
reason gives undue advantage to the non-licensed recruiters in violation of
the right to equal protection of those that operate with government licenses
or authorities.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous
and, contrary to the RTC’s finding, actually makes a distinction between
licensed and non-licensed recruiters. By its terms, persons who engage in
"canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring
workers" without the appropriate government license or authority are guilty of
illegal recruitment whether or not they commit the wrongful acts enumerated
in that section. On the other hand, recruiters who engage in the canvassing,
enlisting, etc. of OFWs, although with the appropriate government license or
authority, are guilty of illegal recruitment only if they commit any of the
wrongful acts enumerated in Section 6.
The Manila RTC also declared Section 7 unconstitutional on the ground that
its sweeping application of the penalties failed to make any distinction as to
the seriousness of the act committed for the application of the penalty
imposed on such violation. As an example, said the trial court, the mere
failure to render a report under Section 6(h) or obstructing the inspection by
the Labor Department under Section 6(g) are penalized by imprisonment for
six years and one day and a minimum fine of ₱200,000.00 but which could
unreasonably go even as high as life imprisonment if committed by at least
three persons.
Apparently, the Manila RTC did not agree that the law can impose such
grave penalties upon what it believed were specific acts that were not as
condemnable as the others in the lists. But, in fixing uniform penalties for
each of the enumerated acts under Section 6, Congress was within its
prerogative to determine what individual acts are equally reprehensible,
consistent with the State policy of according full protection to labor, and
deserving of the same penalties. It is not within the power of the Court to
question the wisdom of this kind of choice. Notably, this legislative policy has
been further stressed in July 2010 with the enactment of R.A. 10022 12 which
increased even more the duration of the penalties of imprisonment and the
amounts of fine for the commission of the acts listed under Section 7.
Obviously, in fixing such tough penalties, the law considered the unsettling
fact that OFWs must work outside the country’s borders and beyond its
immediate protection. The law must, therefore, make an effort to somehow
protect them from conscienceless individuals within its jurisdiction who,
fueled by greed, are willing to ship them out without clear assurance that
their contracted principals would treat such OFWs fairly and humanely.
As the Court held in People v. Ventura,13 the State under its police power
"may prescribe such regulations as in its judgment will secure or tend to
secure the general welfare of the people, to protect them against the
consequence of ignorance and incapacity as well as of deception and fraud."
Police power is "that inherent and plenary power of the State which enables
it to prohibit all things hurtful to the comfort, safety, and welfare of society."14
The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that
allowing the offended parties to file the criminal case in their place of
residence would negate the general rule on venue of criminal cases which is
the place where the crime or any of its essential elements were committed.
Venue, said the RTC, is jurisdictional in penal laws and, allowing the filing of
criminal actions at the place of residence of the offended parties violates
their right to due process. Section 9 provides:
SEC. 9. Venue. – A criminal action arising from illegal recruitment as defined
herein shall be filed with the Regional Trial Court of the province or city
where the offense was committed or where the offended party actually
resides at the time of the commission of the offense: Provided, That the
court where the criminal action is first filed shall acquire jurisdiction to the
exclusion of other courts: Provided, however, That the aforestated provisions
shall also apply to those criminal actions that have already been filed in court
at the time of the effectivity of this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an
alternative venue for violations of Section 6 of R.A. 8042 that differs from the
venue established by the Rules on Criminal Procedure. Indeed, Section
15(a), Rule 110 of the latter Rules allows exceptions provided by laws. Thus:
SEC. 15. Place where action is to be instituted.— (a) Subject to existing
laws, the criminal action shall be instituted and tried in the court of the
municipality or territory where the offense was committed or where any of its
essential ingredients occurred. (Emphasis supplied)
xxxx
Section 9 of R.A. 8042, as an exception to the rule on venue of criminal
actions is, consistent with that law’s declared policy15 of providing a criminal
justice system that protects and serves the best interests of the victims of
illegal recruitment.
G.R. 167590, G.R. 182978-79,16 and G.R. 184298-9917
(Constitutionality of Section 10, last sentence of 2nd paragraph)
G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent
spouses Simplicio and Mila Cuaresma (the Cuaresmas) filed a claim for
death and insurance benefits and damages against petitioners Becmen
Service Exporter and Promotion, Inc. (Becmen) and White Falcon Services,
Inc. (White Falcon) for the death of their daughter Jasmin Cuaresma while
working as staff nurse in Riyadh, Saudi Arabia.
The Labor Arbiter (LA) dismissed the claim on the ground that the
Cuaresmas had already received insurance benefits arising from their
daughter’s death from the Overseas Workers Welfare Administration
(OWWA). The LA also gave due credence to the findings of the Saudi
Arabian authorities that Jasmin committed suicide.
On appeal, however, the National Labor Relations Commission (NLRC)
found Becmen and White Falcon jointly and severally liable for Jasmin’s
death and ordered them to pay the Cuaresmas the amount of
US$113,000.00 as actual damages. The NLRC relied on the Cabanatuan
City Health Office’s autopsy finding that Jasmin died of criminal violence and
rape.
Becmen and White Falcon appealed the NLRC Decision to the Court of
Appeals (CA).18 On June 28, 2006 the CA held Becmen and White Falcon
jointly and severally liable with their Saudi Arabian employer for actual
damages, with Becmen having a right of reimbursement from White Falcon.
Becmen and White Falcon appealed the CA Decision to this Court.
On April 7, 2009 the Court found Jasmin’s death not work-related or work-
connected since her rape and death did not occur while she was on duty at
the hospital or doing acts incidental to her employment. The Court deleted
the award of actual damages but ruled that Becmen’s corporate directors
and officers are solidarily liable with their company for its failure to
investigate the true nature of her death. Becmen and White Falcon
abandoned their legal, moral, and social duty to assist the Cuaresmas in
obtaining justice for their daughter. Consequently, the Court held the foreign
employer Rajab and Silsilah, White Falcon, Becmen, and the latter’s
corporate directors and officers jointly and severally liable to the Cuaresmas
for: 1) P2,500,000.00 as moral damages; 2) P2,500,000.00 as exemplary
damages; 3) attorney’s fees of 10% of the total monetary award; and 4) cost
of suit.
On July 16, 2009 the corporate directors and officers of Becmen, namely,
Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio and Eddie De
Guzman (Gumabay, et al.) filed a motion for leave to Intervene. They
questioned the constitutionality of the last sentence of the second paragraph
of Section 10, R.A. 8042 which holds the corporate directors, officers and
partners jointly and solidarily liable with their company for money claims filed
by OFWs against their employers and the recruitment firms. On September
9, 2009 the Court allowed the intervention and admitted Gumabay, et al.’s
motion for reconsideration.
The key issue that Gumabay, et al. present is whether or not the 2nd
paragraph of Section 10, R.A. 8042, which holds the corporate directors,
officers, and partners of recruitment and placement agencies jointly and
solidarily liable for money claims and damages that may be adjudged
against the latter agencies, is unconstitutional.
In G.R. 167590 (the PASEI case), the Quezon City RTC held as
unconstitutional the last sentence of the 2nd paragraph of Section 10 of R.A.
8042. It pointed out that, absent sufficient proof that the corporate officers
and directors of the erring company had knowledge of and allowed the illegal
recruitment, making them automatically liable would violate their right to due
process of law.
The pertinent portion of Section 10 provides:
SEC. 10. Money Claims. – x x x
The liability of the principal/employer and the recruitment/placement agency
for any and all claims under this section shall be joint and several. This
provision shall be incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to the
workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership
for the aforesaid claims and damages. (Emphasis supplied)
But the Court has already held, pending adjudication of this case, that the
liability of corporate directors and officers is not automatic. To make them
jointly and solidarily liable with their company, there must be a finding that
they were remiss in directing the affairs of that company, such as sponsoring
or tolerating the conduct of illegal activities.19 In the case of Becmen and
White Falcon,20 while there is evidence that these companies were at fault in
not investigating the cause of Jasmin’s death, there is no mention of any
evidence in the case against them that intervenors Gumabay, et al.,
Becmen’s corporate officers and directors, were personally involved in their
company’s particular actions or omissions in Jasmin’s case.

As a final note, R.A. 8042 is a police power measure intended to regulate the
recruitment and deployment of OFWs. It aims to curb, if not eliminate, the
injustices and abuses suffered by numerous OFWs seeking to work abroad.
The rule is settled that every statute has in its favor the presumption of
constitutionality. The Court cannot inquire into the wisdom or expediency of
the laws enacted by the Legislative Department. Hence, in the absence of a
clear and unmistakable case that the statute is unconstitutional, the Court
must uphold its validity.

WHEREFORE, in G.R. 152642 and 152710, the Court DISMISSES the

petitions for having become moot and academic.1âwphi1

In G.R. 167590, the Court SETS ASIDE the Decision of the Regional Trial
Court ofManila dated December 8, 2004 and DECLARES Sections 6, 7, and
9 of Republic Act 8042 valid and constitutional.

In G.R. 182978-79 and G.R. 184298-99 as well as in G.R. 167590, the Court
HOLDS the last sentence of the second paragraph of Section 10 of Republic
Act 8042 valid and constitutional. The Court, however, RECONSIDERS and
SETS ASIDE the portion of its Decision in G.R. 182978-79 and G.R.
184298-99 that held intervenors Eufrocina Gumabay, Elvira Taguiam,
Lourdes Bonifacio, and Eddie De Guzman jointly and solidarily liable with
respondent Becmen Services Exporter and Promotion, Inc. to spouses
Simplicia and Mila Cuaresma for lack of a finding in those cases that such
intervenors had a part in the act or omission imputed to their corporation.

SO ORDERED.
G.R. No. 161757 January 25, 2006
SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON.
ERNESTO S. DINOPOL, in his capacity as Labor Arbiter, NLRC; NCR,
Arbitration Branch, Quezon City and DIVINA A.
MONTEHERMOZO,Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a
corporation duly organized and existing under the laws of the Philippines,
deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper
under a 12-month contract effective February 1, 1997.1 The deployment was
with the assistance of a Taiwanese broker, Edmund Wang, President of Jet
Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued
working for her Taiwanese employer, Hang Rui Xiong, for two more years,
after which she returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a
complaint2 before the National Labor Relations Commission (NLRC) against
Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-
foreign principal alleging that she was jailed for three months and that she
was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate
Regina T. Gavin issued Summons3 to the Manager of Sunace, furnishing it
with a copy of Divina’s complaint and directing it to appear for mandatory
conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been
concluded, however.
On April 6, 2000, Divina filed her Position Paper4 claiming that under her
original one-year contract and the 2-year extended contract which was with
the knowledge and consent of Sunace, the following amounts representing
income tax and savings were deducted:
Year Deduction for Income Tax Deduction for Savings
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5
and while the amounts deducted in 1997 were refunded to her, those
deducted in 1998 and 1999 were not. On even date, Sunace, by its
Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer and
Position Paper,6claiming as follows, quoted verbatim:
COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24
MONTHS SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24
months savings as she already took back her saving already last year and
the employer did not deduct any money from her salary, in accordance with
a Fascimile Message from the respondent SUNACE’s employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached
as ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS
TAX AND PAYMENT OF ATTORNEY’S FEES
4. There is no basis for the grant of tax refund to the complainant as the she
finished her one year contract and hence, was not illegally dismissed by
her employer. She could only lay claim over the tax refund or much more be
awarded of damages such as attorney’s fees as said reliefs are available
only when the dismissal of a migrant worker is without just valid or lawful
cause as defined by law or contract.
The rationales behind the award of tax refund and payment of attorney’s
fees is not to enrich the complainant but to compensate him for actual injury
suffered. Complainant did not suffer injury, hence, does not deserve to be
compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent
SUNACE for monetary claims, considering that she has been totally paid of
all the monetary benefits due her under her Employment Contract to her full
satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the
Taiwanese law, which respondent SUNACE has no control and complainant
has to obey and this Honorable Office has no authority/jurisdiction to
intervene because the power to tax is a sovereign power which the
Taiwanese Government is supreme in its own territory. The sovereign power
of taxation of a state is recognized under international law and among
sovereign states.
7. That respondent SUNACE respectfully reserves the right to file
supplemental Verified Answer and/or Position Paper to substantiate its
prayer for the dismissal of the above case against the herein respondent.
AND BY WAY OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . .
answer to complainant’s position paper"7alleging that Divina’s 2-year
extension of her contract was without its knowledge and consent, hence, it
had no liability attaching to any claim arising therefrom, and Divina in fact
executed a Waiver/Quitclaim and Release of Responsibility and an Affidavit
of Desistance, copy of each document was annexed to said ". . . answer to
complainant’s position paper."
To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-
page reply,8 without, however, refuting Sunace’s disclaimer of knowledge of
the extension of her contract and without saying anything about the Release,
Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s
contract for two more years was without its knowledge and consent in this
wise:
We reject Sunace’s submission that it should not be held responsible for the
amount withheld because her contract was extended for 2 more years
without its knowledge and consent because as Annex "B"9 shows, Sunace
and Edmund Wang have not stopped communicating with each other and
yet the matter of the contract’s extension and Sunace’s alleged non-consent
thereto has not been categorically established.
What Sunace should have done was to write to POEA about the extension
and its objection thereto, copy furnished the complainant herself, her foreign
employer, Hang Rui Xiong and the Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to the extension
and should be liable for anything that resulted thereform
(sic).10 (Underscoring supplied)
The Labor Arbiter rejected too Sunace’s argument that it is not liable on
account of Divina’s execution of a Waiver and Quitclaim and an Affidavit of
Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the
dispute, the same shall be reduced to writing and signed by the parties and
their respective counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied
that it was voluntarily entered into by the parties and after having explained
to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of
the Labor Arbiter before whom the case is pending shall be approved by
him, if after confronting the parties, particularly the complainants, he is
satisfied that they understand the terms and conditions of the settlement and
that it was entered into freely voluntarily (sic) by them and the agreement is
not contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we strike them
down as contrary to law, morals, and public policy.11
He accordingly decided in favor of Divina, by decision of October 9,
2000,12 the dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE
INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in
their personal capacities and as agent of Hang Rui Xiong/Edmund Wang to
jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum
of NT91,950.00 in its peso equivalent at the date of payment, as refund for
the amounts which she is hereby adjudged entitled to as earlier discussed
plus 10% thereof as attorney’s fees since compelled to litigate, complainant
had to engage the services of counsel.
SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002, 14 affirmed
the Labor Arbiter’s decision.
Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002, 16 the full
text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on
the part of the public respondent amounting to lack of jurisdiction when the
NLRC affirmed the Labor Arbiter’s finding that petitioner Sunace
International Management Services impliedly consented to the extension of
the contract of private respondent Divina A. Montehermozo. It is undisputed
that petitioner was continually communicating with private respondent’s
foreign employer (sic). As agent of the foreign principal, "petitioner cannot
profess ignorance of such extension as obviously, the act of the principal
extending complainant (sic) employment contract necessarily bound it."
Grave abuse of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE
COURSE and DISMISSED.17
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in
small letters and underscoring supplied)
Its Motion for Reconsideration having been denied by the appellate court by
Resolution of January 14, 2004,18Sunace filed the present petition for review
on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that
Sunace knew of and impliedly consented to the extension of Divina’s 2-year
contract. It went on to state that "It is undisputed that [Sunace] was
continually communicating with [Divina’s] foreign employer." It thus
concluded that "[a]s agent of the foreign principal, ‘petitioner cannot profess
ignorance of such extension as obviously, the act of the principal extending
complainant (sic) employment contract necessarily bound it.’"
Contrary to the Court of Appeals finding, the alleged continuous
communication was with the Taiwanese brokerWang, not with the foreign
employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to
Sunace, the only basis of a finding of continuous communication,
reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her saving in
police station. As we contact with her employer, she took back her
saving already last years. And they did not deduct any money from
her salary. Or she will call back her employer to check it again. If
her employer said yes! we will get it back for her.
Thank you and best regards.
(Sgd.)
Edmund Wang
President19
The finding of the Court of Appeals solely on the basis of the above-quoted
telefax message, that Sunace continually communicated with the foreign
"principal" (sic) and therefore was aware of and had consented to the
execution of the extension of the contract is misplaced. The message does
not provide evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract. That Sunace
and the Taiwanese broker communicated regarding Divina’s allegedly
withheld savings does not necessarily mean that Sunace ratified the
extension of the contract. As Sunace points out in its Reply20 filed before the
Court of Appeals,
As can be seen from that letter communication, it was just an information
given to the petitioner that the private respondent had t[aken] already her
savings from her foreign employer and that no deduction was made on her
salary. It contains nothing about the extension or the petitioner’s consent
thereto.21
Parenthetically, since the telefax message is dated February 21, 2000, it is
safe to assume that it was sent to enlighten Sunace who had been directed,
by Summons issued on February 15, 2000, to appear on February 28, 2000
for a mandatory conference following Divina’s filing of the complaint on
February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of such
an extension as obviously, the act of its principal extending [Divina’s]
employment contract necessarily bound it,22
WHEREFORE, the petition is GRANTED. The challenged resolutions of the
Court of Appeals are hereby REVERSED and SET ASIDE. The complaint of
respondent Divina A. Montehermozo against petitioner is DISMISSED.
SO ORDERED.

it too is a misapplication, a misapplication of the theory of imputed

knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent,

Sunace, to the principal, employer Xiong, not the other way around.23 The
knowledge of the principal-foreign employer cannot, therefore, be imputed to
its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be

bound under the 2-year employment contract extension, it cannot be said to
be privy thereto. As such, it and its "owner" cannot be held solidarily liable
for any of Divina’s claims arising from the 2-year employment extension. As
the New Civil Code provides,

Contracts take effect only between the parties, their assigns, and heirs,
except in case where the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by provision of law.24

Furthermore, as Sunace correctly points out, there was an implied

revocation of its agency relationship with its foreign principal when, after the
termination of the original employment contract, the foreign principal directly
negotiated with Divina and entered into a new and separate employment
contract in Taiwan. Article 1924 of the New Civil Code reading

The agency is revoked if the principal directly manages the business

entrusted to the agent, dealing directly with third persons.

thus applies.

In light of the foregoing discussions, consideration of the validity of the

Waiver and Affidavit of Desistance which Divina executed in favor of Sunace
is rendered unnecessary.
G.R. No. 167614 March 24, 2009
ANTONIO M. SERRANO, Petitioner,
vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO.,
INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and
communities out of poverty. Their earnings have built houses, provided
health care, equipped schools and planted the seeds of businesses. They
have woven together the world by transmitting ideas and knowledge from
country to country. They have provided the dynamic human link between
cultures, societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts development,
but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th
paragraph of Section 10, Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by law or
contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to
national development, but exacerbates the hardships borne by them by
unduly limiting their entitlement in case of illegal dismissal to their lump-sum
salary either for the unexpired portion of their employment contract "or for
three months for every year of the unexpired term, whichever is less"
(subject clause). Petitioner claims that the last clause violates the OFWs'
constitutional rights in that it impairs the terms of their contract, deprives
them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner
assails the December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the
Court of Appeals (CA), which applied the subject clause, entreating this
Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow
Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment
Administration (POEA)-approved Contract of Employment with the following
terms and conditions:
Duration of contract 12 months
Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with pay 7.00 days per month5
On March 19, 1998, the date of his departure, petitioner was constrained to
accept a downgraded employment contract for the position of Second Officer
with a monthly salary of US$1,000.00, upon the assurance and
representation of respondents that he would be made Chief Officer by the
end of April 1998.6
Respondents did not deliver on their promise to make petitioner Chief
Officer.7 Hence, petitioner refused to stay on as Second Officer and was
repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from
March 19, 1998 up to March 19, 1999, but at the time of his repatriation on
May 26, 1998, he had served only two (2) months and seven (7) days of his
contract, leaving an unexpired portion of nine (9) months and twenty-three
(23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint 9 against respondents
for constructive dismissal and for payment of his money claims in the total
amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90
June 01/30, 1998 2,590.00
July 01/31, 1998 2,590.00
August 01/31, 1998 2,590.00
Sept. 01/30, 1998 2,590.00
Oct. 01/31, 1998 2,590.00
Nov. 01/30, 1998 2,590.00
Dec. 01/31, 1998 2,590.00
Jan. 01/31, 1999 2,590.00
Feb. 01/28, 1999 2,590.00
Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00
---------------------------
---------------------------
--------------------------
25,382.23
Amount adjusted to chief mate's salary
(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010
---------------------------
---------------------------
---------------------------
-------------
TOTAL CLAIM US$ 26,442.7311
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the
dismissal of petitioner illegal and awarding him monetary benefits,
to wit:
WHEREFORE, premises considered, judgment is hereby rendered
declaring that the dismissal of the complainant (petitioner) by the
respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner],
jointly and severally, in Philippine Currency, based on the rate of
exchange prevailing at the time of payment, the amount of EIGHT
THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US
$8,770.00), representing the complainant’s salary for three (3)
months of the unexpired portion of the aforesaid contract of
employment.1avvphi1
The respondents are likewise ordered to pay the complainant
[petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the amount
of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the
complainant’s claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and
severally, in Philippine Currency, at the exchange rate prevailing at
the time of payment, the complainant’s (petitioner's) claim for
attorney’s fees equivalent to ten percent (10%) of the total amount
awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages
are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA
based his computation on the salary period of three months only --
rather than the entire unexpired portion of nine months and 23 days
of petitioner's employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00, consisting
of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month." 14
 Respondents appealed15 to the National Labor Relations
Commission (NLRC) to question the finding of the LA that petitioner
was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the
LA erred in not applying the ruling of the Court in Triple Integrated
Services, Inc. v. National Labor Relations Commission17 that in
case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA
Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.
Respondents are hereby ordered to pay complainant, jointly and
severally, in Philippine currency, at the prevailing rate of exchange
at the time of payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorney’s fees 424.50
TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded
to petitioner by reducing the applicable salary rate from US$2,590.00 to
US$1,400.00 because R.A. No. 8042 "does not provide for the award of
overtime pay, which should be proven to have been actually performed, and
for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he
questioned the constitutionality of the subject clause. 21 The NLRC denied
the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the
constitutional challenge against the subject clause. 24 After initially dismissing
the petition on a technicality, the CA eventually gave due course to it, as
directed by this Court in its Resolution dated August 7, 2003 which granted
the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on
the reduction of the applicable salary rate; however, the CA skirted the
constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner
brings his cause to this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way
not in accord with applicable decision of the Supreme Court involving similar
issue of granting unto the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were
merely applying their interpretation of Section 10 of Republic Act No. 8042, it
is submitted that the Court of Appeals gravely erred in law when it failed to
discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional
issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back
wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of
Republic Act No. 8042, the Court of Appeals gravely erred in law in
excluding from petitioner’s award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his
salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as
he is already old and sickly, and he intends to make use of the monetary
award for his medical treatment and medication. 29 Required to comment,
counsel for petitioner filed a motion, urging the court to allow partial
execution of the undisputed monetary award and, at the same time, praying
that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the
Court now takes up the full merit of the petition mindful of the extreme
importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of
petitioner was illegal is not disputed. Likewise not disputed is the salary
differential of US$45.00 awarded to petitioner in all three fora. What remains
disputed is only the computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum
salary of petitioner at the monthly rate of US$1,400.00 covering the period of
three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends
that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is
entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his
salaries for the entire nine months and 23 days left of his employment
contract, computed at the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it
unduly impairs the freedom of OFWs to negotiate for and stipulate in their
overseas employment contracts a determinate employment period and a
fixed salary package.32 It also impinges on the equal protection clause, for it
treats OFWs differently from local Filipino workers (local workers) by putting
a cap on the amount of lump-sum salary to which OFWs are entitled in case
of illegal dismissal, while setting no limit to the same monetary award for
local workers when their dismissal is declared illegal; that the disparate
treatment is not reasonable as there is no substantial distinction between the
two groups;33and that it defeats Section 18,34 Article II of the Constitution
which guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor
tribunals are not in line with existing jurisprudence on the issue of money
claims of illegally dismissed OFWs. Though there are conflicting rulings on
this, petitioner urges the Court to sort them out for the guidance of affected
OFWs.36
Petitioner further underscores that the insertion of the subject clause into
R.A. No. 8042 serves no other purpose but to benefit local placement
agencies. He marks the statement made by the Solicitor General in his
Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on
its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money claims
was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement
agencies, the subject clause sacrifices the well-being of OFWs. Not only
that, the provision makes foreign employers better off than local employers
because in cases involving the illegal dismissal of employees, foreign
employers are liable for salaries covering a maximum of only three months
of the unexpired employment contract while local employers are liable for the
full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the
amount of backwages they have to give their employees they have illegally
dismissed, following well-entrenched and unequivocal jurisprudence on the
matter. On the other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3) months unpaid
salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process
clause, for it deprives him of the salaries and other emoluments he is entitled
to under his fixed-period employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the
constitutional issue should not be entertained, for this was belatedly
interposed by petitioner in his appeal before the CA, and not at the earliest
opportunity, which was when he filed an appeal before the NLRC. 40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect
on July 15, 1995, its provisions could not have impaired petitioner's 1998
employment contract. Rather, R.A. No. 8042 having preceded petitioner's
contract, the provisions thereof are deemed part of the minimum terms of
petitioner's employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms
of the nature of their employment, such that their rights to monetary benefits
must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers
perform their jobs within Philippine territory, OFWs perform their jobs for
foreign employers, over whom it is difficult for our courts to acquire
jurisdiction, or against whom it is almost impossible to enforce judgment; and
second, as held in Coyoca v. National Labor Relations Commission 43 and
Millares v. National Labor Relations Commission,44 OFWs are contractual
employees who can never acquire regular employment status, unlike local
workers who are or can become regular employees. Hence, the OSG posits
that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid
basis for the differentiated treatment under the subject clause of the money
claims of OFWs who are illegally dismissed. Thus, the provision does not
violate the equal protection clause nor Section 18, Article II of the
Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police
power measure adopted to mitigate the solidary liability of placement
agencies for this "redounds to the benefit of the migrant workers whose
welfare the government seeks to promote. The survival of legitimate
placement agencies helps [assure] the government that migrant workers are
properly deployed and are employed under decent and humane
conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the
acts of its co-equals, such as the Congress, it does so only when these
conditions obtain: (1) that there is an actual case or controversy involving a
conflict of rights susceptible of judicial determination; 47 (2) that the
constitutional question is raised by a proper party48 and at the earliest
opportunity;49 and (3) that the constitutional question is the very lis mota of
the case,50otherwise the Court will dismiss the case or decide the same on
some other ground.51
Without a doubt, there exists in this case an actual controversy directly
involving petitioner who is personally aggrieved that the labor tribunals and
the CA computed his monetary award based on the salary period of three
months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that
the requirement that a constitutional issue be raised at the earliest
opportunity entails the interposition of the issue in the pleadings before
a competent court, such that, if the issue is not raised in the pleadings
before that competent court, it cannot be considered at the trial and, if not
considered in the trial, it cannot be considered on appeal. 52 Records disclose
that the issue on the constitutionality of the subject clause was first raised,
not in petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his Petition
for Certiorari before the CA.54Nonetheless, the issue is deemed seasonably
raised because it is not the NLRC but the CA which has the competence to
resolve the constitutional issue. The NLRC is a labor tribunal that merely
performs a quasi-judicial function – its function in the present case is limited
to determining questions of fact to which the legislative policy of R.A. No.
8042 is to be applied and to resolving such questions in accordance with the
standards laid down by the law itself;55 thus, its foremost function is to
administer and enforce R.A. No. 8042, and not to inquire into the validity of
its provisions. The CA, on the other hand, is vested with the power of judicial
review or the power to declare unconstitutional a law or a provision thereof,
such as the subject clause.56 Petitioner's interposition of the constitutional
issue before the CA was undoubtedly seasonable. The CA was therefore
remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of
the case likewise obtains because the monetary claim of petitioner to his
lump-sum salary for the entire unexpired portion of his 12-month
employment contract, and not just for a period of three months, strikes at the
very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the
subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the
stipulations in his contract on the term of his employment and the fixed
salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted
have only a prospective operation,58and cannot affect acts or contracts
already perfected;59 however, as to laws already in existence, their
provisions are read into contracts and deemed a part thereof.60 Thus, the
non-impairment clause under Section 10, Article II is limited in application to
laws about to be enacted that would in any way derogate from existing acts
or contracts by enlarging, abridging or in any manner changing the intention
of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995
preceded the execution of the employment contract between petitioner and
respondents in 1998. Hence, it cannot be argued that R.A. No. 8042,
particularly the subject clause, impaired the employment contract of the
parties. Rather, when the parties executed their 1998 employment contract,
they were deemed to have incorporated into it all the provisions of R.A. No.
8042.
But even if the Court were to disregard the timeline, the subject clause may
not be declared unconstitutional on the ground that it impinges on the
impairment clause, for the law was enacted in the exercise of the police
power of the State to regulate a business, profession or calling, particularly
the recruitment and deployment of OFWs, with the noble end in view of
ensuring respect for the dignity and well-being of OFWs wherever they may
be employed.61Police power legislations adopted by the State to promote the
health, morals, peace, education, good order, safety, and general welfare of
the people are generally applicable not only to future contracts but even to
those already in existence, for all private contracts must yield to the superior
and legitimate measures taken by the State to promote public welfare. 62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of
law nor shall any person be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the
labor sector, without distinction as to place of deployment, full protection of
their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional
provisions translate to economic security and parity: all monetary benefits
should be equally enjoyed by workers of similar category, while all monetary
obligations should be borne by them in equal degree; none should be denied
the protection of the laws which is enjoyed by, or spared the burden imposed
on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to
incorporate, when it sees fit, a system of classification into its legislation;
however, to be valid, the classification must comply with these requirements:
1) it is based on substantial distinctions; 2) it is germane to the purposes of
the law; 3) it is not limited to existing conditions only; and 4) it applies equally
to all members of the class.66
There are three levels of scrutiny at which the Court reviews the
constitutionality of a classification embodied in a law: a) the deferential or
rational basis scrutiny in which the challenged classification needs only be
shown to be rationally related to serving a legitimate state interest;67 b) the
middle-tier or intermediate scrutiny in which the government must show that
the challenged classification serves an important state interest and that the
classification is at least substantially related to serving that interest; 68 and c)
strict judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right 70 or
operates to the peculiar disadvantage of a suspect class 71 is presumed
unconstitutional, and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest and that it
is the least restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect
classifications73 based on race74 or gender75 but not when the classification
is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral
ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, 77 the
constitutionality of a provision in the charter of the Bangko Sentral ng
Pilipinas(BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization
Law (SSL), even when the rank-and-file employees of other GFIs had been
exempted from the SSL by their respective charters. Finding that the
disputed provision contained a suspect classification based on salary grade,
the Court deliberately employed the standard of strict judicial scrutiny in its
review of the constitutionality of said provision. More significantly, it was in
this case that the Court revealed the broad outlines of its judicial philosophy,
to wit:
Congress retains its wide discretion in providing for a valid classification, and
its policies should be accorded recognition and respect by the courts of
justice except when they run afoul of the Constitution. The deference stops
where the classification violates a fundamental right, or prejudices persons
accorded special protection by the Constitution. When these violations
arise, this Court must discharge its primary role as the vanguard of
constitutional guaranties, and require a stricter and more exacting adherence
to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by
the Constitution requires a stricter judicial scrutiny finds no support in
American or English jurisprudence. Nevertheless, these foreign decisions
and authorities are not per se controlling in this jurisdiction. At best, they are
persuasive and have been used to support many of our decisions. We
should not place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to our own
decisions through the employment of our own endowments. We live in a
different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a
people, and always with our own concept of law and justice. Our laws must
be construed in accordance with the intention of our own lawmakers and
such intent may be deduced from the language of each law and the context
of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all
of all our laws. And it need not be stressed that our public interest is distinct
and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of
equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims "equality" as an ideal precisely in
protest against crushing inequities in Philippine society. The command to
promote social justice in Article II, Section 10, in "all phases of national
development," further explicitated in Article XIII, are clear commands to the
State to take affirmative action in the direction of greater equality. x x x
[T]here is thus in the Philippine Constitution no lack of doctrinal support for a
more vigorous state effort towards achieving a reasonable measure of
equality.
Our present Constitution has gone further in guaranteeing vital social and
economic rights to marginalized groups of society, including labor. Under the
policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less
privilege in life should have more in law. And the obligation to afford
protection to labor is incumbent not only on the legislative and executive
branches but also on the judiciary to translate this pledge into a living reality.
Social justice calls for the humanization of laws and the equalization of social
and economic forces by the State so that justice in its rational and objectively
secular conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion given
to Congress in exercising its legislative power. Judicial scrutiny would be
based on the "rational basis" test, and the legislative discretion would be
given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental
right, or the perpetuation of prejudice against persons favored by the
Constitution with special protection, judicial scrutiny ought to be more
strict. A weak and watered down view would call for the abdication of this
Court’s solemn duty to strike down any law repugnant to the Constitution and
the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its
instrumentalities. Oppressive acts will be struck down regardless of the
character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary
grade or officer-employee status. It is akin to a distinction based on
economic class and status, with the higher grades as recipients of a benefit
specifically withheld from the lower grades. Officers of the BSP now receive
higher compensation packages that are competitive with the industry, while
the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are
paid the strictly regimented rates of the SSL while employees higher in rank -
possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to
stay. Considering that majority, if not all, the rank-and-file employees consist
of people whose status and rank in life are less and limited, especially in
terms of job marketability, it is they - and not the officers - who have the real
economic and financial need for the adjustment . This is in accord with the
policy of the Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and improve the
quality of life for all." Any act of Congress that runs counter to this
constitutional desideratum deserves strict scrutiny by this Court before it can
pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the
Court in the present case also employs the standard of strict judicial scrutiny,
for it perceives in the subject clause a suspect classification prejudicial to
OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it
applies to all OFWs. However, a closer examination reveals that the subject
clause has a discriminatory intent against, and an invidious impact on,
OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-à-
vis OFWs with employment contracts of one year or more;
Second, among OFWs with employment contracts of more than
one year; and
Third, OFWs vis-à-vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis-à-vis OFWs
with employment contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v.
National Labor Relations Commission79(Second Division, 1999) that the
Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which
amount to award an illegally dismissed overseas contract worker, i.e.,
whether his salaries for the unexpired portion of his employment
contract or three (3) months’ salary for every year of the unexpired
term, whichever is less, comes into play only when the employment
contract concerned has a term of at least one (1) year or more. This is
evident from the words "for every year of the unexpired term" which
follows the words "salaries x x x for three months." To follow petitioners’
thinking that private respondent is entitled to three (3) months salary only
simply because it is the lesser amount is to completely disregard and
overlook some words used in the statute while giving effect to some. This is
contrary to the well-established rule in legal hermeneutics that in interpreting
a statute, care should be taken that every part or word thereof be given
effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res
magis valeat quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his
10-month contract, but was awarded his salaries for the remaining 8 months
and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made
conflicting rulings on Section 10(5). One was Asian Center for Career and
Employment System and Services v. National Labor Relations
Commission (Second Division, October 1998),81 which involved an OFW
who was awarded a two-year employment contract, but was dismissed after
working for one year and two months. The LA declared his dismissal illegal Talidano v. 12 3 9 months 3 months
and awarded him SR13,600.00 as lump-sum salary covering eight months, Falcon87 months months
the unexpired portion of his contract. On appeal, the Court reduced the
award to SR3,600.00 equivalent to his three months’ salary, this being the Univan v. 12 3 9 months 3 months
lesser value, to wit: CA 88 months months

Oriental v. 12 more 10 months 3 months

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas CA 89 months than 2
employment without just, valid or authorized cause is entitled to his salary for months
the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less. PCL v. 12 more more or 3 months
NLRC90 months than 2 less 9
months months
In the case at bar, the unexpired portion of private respondent’s employment
contract is eight (8) months. Private respondent should therefore be paid his Olarte v. 12 21 days 11 months 3 months
basic salary corresponding to three (3) months or a total of SR3,600. 82 Nayona91 months and 9 days

JSS 12 16 days 11 months 3 months

Another was Triple-Eight Integrated Services, Inc. v. National Labor v.Ferrer92 months and 24
Relations Commission (Third Division, December 1998),83 which involved an days
OFW (therein respondent Erlinda Osdana) who was originally granted a 12-
month contract, which was deemed renewed for another 12 months. After Pentagon v. 12 9 2 months 2 months and 23
serving for one year and seven-and-a-half months, respondent Osdana was Adelantar93 months months and 23 days
illegally dismissed, and the Court awarded her salaries for the entire and 7 days
days
unexpired portion of four and one-half months of her contract.
Phil. Employ 12 10 2 months Unexpired portion
The Marsaman interpretation of Section 10(5) has since been adopted in the v. Paramio, months months
following cases: et al.94

Flourish 2 years 26 days 23 months 6 months or 3

Case Title Contract Period Unexpired Period Applied in Maritime v. and 4 days months for each
Period of Period the Computation Almanzor 95 year of contract
Service of the Monetary
Award Athenna 1 year, 1 1 year, 9 6 months or 3
Manpower 10 month months months for each
Skippers v. 6 2 4 months 4 months v. Villanos 96 months and 28 year of contract
Maguad84 months months and 28 days
days
Bahia 9 8 4 months 4 months
Shipping v. months months
Reynaldo As the foregoing matrix readily shows, the subject clause classifies OFWs
Chua 85 into two categories. The first category includes OFWs with fixed-period
employment contracts of less than one year; in case of illegal dismissal, they
Centennial 9 4 5 months 5 months are entitled to their salaries for the entire unexpired portion of their contract.
Transmarine months months The second category consists of OFWs with fixed-period employment
v. dela Cruz
contracts of one year or more; in case of illegal dismissal, they are entitled to
l86
monetary award equivalent to only 3 months of the unexpired portion of their
contracts.
The disparity in the treatment of these two groups cannot be discounted. EDI v. 2 years 5 19 months 19 months
In Skippers, the respondent OFW worked for only 2 months out of his 6- NLRC, et months
month contract, but was awarded his salaries for the remaining 4 months. In al.102
contrast, the respondent OFWs in Oriental and PCL who had also worked for
about 2 months out of their 12-month contracts were awarded their salaries Barros v. 12 months 4 8 months 8 months
for only 3 months of the unexpired portion of their contracts. Even the OFWs NLRC, et months
involved in Talidano and Univan who had worked for a longer period of 3 al.103
months out of their 12-month contracts before being illegally dismissed were
Philippine 12 months 6 5 months and 5 months and 18
awarded their salaries for only 3 months. Transmarine months 18 days days
v. Carilla104 and 22
To illustrate the disparity even more vividly, the Court assumes a days
hypothetical OFW-A with an employment contract of 10 months at a monthly
salary rate of US$1,000.00 and a hypothetical OFW-B with an employment
contract of 15 months with the same monthly salary rate of US$1,000.00. It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract
Both commenced work on the same day and under the same employer, and periods or the unexpired portions thereof, were treated alike in terms of the
were illegally dismissed after one month of work. Under the subject clause, computation of their monetary benefits in case of illegal dismissal. Their
OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the claims were subjected to a uniform rule of computation: their basic salaries
remaining 9 months of his contract, whereas OFW-B will be entitled to only multiplied by the entire unexpired portion of their employment contracts.
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion
of his contract, instead of US$14,000.00 for the unexpired portion of 14 The enactment of the subject clause in R.A. No. 8042 introduced a
months of his contract, as the US$3,000.00 is the lesser amount. differentiated rule of computation of the money claims of illegally dismissed
OFWs based on their employment periods, in the process singling out one
The disparity becomes more aggravating when the Court takes into account category whose contracts have an unexpired portion of one year or more
jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, and subjecting them to the peculiar disadvantage of having their monetary
1995,97 illegally dismissed OFWs, no matter how long the period of their awards limited to their salaries for 3 months or for the unexpired portion
employment contracts, were entitled to their salaries for the entire unexpired thereof, whichever is less, but all the while sparing the other category from
portions of their contracts. The matrix below speaks for itself: such prejudice, simply because the latter's unexpired contracts fall short of
one year.

Case Title Contract Period Unexpired Period Applied in Among OFWs With Employment Contracts of More Than One Year
Period of Period the Computation
Service of the Monetary
Award Upon closer examination of the terminology employed in the subject clause,
the Court now has misgivings on the accuracy of
ATCI v. CA, 2 years 2 22 months 22 months the Marsaman interpretation.
et al.98 months

Phil. 2 years 7 days 23 months and 23 months and 23 The Court notes that the subject clause "or for three (3) months for every
Integrated v. 23 days days year of the unexpired term, whichever is less" contains the qualifying
NLRC99 phrases "every year" and "unexpired term." By its ordinary meaning, the
word "term" means a limited or definite extent of time.105 Corollarily, that
JGB v. 2 years 9 15 months 15 months "every year" is but part of an "unexpired term" is significant in many ways:
NLC100 months
first, the unexpired term must be at least one year, for if it were any shorter,
Agoy v. 2 years 2 22 months 22 months there would be no occasion for such unexpired term to be measured by
NLRC101 months every year; and second, the original term must be more than one year, for
otherwise, whatever would be the unexpired term thereof will not reach even
a year. Consequently, the more decisive factor in the determination of when
the subject clause "for three (3) months for every year of the unexpired
term, whichever is less" shall apply is not the length of the original contract
period as held in Marsaman,106 but the length of the unexpired portion of the
contract period -- the subject clause applies in cases when the unexpired
portion of the contract period is at least one year, which arithmetically
requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination
among OFWs whose contract periods are for more than one year: those who
are illegally dismissed with less than one year left in their contracts shall be
entitled to their salaries for the entire unexpired portion thereof, while those
who are illegally dismissed with one year or more remaining in their
contracts shall be covered by the subject clause, and their monetary benefits
limited to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the
subject clause, the Court assumes hypothetical OFW-C and OFW-D, who
each have a 24-month contract at a salary rate of US$1,000.00 per month.
OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in the contract
period of OFW-C, the subject clause applies to the computation of the
latter's monetary benefits. Thus, OFW-C will be entitled, not to
US$12,000,00 or the latter's total salaries for the 12 months unexpired
portion of the contract, but to the lesser amount of US$3,000.00 or the
latter's salaries for 3 months out of the 12-month unexpired term of the
contract. On the other hand, OFW-D is spared from the effects of the subject
clause, for there are only 11 months left in the latter's contract period. Thus,
OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total
salaries for the entire 11-month unexpired portion.
OFWs vis-à-vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of
computation of the monetary awards of illegally dismissed OFWs was in
place. This uniform system was applicable even to local workers with fixed-
term employment.107
The earliest rule prescribing a uniform system of computation was actually
Article 299 of the Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and
employees should have been made of a fixed period, none of the contracting
parties, without the consent of the other, may withdraw from the fulfillment of
said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the
following articles.
In Reyes v. The Compañia Maritima,109 the Court applied the foregoing
provision to determine the liability of a shipping company for the illegal
discharge of its managers prior to the expiration of their fixed-term
employment. The Court therein held the shipping company liable for the
salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605
of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the
agent should be for a definite period or voyage, they cannot be discharged
until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused
to the vessel or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, 110 in
which the Court held the shipping company liable for the salaries and
subsistence allowance of its illegally dismissed employees for
the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of
the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889,
to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a
certain time and for a certain work cannot leave or be dismissed without
sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in
Article 1586 as a conjunctive "and" so as to apply the provision to local
workers who are employed for a time certain although for no particular skill.
This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel
de France Company.113 And in both Lemoine and Palomar, the Court
adopted the general principle that in actions for wrongful discharge founded
on Article 1586, local workers are entitled to recover damages to the extent
of the amount stipulated to be paid to them by the terms of their contract. On
the computation of the amount of such damages, the Court in Aldaz v.
Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has
been brought to our attention to the contrary under Spanish jurisprudence,
that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of
reducing the damages resulting from such wrongful discharge. However,
while this is the general rule, the burden of showing that he failed to make an
effort to secure other employment of a like nature, and that other
employment of a like nature was obtainable, is upon the defendant. When an
employee is wrongfully discharged under a contract of employment his prima
facie damage is the amount which he would be entitled to had he continued
in such employment until the termination of the period. (Howard vs. Daly, 61
N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2,
98 Mich., 43.)115(Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on
fixed-term employment: Section 2 (Obligations with a Period), Chapter 3,
Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of
Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil
Code of 1889, the new provisions of the Civil Code do not expressly provide
for the remedies available to a fixed-term worker who is illegally discharged.
However, it is noted that in Mackay Radio & Telegraph Co., Inc. v.
Rich,117 the Court carried over the principles on the payment of damages
underlying Article 1586 of the Civil Code of 1889 and applied the same to a
case involving the illegal discharge of a local worker whose fixed-period
employment contract was entered into in 1952, when the new Civil Code
was already in effect.118
More significantly, the same principles were applied to cases involving
overseas Filipino workers whose fixed-term employment contracts were
illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v.
Ople,119involving seafarers who were illegally discharged. In Teknika Skills
and Trade Services, Inc. v. National Labor Relations Commission, 120 an
OFW who was illegally dismissed prior to the expiration of her fixed-period
employment contract as a baby sitter, was awarded salaries corresponding
to the unexpired portion of her contract. The Court arrived at the same ruling
in Anderson v. National Labor Relations Commission,121 which involved a
foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who
was illegally dismissed after only nine months on the job -- the Court
awarded him salaries corresponding to 15 months, the unexpired portion of
his contract. In Asia World Recruitment, Inc. v. National Labor Relations
Commission,122 a Filipino working as a security officer in 1989 in Angola was
awarded his salaries for the remaining period of his 12-month contract after
he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National
Labor Relations Commission,123 an OFW whose 12-month contract was
illegally cut short in the second month was declared entitled to his salaries
for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term
employment who were illegally discharged were treated alike in terms of the
computation of their money claims: they were uniformly entitled to their
salaries for the entire unexpired portions of their contracts. But with the
enactment of R.A. No. 8042, specifically the adoption of the subject clause,
illegally dismissed OFWs with an unexpired portion of one year or more in
their employment contract have since been differently treated in that their
money claims are subject to a 3-month cap, whereas no such limitation is
imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of
fixed-term employees who are illegally discharged, it imposes a 3-
month cap on the claim of OFWs with an unexpired portion of one year
or more in their contracts, but none on the claims of other OFWs or
local workers with fixed-term employment. The subject clause singles
out one classification of OFWs and burdens it with a peculiar
disadvantage.
There being a suspect classification involving a vulnerable sector protected
by the Constitution, the Court now subjects the classification to a strict
judicial scrutiny, and determines whether it serves a compelling state interest
through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights
and powers arrayed in the Constitution and calibrated by history.124 It is akin
to the paramount interest of the state125 for which some individual liberties
must give way, such as the public interest in safeguarding health or
maintaining medical standards,126 or in maintaining access to information on
matters of public concern.127
In the present case, the Court dug deep into the records but found no
compelling state interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed
to protect the employment of Filipino seafarers overseas x x x. By limiting the
liability to three months [sic], Filipino seafarers have better chance of getting
hired by foreign employers." The limitation also protects the interest of local
placement agencies, which otherwise may be made to shoulder millions of
pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on
its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare
the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly
deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the
source of its perception of the state interest sought to be served by the
subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep.
Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314), from
which the law originated;130 but the speech makes no reference to the
underlying reason for the adoption of the subject clause. That is only natural
for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on
money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of the
complaint, the claim arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of
damages.
The liability of the principal and the recruitment/placement agency or any
and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money
claims exclusive of damages under this Section shall not be less than fifty
percent (50%) of such money claims: Provided, That any installment
payments, if applicable, to satisfy any such compromise or voluntary
settlement shall not be more than two (2) months. Any compromise/voluntary
agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided
under this Section shall subject the responsible officials to any or all of the
following penalties:
(1) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without
prejudice to any liability which any such official may have incurred under
other existing laws or rules and regulations as a consequence of violating
the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the
computation of money claims.
A rule on the computation of money claims containing the subject clause
was inserted and eventually adopted as the 5th paragraph of Section 10 of
R.A. No. 8042. The Court examined the rationale of the subject clause in the
transcripts of the "Bicameral Conference Committee (Conference
Committee) Meetings on the Magna Carta on OCWs (Disagreeing
Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the
Court finds no discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the
existence of a compelling state interest that would justify the perpetuation of
the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause
is to protect the employment of OFWs by mitigating the solidary liability of
placement agencies, such callous and cavalier rationale will have to be
rejected. There can never be a justification for any form of government
action that alleviates the burden of one sector, but imposes the same burden
on another sector, especially when the favored sector is composed of private
businesses such as placement agencies, while the disadvantaged sector is
composed of OFWs whose protection no less than the Constitution
commands. The idea that private business interest can be elevated to the
level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary
liability of placement agencies vis-a-vistheir foreign principals, there are
mechanisms already in place that can be employed to achieve that purpose
without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and
Employment of Land-Based Overseas Workers, dated February 4, 2002,
imposes administrative disciplinary measures on erring foreign employers
who default on their contractual obligations to migrant workers and/or their
Philippine agents. These disciplinary measures range from temporary
disqualification to preventive suspension. The POEA Rules and Regulations
Governing the Recruitment and Employment of Seafarers, dated May 23,
2003, contains similar administrative disciplinary measures against erring
foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive
means of aiding local placement agencies in enforcing the solidary liability of
their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042
is violative of the right of petitioner and other OFWs to equal
protection.1avvphi1
Further, there would be certain misgivings if one is to approach the
declaration of the unconstitutionality of the subject clause from the lone
perspective that the clause directly violates state policy on labor under
Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-
executing,132 there are some which this Court has declared not judicially
enforceable, Article XIII being one,133 particularly Section 3 thereof, the
nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of
tenure may be deemed as self-executing in the sense that these are
automatically acknowledged and observed without need for any enabling
legislation. However, to declare that the constitutional provisions are enough
to guarantee the full exercise of the rights embodied therein, and the
realization of ideals therein expressed, would be impractical, if not
unrealistic. The espousal of such view presents the dangerous tendency of
being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to
continued employment-a utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still needed to define
the parameters of these guaranteed rights to ensure the protection and
promotion, not only the rights of the labor sector, but of the employers' as
well. Without specific and pertinent legislation, judicial bodies will be at a
loss, formulating their own conclusion to approximate at least the aims of the
Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a
source of a positive enforceable right to stave off the dismissal of an
employee for just cause owing to the failure to serve proper notice or
hearing. As manifested by several framers of the 1987 Constitution, the
provisions on social justice require legislative enactments for their
enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct
enforceable rights, for the violation of which the questioned clause may be
declared unconstitutional. It may unwittingly risk opening the floodgates of
litigation to every worker or union over every conceivable violation of so
broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the
working class any actual enforceable right, but merely clothes it with the
status of a sector for whom the Constitution urges protection through
executive or legislative action and judicial recognition. Its utility is best
limited to being an impetus not just for the executive and legislative
departments, but for the judiciary as well, to protect the welfare of the
working class. And it was in fact consistent with that constitutional agenda
that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate
Justice now Chief Justice Reynato S. Puno, formulated the judicial precept
that when the challenge to a statute is premised on the perpetuation of
prejudice against persons favored by the Constitution with special protection
-- such as the working class or a section thereof -- the Court may recognize
the existence of a suspect classification and subject the same to strict
judicial scrutiny.
The view that the concepts of suspect classification and strict judicial
scrutiny formulated in Central Bank Employee Association exaggerate the
significance of Section 3, Article XIII is a groundless apprehension. Central
Bank applied Article XIII in conjunction with the equal protection clause.
Article XIII, by itself, without the application of the equal protection clause,
has no life or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject
clause violates petitioner's right to substantive due process, for it deprives
him of property, consisting of monetary benefits, without any existing valid
governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject
clause of limiting the entitlement of OFWs to their three-month salary in case
of illegal dismissal, is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed, there is nothing in
the text of the law or the records of the deliberations leading to its enactment
or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental
purpose; and it is for that precise reason that the clause violates not just
petitioner's right to equal protection, but also her right to substantive due
process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries
for the entire unexpired period of nine months and 23 days of his
employment contract, pursuant to law and jurisprudence prior to the
enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the
salary basis in the computation of his monetary award, because these are
fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay.
For seafarers like petitioner, DOLE Department Order No. 33, series 1996,
provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other
bonuses; whereas overtime pay is compensation for all work "performed" in
excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion
of overtime and holiday pay in the computation of petitioner's monetary
award, unless there is evidence that he performed work during those
periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed
in light of our ruling in Cagampan v. National Labor Relations Commission,
to wit:
The rendition of overtime work and the submission of sufficient proof that
said was actually performed are conditions to be satisfied before a seaman
could be entitled to overtime pay which should be computed on the basis of
30% of the basic monthly salary. In short, the contract provision guarantees
the right to overtime pay but the entitlement to such benefit must first be
established.
In the same vein, the claim for the day's leave pay for the unexpired portion
of the contract is unwarranted since the same is given during the actual
service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for
three months for every year of the unexpired term, whichever is less" in the
5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision
and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the
effect that petitioner is AWARDED his salaries for the entire unexpired
portion of his employment contract consisting of nine months and 23 days
computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.
G.R. No. 179532 May 30, 2011
CLAUDIO S. YAP, Petitioner,
vs.
THENAMARIS SHIP'S MANAGEMENT and INTERMARE MARITIME
AGENCIES, INC., Respondents.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Decision2 dated February 28, 2007, which affirmed with modification the
National Labor Relations Commission (NLRC) resolution3 dated April 20,
2005.
The undisputed facts, as found by the CA, are as follows:
[Petitioner] Claudio S. Yap was employed as electrician of the vessel, M/T
SEASCOUT on 14 August 2001 by Intermare Maritime Agencies, Inc. in
behalf of its principal, Vulture Shipping Limited. The contract of employment
entered into by Yap and Capt. Francisco B. Adviento, the General Manager
of Intermare, was for a duration of 12 months. On 23 August 2001, Yap
boarded M/T SEASCOUT and commenced his job as electrician. However,
on or about 08 November 2001, the vessel was sold. The Philippine
Overseas Employment Administration (POEA) was informed about the sale
on 06 December 2001 in a letter signed by Capt. Adviento. Yap, along with
the other crewmembers, was informed by the Master of their vessel that the
same was sold and will be scrapped. They were also informed about the
Advisory sent by Capt. Constatinou, which states, among others:
" …PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE
TRANSFERRED TO OTHER VESSELS AFTER VESSEL S DELIVERY
(GREEK VIA ATHENS-PHILIPINOS VIA MANILA…
…FOR CREW NOT WISH TRANSFER TO DECLARE THEIR
PROSPECTED TIME FOR REEMBARKATION IN ORDER TO SCHEDULE
THEM ACCLY…"
Yap received his seniority bonus, vacation bonus, extra bonus along with the
scrapping bonus. However, with respect to the payment of his wage, he
refused to accept the payment of one-month basic wage. He insisted that he
was entitled to the payment of the unexpired portion of his contract since he
was illegally dismissed from employment. He alleged that he opted for
immediate transfer but none was made.
[Respondents], for their part, contended that Yap was not illegally dismissed.
They alleged that following the sale of the M/T SEASCOUT, Yap signed off
from the vessel on 10 November 2001 and was paid his wages
corresponding to the months he worked or until 10 November 2001 plus his
seniority bonus, vacation bonus and extra bonus. They further alleged that
Yap’s employment contract was validly terminated due to the sale of the
vessel and no arrangement was made for Yap’s transfer to Thenamaris’
other vessels.4
Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with
Damages and Attorney’s Fees before the Labor Arbiter (LA). Petitioner
claimed that he was entitled to the salaries corresponding to the unexpired
portion of his contract. Subsequently, he filed an amended complaint,
impleading Captain Francisco Adviento of respondents Intermare Maritime
Agencies, Inc. (Intermare) and Thenamaris Ship’s Management
(respondents), together with C.J. Martionos, Interseas Trading and
Financing Corporation, and Vulture Shipping Limited/Stejo Shipping Limited.
On July 26, 2004, the LA rendered a decision5 in favor of petitioner, finding
the latter to have been constructively and illegally dismissed by respondents.
Moreover, the LA found that respondents acted in bad faith when they
assured petitioner of re-embarkation and required him to produce an
electrician certificate during the period of his contract, but actually he was
not able to board one despite of respondents’ numerous vessels. Petitioner
made several follow-ups for his re-embarkation but respondents failed to
heed his plea; thus, petitioner was forced to litigate in order to vindicate his
rights. Lastly, the LA opined that since the unexpired portion of petitioner’s
contract was less than one year, petitioner was entitled to his salaries for the
unexpired portion of his contract for a period of nine months. The LA
disposed, as follows:
WHEREFORE, in view of the foregoing, a decision is hereby rendered
declaring complainant to have been constructively dismissed. Accordingly,
respondents Intermare Maritime Agency Incorporated, Thenamaris Ship’s
Mgt., and Vulture Shipping Limited are ordered to pay jointly and severally
complainant Claudio S. Yap the sum of $12,870.00 or its peso equivalent at
the time of payment. In addition, moral damages of ONE HUNDRED
THOUSAND PESOS (₱100,000.00) and exemplary damages of FIFTY
THOUSAND PESOS (₱50,000.00) are awarded plus ten percent (10%) of
the total award as attorney’s fees.
Other money claims are DISMISSED for lack of merit.
SO ORDERED.6
Aggrieved, respondents sought recourse from the NLRC.
In its decision7 dated January 14, 2005, the NLRC affirmed the LA’s findings
that petitioner was indeed constructively and illegally dismissed; that
respondents’ bad faith was evident on their wilful failure to transfer petitioner
to another vessel; and that the award of attorney’s fees was warranted.
However, the NLRC held that instead of an award of salaries corresponding
to nine months, petitioner was only entitled to salaries for three months as
provided under Section 108 of Republic Act (R.A.) No. 8042,9 as enunciated
in our ruling in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission.10 Hence, the NLRC ruled in this wise:
WHEREFORE, premises considered, the decision of the Labor Arbiter
finding the termination of complainant illegal is hereby AFFIRMED with a
MODIFICATION. Complainant[’s] salary for the unexpired portion of his
contract should only be limited to three (3) months basic salary.
Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping Limited
and Thenamaris Ship Management are hereby ordered to jointly and
severally pay complainant, the following:
1. Three (3) months basic salary – US$4,290.00 or its peso
equivalent at the time of actual payment.
2. Moral damages – ₱100,000.00
3. Exemplary damages – ₱50,000.00
4. Attorney’s fees equivalent to 10% of the total monetary award.
SO ORDERED.11
Respondents filed a Motion for Partial Reconsideration,12 praying for the
reversal and setting aside of the NLRC decision, and that a new one be
rendered dismissing the complaint. Petitioner, on the other hand, filed his
own Motion for Partial Reconsideration,13 praying that he be paid the nine
(9)-month basic salary, as awarded by the LA.
On April 20, 2005, a resolution14 was rendered by the NLRC, affirming the
findings of Illegal Dismissal and respondents’ failure to transfer petitioner to
another vessel. However, finding merit in petitioner’s arguments, the NLRC
reversed its earlier Decision, holding that "there can be no choice to grant
only three (3) months salary for every year of the unexpired term because
there is no full year of unexpired term which this can be applied." Hence –
WHEREFORE, premises considered, complainant’s Motion for Partial
Reconsideration is hereby granted. The award of three (3) months basic
salary in the sum of US$4,290.00 is hereby modified in that complainant is
entitled to his salary for the unexpired portion of employment contract in the
sum of US$12,870.00 or its peso equivalent at the time of actual payment.
All aspect of our January 14, 2005 Decision STANDS.
SO ORDERED.15
Respondents filed a Motion for Reconsideration, which the NLRC denied.
Undaunted, respondents filed a petition for certiorari 16 under Rule 65 of the
Rules of Civil Procedure before the CA. On February 28, 2007, the CA
affirmed the findings and ruling of the LA and the NLRC that petitioner was
constructively and illegally dismissed. The CA held that respondents failed to
show that the NLRC acted without statutory authority and that its findings
were not supported by law, jurisprudence, and evidence on record. Likewise,
the CA affirmed the lower agencies’ findings that the advisory of Captain
Constantinou, taken together with the other documents and additional
requirements imposed on petitioner, only meant that the latter should have
been re-embarked. In the same token, the CA upheld the lower agencies’
unanimous finding of bad faith, warranting the imposition of moral and
exemplary damages and attorney’s fees. However, the CA ruled that the
NLRC erred in sustaining the LA’s interpretation of Section 10 of R.A. No.
8042. In this regard, the CA relied on the clause "or for three months for
every year of the unexpired term, whichever is less" provided in the 5th
paragraph of Section 10 of R.A. No. 8042 and held:
In the present case, the employment contract concerned has a term of one
year or 12 months which commenced on August 14, 2001. However, it was
preterminated without a valid cause. [Petitioner] was paid his wages for the
corresponding months he worked until the 10th of November. Pursuant to
the provisions of Sec. 10, [R.A. No.] 8042, therefore, the option of "three
months for every year of the unexpired term" is applicable.17
Thus, the CA provided, to wit:
WHEREFORE, premises considered, this Petition for Certiorari is DENIED.
The Decision dated January 14, 2005, and Resolutions, dated April 20, 2005
and July 29, 2005, respectively, of public respondent National Labor
Relations Commission-Fourth Division, Cebu City, in NLRC No. V-000038-
04 (RAB VIII (OFW)-04-01-0006) are hereby AFFIRMED with the
MODIFICATION that private respondent is entitled to three (3) months of
basic salary computed at US$4,290.00 or its peso equivalent at the time of
actual payment.
Costs against Petitioners.18
Both parties filed their respective motions for reconsideration, which the CA,
however, denied in its Resolution19dated August 30, 2007.
Unyielding, petitioner filed this petition, raising the following issues:
1) Whether or not Section 10 of R.A. [No.] 8042, to the extent that it
affords an illegally dismissed migrant worker the lesser benefit of –
"salaries for [the] unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term, whichever
is less" – is constitutional; and
2) Assuming that it is, whether or not the Court of Appeals gravely
erred in granting petitioner only three (3) months backwages when
his unexpired term of 9 months is far short of the "every year of the
unexpired term" threshold.20
In the meantime, while this case was pending before this Court, we declared
as unconstitutional the clause "or for three months for every year of the
unexpired term, whichever is less" provided in the 5th paragraph of Section
10 of R.A. No. 8042 in the case of Serrano v. Gallant Maritime Services,
Inc.21 on March 24, 2009.
Apparently, unaware of our ruling in Serrano, petitioner claims that the 5th
paragraph of Section 10, R.A. No. 8042, is violative of Section 1, 22 Article III
and Section 3,23 Article XIII of the Constitution to the extent that it gives an
erring employer the option to pay an illegally dismissed migrant worker only
three months for every year of the unexpired term of his contract; that said
provision of law has long been a source of abuse by callous employers
against migrant workers; and that said provision violates the equal protection
clause under the Constitution because, while illegally dismissed local
workers are guaranteed under the Labor Code of reinstatement with full
backwages computed from the time compensation was withheld from them
up to their actual reinstatement, migrant workers, by virtue of Section 10 of
R.A. No. 8042, have to waive nine months of their collectible backwages
every time they have a year of unexpired term of contract to reckon with.
Finally, petitioner posits that, assuming said provision of law is constitutional,
the CA gravely abused its discretion when it reduced petitioner’s backwages
from nine months to three months as his nine-month unexpired term cannot
accommodate the lesser relief of three months for every year of the
unexpired term.24
On the other hand, respondents, aware of our ruling in Serrano, aver that our
pronouncement of unconstitutionality of the clause "or for three months for
every year of the unexpired term, whichever is less" provided in the 5th
paragraph of Section 10 of R.A. No. 8042 in Serrano should not apply in this
case because Section 10 of R.A. No. 8042 is a substantive law that deals
with the rights and obligations of the parties in case of Illegal Dismissal of a
migrant worker and is not merely procedural in character. Thus, pursuant to
the Civil Code, there should be no retroactive application of the law in this
case. Moreover, respondents asseverate that petitioner’s tanker allowance
of US$130.00 should not be included in the computation of the award as
petitioner’s basic salary, as provided under his contract, was only
US$1,300.00. Respondents submit that the CA erred in its computation
since it included the said tanker allowance. Respondents opine that
petitioner should be entitled only to US$3,900.00 and not to US$4,290.00, as
granted by the CA. Invoking Serrano, respondents claim that the tanker
allowance should be excluded from the definition of the term "salary." Also,
respondents manifest that the full sum of ₱878,914.47 in Intermare’s bank
account was garnished and subsequently withdrawn and deposited with the
NLRC Cashier of Tacloban City on February 14, 2007. On February 16,
2007, while this case was pending before the CA, the LA issued an Order
releasing the amount of ₱781,870.03 to petitioner as his award, together
with the sum of ₱86,744.44 to petitioner’s former lawyer as attorney’s fees,
and the amount of ₱3,570.00 as execution and deposit fees. Thus,
respondents pray that the instant petition be denied and that petitioner be
directed to return to Intermare the sum of US$8,970.00 or its peso
equivalent.25
On this note, petitioner counters that this new issue as to the inclusion of the
tanker allowance in the computation of the award was not raised by
respondents before the LA, the NLRC and the CA, nor was it raised in
respondents’ pleadings other than in their Memorandum before this Court,
which should not be allowed under the circumstances.26
The petition is impressed with merit.
Prefatorily, it bears emphasis that the unanimous finding of the LA, the
NLRC and the CA that the dismissal of petitioner was illegal is not disputed.
Likewise not disputed is the tribunals’ unanimous finding of bad faith on the
part of respondents, thus, warranting the award of moral and exemplary
damages and attorney’s fees. What remains in issue, therefore, is the
constitutionality of the 5th paragraph of Section 10 of R.A. No. 8042 and,
necessarily, the proper computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
Verily, we have already declared in Serrano that the clause "or for three
months for every year of the unexpired term, whichever is less" provided in
the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for
being violative of the rights of Overseas Filipino Workers (OFWs) to equal
protection of the laws. In an exhaustive discussion of the intricacies and
ramifications of the said clause, this Court, in Serrano, pertinently held:
The Court concludes that the subject clause contains a suspect classification
in that, in the computation of the monetary benefits of fixed-term employees
who are illegally discharged, it imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in their contracts, but none on
the claims of other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.27
Moreover, this Court held therein that the subject clause does not state or
imply any definitive governmental purpose; hence, the same violates not just
therein petitioner’s right to equal protection, but also his right to substantive
due process under Section 1, Article III of the Constitution. 28 Consequently,
petitioner therein was accorded his salaries for the entire unexpired period of
nine months and 23 days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
We have already spoken. Thus, this case should not be different from
Serrano.
As a general rule, an unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is
inoperative as if it has not been passed at all. The general rule is supported
by Article 7 of the Civil Code, which provides:
Art. 7. Laws are repealed only by subsequent ones, and their violation or
non-observance shall not be excused by disuse or custom or practice to the
contrary.
The doctrine of operative fact serves as an exception to the aforementioned
general rule. In Planters Products, Inc. v. Fertiphil Corporation,29 we held:
The doctrine of operative fact, as an exception to the general rule, only
applies as a matter of equity and fair play. It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior to a
determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be
erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality will
impose an undue burden on those who have relied on the invalid law. Thus,
it was applied to a criminal case when a declaration of unconstitutionality
would put the accused in double jeopardy or would put in limbo the acts
done by a municipality in reliance upon a law creating it. 30
Following Serrano, we hold that this case should not be included in the
aforementioned exception. After all, it was not the fault of petitioner that he
lost his job due to an act of illegal dismissal committed by respondents. To
rule otherwise would be iniquitous to petitioner and other OFWs, and would,
in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFW’s security of tenure
which an employment contract embodies and actually profit from such
violation based on an unconstitutional provision of law.
In the same vein, we cannot subscribe to respondents’ postulation that the
tanker allowance of US$130.00 should not be included in the computation of
the lump-sum salary to be awarded to petitioner.
First. It is only at this late stage, more particularly in their Memorandum, that
respondents are raising this issue. It was not raised before the LA, the
NLRC, and the CA. They did not even assail the award accorded by the CA,
which computed the lump-sum salary of petitioner at the basic salary of
US$1,430.00, and which clearly included the US$130.00 tanker allowance.
Hence, fair play, justice, and due process dictate that this Court cannot now,
for the first time on appeal, pass upon this question. Matters not taken up
below cannot be raised for the first time on appeal. They must be raised
seasonably in the proceedings before the lower tribunals. Questions raised
on appeal must be within the issues framed by the parties; consequently,
issues not raised before the lower tribunals cannot be raised for the first time
on appeal.311avvphi1
Their unfortunate circumstance makes them easy prey to avaricious
employers. They will climb mountains, cross the seas, endure slave
treatment in foreign lands just to survive. Out of despondence, they will work
under sub-human conditions and accept salaries below the minimum. The
least we can do is to protect them with our laws.
WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision
dated February 28, 2007 and Resolution dated August 30, 2007 are hereby
MODIFIED to the effect that petitioner is AWARDED his salaries for the
entire unexpired portion of his employment contract consisting of nine
months computed at the rate of US$1,430.00 per month. All other awards
are hereby AFFIRMED. No costs.

Second. Respondents’ invocation of Serrano is unavailing. Indeed, we made SO ORDERED.

the following pronouncements in Serrano, to wit:

The word salaries in Section 10(5) does not include overtime and leave pay.
For seafarers like petitioner, DOLE Department Order No. 33, series 1996,
provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other
bonuses; whereas overtime pay is compensation for all work "performed" in
excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.32

A close perusal of the contract reveals that the tanker allowance of

US$130.00 was not categorized as a bonus but was rather encapsulated in
the basic salary clause, hence, forming part of the basic salary of petitioner.
Respondents themselves in their petition for certiorari before the CA averred
that petitioner’s basic salary, pursuant to the contract, was "US$1,300.00 +
US$130.00 tanker allowance."33 If respondents intended it differently, the
contract per se should have indicated that said allowance does not form part
of the basic salary or, simply, the contract should have separated it from the
basic salary clause.

A final note.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte

v. Nayona,34 this Court held that:

Our overseas workers belong to a disadvantaged class. Most of them come

from the poorest sector of our society. Their profile shows they live in
suffocating slums, trapped in an environment of crimes. Hardly literate and in
ill health, their only hope lies in jobs they find with difficulty in our country.
G.R. No. 78763 July 12,1989
MANILA ELECTRIC COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO
M. SIGNO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Dominador Maglalang for private respondent.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking
the annulment of the resolution of the respondent National Labor Relations
Commission dated March 12, 1987 (p. 28, Rollo) in NLRC Case No. NCR-8-
3808-83, entitled, "Apolinario M. Signo, Complainant, versus Manila Electric
Company, Respondents", affirming the decision of the Labor Arbiter which
ordered the reinstatement of private respondent herein, Apolinario Signo, to
his former position without backwages.
The antecedent facts are as follows:
Private respondent Signo was employed in petitioner company as
supervisor-leadman since January 1963 up to the time when his services
were terminated on May 18, 1983.
In 1981, a certain Fernando de Lara filed an application with the petitioner
company for electrical services at his residence at Peñafrancia Subdivision,
Marcos Highway, Antipolo, Rizal. Private respondent Signo facilitated the
processing of the said application as well as the required documentation for
said application at the Municipality of Antipolo, Rizal. In consideration
thereof, private respondent received from Fernando de Lara the amount of
P7,000.00. Signo thereafter filed the application for electric services with the
Power Sales Division of the company.
It was established that the area where the residence of de Lara was located
is not yet within the serviceable point of Meralco, because the place was
beyond the 30-meter distance from the nearest existing Meralco facilities. In
order to expedite the electrical connections at de Lara's residence, certain
employees of the company, including respondent Signo, made it appear in
the application that the sari-sari store at the corner of Marcos Highway, an
entrance to the subdivision, is applicant de Lara's establishment, which, in
reality is not owned by the latter.
As a result of this scheme, the electrical connections to de Lara's residence
were installed and made possible. However, due to the fault of the Power
Sales Division of petitioner company, Fernando de Lara was not billed for
more than a year.
Petitioner company conducted an investigation of the matter and found
respondent Signo responsible for the said irregularities in the installation.
Thus, the services of the latter were terminated on May 18, 1983.
On August 10 1983, respondent Signo filed a complaint for illegal dismissal,
unpaid wages, and separation pay.
After the parties had submitted their position papers, the Labor Arbiter
rendered a decision (p. 79, Rollo) on April 29, 1985, which stated, inter alia:
Verily, complainant's act of inducing the Meralco
employees to effectuate the installation on Engr. de Lara's
residence prejudiced the respondent, and therefore,
complainant himself had indeed became a participant in
the transactions, although not directly, which turned out to
be illegal, not to mention that some of the materials used
therein belongs to Meralco, some of which were inferior
quality. . . .
While complainant may deny the violation, he cannot do
away with company's Code on Employee Discipline, more
particularly Section 7, par. 8 and Section 6, par. 24 thereof
However, as admitted by the respondent, the infraction of
the above cited Code is punishable by reprimand to
dismissal."
... . And in this case, while considering that complainant
indeed committed the above-cited infractions of company
Code of Employee Discipline, We shall also consider his
records of uninterrupted twenty (20) years of service
coupled with two (2) commendations for honesty.
 Likewise, We shall take note that subject offense is his
first, and therefore, to impose the extreme penalty of
dismissal is certainly too drastic. A penalty short of
dismissal is more in keeping with justice, and adherence to
compassionate society.
WHEREFORE, respondent Meralco is hereby directed to
reinstate complainant Apolinario M. Signo to his former
position as Supervisor Leadman without backwages,
considering that he is not at all faultless. He is however,
here warned, that commission of similar offense in the
future, shall be dealt with more severely.
SO ORDERED.
Both parties appealed from the decision to the respondent Commission. On
March 12, 1987, the respondent Commission dismissed both appeals for
lack of merit and affirmed in toto the decision of the Labor Arbiter.
On June 23, 1987, the instant petition was filed with the petitioner
contending that the respondent Commission committed grave abuse of
discretion in affirming the decision of the Labor Arbiter. A temporary
restraining order was issued by this Court on August 3, 1987, enjoining the
respondents from enforcing the questioned resolution of the respondent
Commission.
The issue to resolve in the instant case is whether or not respondent Signo
should be dismissed from petitioner company on grounds of serious
misconduct and loss of trust and confidence.
Petitioner contends that respondent Signo violated Sections 6 and 7 of the
company's Code on Employee Discipline, which provide:
Section 6, Par. 24—Encouraging, inducing or threatening
another employee to perform an act constituting a violation
of this Code or of company work, rules or an offense in
connection with the official duties of the latter, or allowing
himself to be persuaded, induced or influenced to commit
such offense.
Penalty—Reprimand to dismissal, depending upon the
gravity of the offense.
Section 7, Par. 8—Soliciting or receiving money, gift,
share, percentage or benefits from any person, personally
or through the mediation of another, to perform an act
prejudicial to the Company.
Penalty—Dismissal. (pp. 13-14, Rollo)
Petitioner further argues that the acts of private respondent constituted
breach of trust and caused the petitioner company economic losses resulting
from the unbilled electric consumption of de Lara; that in view thereof, the
dismissal of private respondent Signo is proper considering the
circumstances of the case.
The power to dismiss is the normal prerogative of the employer. An
employer, generally, can dismiss or lay-off an employee for just and
authorized causes enumerated under Articles 282 and 283 of the Labor
Code. However, the right of an employer to freely discharge his employees
is subject to regulation by the State, basically in the exercise of its
paramount police power. This is so because the preservation of the lives of
the citizens is a basic duty of the State, more vital than the preservation of
corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782, December
1, 1987,156 SCRA 78).
There is no question that herein respondent Signo is guilty of breach of trust
and violation of company rules, the penalty for which ranges from reprimand
to dismissal depending on the gravity of the offense. However, as earlier
stated, the respondent Commission and the Labor Arbiter found that
dismissal should not be meted to respondent Signo considering his twenty
(20) years of service in the employ of petitioner, without any previous
derogatory record, in addition to the fact that petitioner company had
awarded him in the past, two (2) commendations for honesty. If ever the
petitioner suffered losses resulting from the unlisted electric consumption of
de Lara, this was found to be the fault of petitioner's Power Sales Division.
We find no reason to disturb these findings. Well-established is the principle
that findings of administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality. Judicial review by this Court on
labor cases does not go so far as to evaluate the sufficiency of the evidence
upon which the proper labor officer or office based his or its determination
but is limited to issues of jurisdiction or grave abuse of discretion (Special
Events and Central Shipping Office Workers Union v. San Miguel
Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).
This Court has held time and again, in a number of decisions, that
notwithstanding the existence of a valid cause for dismissal, such as breach
of trust by an employee, nevertheless, dismissal should not be imposed, as it
is too severe a penalty if the latter has been employed for a considerable
length of time in the service of his employer. (Itogon-Suyoc Mines, Inc. v.
NLRC, et al., G.R. No. L- 54280, September 30,1982,117 SCRA 523;
Meracap v. International Ceramics Manufacturing Co., Inc., et al., G.R. Nos.
L-48235-36, July 30,1979, 92 SCRA 412; Sampang v. Inciong, G.R. No.
50992, June 19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056,
October 30,1980, 100 SCRA 691; Philippine Airlines, Inc. v. PALEA, G.R.
No. L-24626, June 28, 1974, 57 SCRA 489).
In a similar case, this Court ruled:
As repeatedly been held by this Court, an employer cannot
legally be compelled to continue with the employment of a
person who admittedly was guilty of breach of trust
towards his employer and whose continuance in the
service of the latter is patently inimical to its interest. The
law in protecting the rights of the laborers, authorized
neither oppression nor self- destruction of the employer.
and paramount consideration. This kind of interpretation gives meaning and
substance to the liberal and compassionate spirit of the law as provided for
in Article 4 of the New Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of the Labor Code
including its implementing rules and regulations shall be resolved in favor of
labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152 SCRA 140).
In view of the foregoing, reinstatement of respondent Signo is proper in the
instant case, but without the award of backwages, considering the good faith
of the employer in dismissing the respondent.
ACCORDINGLY, premises considered, the petition is hereby DISMISSED
and the assailed decision of the National Labor Relations Commission dated
March 12, 1987 is AFFIRMED. The temporary restraining order issued on
August 3, 1987 is lifted.
SO ORDERED.
Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur.

However, taking into account private respondent's 'twenty-

three (23) years of service which undisputedly is
unblemished by any previous derogatory record' as found
by the respondent Commission itself, and since he has
been under preventive suspension during the pendency of
this case, in the absence of a showing that the continued
employment of private respondent would result in
petitioner's oppression or self-destruction, We are of the
considered view that his dismissal is a drastic punishment.
... .

xxx xxx xxx

The ends of social and compassionate justice would

therefore be served if private respondent is reinstated but
without backwages in view of petitioner's obvious good
faith. (Itogon- Suyoc Mines, Inc. v. NLRC, et al., 11 7
SCRA 528)

Further, in carrying out and interpreting the Labor Code's provisions and its
implementing regulations, the workingman's welfare should be the primordial
G.R. No. 98107 August 18, 1997
BENJAMIN C. JUCO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL
HOUSING CORPORATION, respondents.
HERMOSISIMA, JR., J.:
This is a petition for certiorari to set aside the Decision of the National Labor
Relations Commission (NLRC) dated March 14, 1991, which reversed the
Decision dated May 21, 1990 of Labor Arbiter Manuel R Caday, on the
ground of lack of jurisdiction.
Petitioner Benjamin C. Juco was hired as a project engineer of respondent
National Housing Corporation (NHC) from November 16, 1970 to May 14,
1975. On May 14, 1975, he was separated from the service for having been
implicated in a crime of theft and/or malversation of public funds.
On March 25, 1977, petitioner filed a complaint for illegal dismissal against
the NHC with the Department of Labor.
On September 17, 1977, the Labor Arbiter rendered a decision dismissing
the complaint on the ground that the NLRC had no jurisdiction over the
case. 1
Petitioner then elevated the case to the NLRC which rendered a decision on
December 28, 1982, reversing the decision of the Labor Arbiter. 2
Dissatisfied with the decision of the NLRC, respondent NHC appealed
before this Court and on January 17, 1985, we rendered a decision, the
dispositive portion thereof reads as follows:
WHEREFORE, the petition is hereby GRANTED. The
questioned decision of the respondent National Labor
Relations Commission is SET ASIDE. The decision of the
Labor Arbiter dismissing the case before it for lack of
jurisdiction is REINSTATED. 3
On January 6, 1989, petitioner filed with the Civil Service Commission a
complaint for illegal dismissal, with preliminary mandatory injunction. 4
On February 6, 1989, respondent NHC moved for the dismissal of the
complaint on the ground that the Civil Service Commission has no
jurisdiction over the case. 5
On April 11, 1989, the Civil Service Commission issued an order dismissing
the complaint for lack of jurisdiction. It ratiocinated that:
The Board finds the comment and/or motion to dismiss
meritorious. It was not disputed that NHC is a government
corporation without an original charter but
organized/created under the Corporation Code.
Article IX, Section 2 (1) of the 1987 Constitution provides:
The civil service embraces all branches,
subdivisions, instrumentalities and
agencies of the Government, including
government owned and controlled
corporations with original charters.
(emphasis supplied)
From the aforequoted constitutional provision, it is clear
that respondent NHC is not within the scope of the civil
service and is therefore beyond the jurisdiction of this
Board. Moreover, it is pertinent to state that the 1987
Constitution was ratified and became effective on
February 2, 1987.
WHEREFORE, for lack of jurisdiction, the instant
complaint is hereby dismissed.6
On April 28, 1989, petitioner filed with respondent NLRC a complaint for
illegal dismissal with preliminary mandatory injunction against respondent
NHC. 7
On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday
ruled that petitioner was illegally dismissed from his employment by
respondent as there was evidence in the record that the criminal case
against him was purely fabricated, prompting the trial court to dismiss the
charges against him. Hence, he concluded that the dismissal was illegal as it
was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering
that the period from which to reckon the reglementary period of four years
should be from the date of the receipt of the decision of the Civil Service
Commission promulgated on April 11, 1989. He also ratiocinated that:
It appears . . . complainant filed the complaint for illegal
dismissal with the Civil Service Commission on January 6,
1989 and the same was dismissed on April 11, 1989 after
which on April 28, 1989, this case was filed by the
complainant. Prior to that, this case was ruled upon by the
Supreme Court on January 17, 1985 which enjoined the
complainant to go to the Civil Service Commission which
in fact, complainant did. Under the circumstances, there is
merit on the contention that the running of the
reglementary period of four (4) years was suspended with
the filing of the complaint with the said Commission. Verily,
it was not the fault of the respondent for failing to file the
complaint as alleged by the respondent but due to, in the
words of the complainant, a "legal knot" that has to be
untangled. 8
Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of
which reads:
Premises considered, judgment is hereby rendered
declaring the dismissal of the complainant as illegal and
ordering the respondent to immediately reinstate him to his
former position without loss of seniority rights with full back
wages inclusive of allowance and to his other benefits or
equivalent computed from the time it is withheld from him
when he was dismissed on March 27, 1977, until actually
reinstated. 9
On June 1, 1990, respondent NHC filed its appeal before the NLRC and on
March 14, 1991, the NLRC promulgated a decision which reversed the
decision of Labor Arbiter Manuel R. Caday on the ground of lack of
jurisdiction. 10
The primordial issue that confronts us is whether or not public respondent
committed grave abuse of discretion in holding that petitioner is not
governed by the Labor Code.
Under the laws then in force, employees of government-owned and/or
controlled corporations were governed by the Civil Service Law and not by
the Labor Code. Hence,
Article 277 of the Labor Code (PD 442) then provided:
The terms and conditions of employment of all government
employees, including employees of government-owned
and controlled corporations shall be governed by the Civil
Service Law, rules and regulations . . . .
The 1973 Constitution, Article II-B, Section 1(1), on the
other hand provided:
The Civil Service embraces every branch, agency,
subdivision and instrumentality of the government,
including government-owned or controlled corporations.
Although we had earlier ruled in National Housing Corporation v.
Juco, 11 that employees of government-owned and/or controlled
corporations, whether created by special law or formed as subsidiaries under
the general Corporation Law, are governed by the Civil Service Law and not
by the Labor Code, this ruling has been supplanted by the 1987 Constitution.
Thus, the said Constitution now provides:
The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government owned or controlled corporations
with original charter. (Article IX-B, Section 2[1])
In National Service Corporation (NASECO) v. National Labor Relations
Commission, 12 we had the occasion to apply the present Constitution in
deciding whether or not the employees of NASECO are covered by the Civil
Service Law or the Labor Code notwithstanding that the case arose at the
time when the 1973 Constitution was still in effect. We ruled that the NLRC
has jurisdiction over the employees of NASECO on the ground that it is the
1987 Constitution that governs because it is the Constitution in place at the
time of the decision. Furthermore, we ruled that the new phrase "with original
charter" means that government-owned and controlled corporations refer to WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated
corporations chartered by special law as distinguished from corporations March 14, 1991 is hereby REVERSED and the Decision of the Labor Arbiter
organized under the Corporation Code. Thus, NASECO which had been dated May 21, 1990 is REINSTATED.
organized under the general incorporation statute and a subsidiary of the
National Investment Development Corporation, which in turn was a SO ORDERED.
subsidiary of the Philippine National Bank, is exluded from the purview of the
Civil Service Commission.
Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.
We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government

owned corporation organized in 1959 in accordance with Executive Order
No. 399, otherwise known as the Uniform Charter of Government
Corporation, dated January 1, 1959. Its shares of stock are and have been
one hundred percent (100%) owned by the Government from its
incorporation under Act 1459, the former corporation law. The government
entities that own its shares of stock are the Government Service Insurance
System, the Social Security System, the Development Bank of the
Philippines, the National Investment and Development Corporation and the
People's Homesite and Housing Corporation. 13 Considering the fact that the
NHA had been incorporated under Act 1459, the former corporation law, it is
but correct to say that it is a government-owned or controlled corporation
whose employees are subject to the provisions of the Labor Code. This
observation is reiterated in the recent case of Trade Union of the Philippines
and Allied Services (TUPAS) v. National Housing
Corporation, 14 where we held that the NHA is now within the jurisdiction of
the Department of Labor and Employment, it being a government-owned
and/or controlled corporation without an original charter. Furthermore, we
also held that the workers or employees of the NHC (now NHA) undoubtedly
have the right to form unions or employee's organization and that there is no
impediment to the holding of a certification election among them as they are
covered by the Labor Code.

Thus, the NLRC erred in dismissing petitioner's complaint for lack of

jurisdiction because the rule now is that the Civil Service now covers only
government-owned or controlled corporations with original
charters. 15 Having been incorporated under the Corporation Law, its
relations with its personnel are governed by the Labor Code and come under
the jurisdiction of the National Labor Relations Commission.

One final point. Petitioners have been tossed from one forum to another for a
simple illegal dismissal case. It is but apt that we put an end to his dilemna in
the interest of justice.
G.R. No. 87676 December 20, 1989
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL
PARKS DEVELOPMENT COMMITTEE, petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL PARKS
DEVELOPMENT SUPERVISORY ASSOCIATION & THEIR
MEMBERS, respondents.
Bienvenido D. Comia for respondents.
GRIÑO-AQUINO, J.:
The Regional Trial Court of Manila, Branch III, dismissed for lack of
jurisdiction, the petitioner's complaint in Civil Case No. 88- 44048 praying for
a declaration of illegality of the strike of the private respondents and to
restrain the same. The Court of Appeals denied the petitioner's petition for
certiorari, hence, this petition for review.
The key issue in this case is whether the petitioner, National Parks
Development Committee (NPDC), is a government agency, or a private
corporation, for on this issue depends the right of its employees to strike.
This issue came about because although the NPDC was originally created in
1963 under Executive Order No. 30, as the Executive Committee for the
development of the Quezon Memorial, Luneta and other national parks, and
later renamed as the National Parks Development Committee under
Executive Order No. 68, on September 21, 1967, it was registered in the
Securities and Exchange Commission (SEC) as a non-stock and non-profit
corporation, known as "The National Parks Development Committee, Inc."
However, in August, 1987, the NPDC was ordered by the SEC to show
cause why its Certificate of Registration should not be suspended for: (a)
failure to submit the General Information Sheet from 1981 to 1987; (b) failure
to submit its Financial Statements from 1981 to 1986; (c) failure to register
its Corporate Books; and (d) failure to operate for a continuous period of at
least five (5) years since September 27, 1967.
On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed
SEC that his Office had no objection to the suspension, cancellation, or
revocation of the Certificate of Registration of NPDC.
By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC
was attached to the Ministry (later Department) of Tourism and provided with
a separate budget subject to audit by the Commission on Audit.
On September 10, 1987, the Civil Service Commission notified NPDC that
pursuant to Executive Order No. 120, all appointments and other personnel
actions shall be submitted through the Commission.
Meanwhile, the Rizal Park Supervisory Employees Association, consisting of
employees holding supervisory positions in the different areas of the parks,
was organized and it affiliated with the Trade Union of the Philippines and
Allied Services (TUPAS) under Certificate No. 1206.
On June 15, 1987, two collective bargaining agreements were entered into
between NPDC and NPDCEA (TUPAS local Chapter No. 967) and NPDC
and NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until
June 30, 1989.
On March 20, 1988, these unions staged a stake at the Rizal Park, Fort
Santiago, Paco Park, and Pook ni Mariang Makiling at Los Banos, Laguna,
alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch
III, a complaint against the union to declare the strike illegal and to restrain it
on the ground that the strikers, being government employees, have no right
to strike although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted the
restraining order for lack of jurisdiction. It held that the case "properly falls
under the jurisdiction of the Department of Labor," because "there exists an
employer-employee relationship" between NPDC and the strikers, and "that
the acts complained of in the complaint, and which plaintiff seeks to enjoin in
this action, fall under paragraph 5 of Article 217 of the Labor Code, ..., in
relation to Art. 265 of the same Code, hence, jurisdiction over said acts does
not belong to this Court but to the Labor Arbiters of the Department of
Labor." (p. 142, Rollo.).
Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No.
14204). On March 31, 1989, the Court of appeals affirmed the order of the
trial court, hence, this petition for review. The petitioner alleges that the
Court of Appeals erred:
1) in not holding that the NPDC employees are covered by
the Civil Service Law; and
2) in ruling that petitioner's labor dispute with its
employees is cognizable by the Department of Labor.
We have considered the petition filed by the Solicitor General on behalf of
NPDC and the comments thereto and are persuaded that it is meritorious.
In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 84637-39,
August 2, 1989, we ruled that the NPDC is an agency of the government, not
a government-owned or controlled corporation, hence, the Sandiganbayan
had jurisdiction over its acting director who committed estafa. We held thus:
Since NPDC is a government agency, its employees are covered by civil
service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its
employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize
and join unions of their choice, there is as yet no law permitting them to
strike. In case of a labor dispute between the employees and the
government, Section 15 of Executive Order No. 180 dated June 1, 1987
provides that the Public Sector Labor- Management Council, not the
Department of Labor and Employment, shall hear the dispute. Clearly, the
Court of Appeals and the lower court erred in holding that the labor dispute
between the NPDC and the members of the NPDSA is cognizable by the
Department of Labor and Employment.
WHEREFORE, the petition for review is granted. The decision of the Court
of Appeals in CA-G.R. SP No. 14204 is hereby set aside. The private
respondents' complaint should be filed in the Public Sector Labor-
Management Council as provided in Section 15 of Executive Order No. 180.
Costs against the private respondents.

The National Parks Development Committee was created SO ORDERED.

originally as an Executive Committee on January 14,1963,
for the development of the Quezon Memorial, Luneta and
other national parks (Executive Order No. 30). It was later Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
designated as the National Parks Development Committee
(NPDC) on February 7, 1974 (E.O. No. 69). On January 9,
1966, Mrs. Imelda R. Marcos and Teodoro F. Valencia
were designated Chairman and Vice- Chairman
respectively (E.O. No. 3). Despite an attempt to transfer it
to the Bureau of Forest Development, Department of
Natural Resources, on December 1, 1975 (Letter of
Implementation No. 39, issued pursuant to PD No. 830,
dated November 27, 1975), the NPDC has remained
under the Office of the President (E.O. No. 709, dated July
27, 1981).

Since 1977 to 1981, the annual appropriations decrees

listed NPDC as a regular government agency under the
Office of the President and allotments for its maintenance
and operating expenses were issued direct to NPDC (Exh.
10-A Perlas, Item No. 2, 3). (Italics ours.)