Case No.

DIVISION
[ GR No. 194649, Aug 10, 2016 ]
SOLIMAN SECURITY SERVICES v. IGMEDIO C. SARMIENTO +
RESOLUTION

PEREZ, J.:
This is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, assailing
the Decision[2] dated 27 August 2010 and the Resolution[3] dated 25 November 2010 of the
Court of Appeals in CA-G.R. SP No. 110905, which affirmed the 2 June 2009 Decision[4] of
the National Labor Relations Commission (NLRC) declaring respondents Igmedio C.
Sarmiento (Sarmiento), Jose Jun Cada (Cada), and Ervin R. Robis (Robis) to have been
illegally dismissed from employment.

The Antecedent Facts

This case stemmed from a complaint filed by respondents against petitioners Soliman
Security Services, Inc. (the agency) and Teresita L. Soliman (Teresita) for illegal dismissal;
underpayment of salaries, overtime pay and premium pay for holiday and rest day;
damages; attorney's fees; illegal deduction and non-payment of ECOLA.

Respondents were hired as security guards by petitioner Soliman Security Services, Inc.
and were assigned to Interphil Laboratories, working seven (7) days a week for twelve
(12) straight hours daily. Respondents alleged that during their employment - from May
1997 until January 2007 for Robis and from May 2003 until January 2007 for Sarmiento
and Cada — they were paid only P275.00 a day for eight (8) hours of work or P325.00 for
twelve (12) hours of work but were not paid ECOLA, night shift differentials, holiday pay,
as well as rest day premiums. For cash bond and mutual aid contributions, the amounts of
P400.00 and P100.00, respectively, were deducted from their salaries per month.
Respondents claimed that they sought a discussion of the nonpayment of their benefits
with petitioner Teresita Soliman but the latter refused to take heed and told them to tender
their resignations instead. According to respondents, on 21 January 2007, they received an
order relieving them from their posts and since then, they were not given any assignments.

On the other hand, the agency's version of the story hinges on an alleged placement of the
respondents under a "floating status." The agency admitted relieving the respondents from
duty on 20 January 2007 but insists that the same was only done pursuant to its contract
with client Interphil Laboratories. To support this claim, petitioners presented a standing
contract[5] with Astrazeneca Pharmaceuticals, Interphil's predecessor-in-interest. The
contract contained stipulations pertaining to the client's policy of replacing guards on duty
every six (6) months without repeat assignment. The agency further posits that respondent
guards were directed several times to report to the office for their new assignments but
they failed to comply with such directives.

A review of the records reveals the following timeline: (1) on 20 January 2007, the agency
sent respondents notices informing them that they were being relieved from their current
posts pursuant to a standing contract with Interphil Laboratories[6] with directives for
respondents to report to the office for their new assignments; (2) on 7 February 2007, the
agency sent another letter addressed to Robis, directing him to report to the office for his
new assignment;[7] (3) on 22 February 2007, the first complaint for illegal dismissal was
filed with the Labor Arbiter;[8] (4) on 26 March 2007, a hearing before the Executive Labor
Arbiter was conducted, where petitioner agency's representative presented respondents
an offer to return to work;[9] (5) the agency sent respondents letters dated 24[10] and
26[11] April 2007, directing them to clarify their intentions as they have not been reporting
to seek new assignments; (6) on 3 August 2007, respondents filed a Supplemental
Complaint,[12] the purpose of which was to anticipate the possibility that the agency might
set up the defense of pre-maturity of filing of the constructive dismissal complaint; (7)
respondents executed their respective complaint affidavits on 8 August 2007;[13] (8) and
finally after the parties submitted their respective position papers, the Executive Labor
Arbiter rendered a decision on 4 January 2008.[14]

Finding that respondents' failure to comply with the Memoranda amounted to

abandonment, the Labor Arbiter dismissed the complaint.[15] The Labor Arbiter concluded
that there can be no dismissal to speak of, much less an illegal dismissal. On appeal, the
NLRC reversed the 4 January 2008 decision of the the Executive Labor Arbiter, ultimately
finding respondents to have been illegally dismissed. The NLRC ruled that the letters
directing respondents to "clarify their intentions" were not in the nature of return-to-work
orders, which may effectively interrupt their floating status. The NLRC observed that the
Memoranda received by respondents were but mere afterthoughts devised after the case
for illegal dismissal was filed. The NLRC also put the agency to task for failing to traverse
the guards' averment that there were other employee-guards who stayed with the same
client beyond the six-month term imposed.

Aggrieved, the petitioners brought the case to the Court of Appeals, asking the court to
issue an extraordinary writ of certiorari to reverse the NLRC decision. Reiterating that the
agency had no legitimate reasons for placing respondents on prolonged floating status, the
appellate court affirmed the decision of the NLRC. The dispositive portion of the NLRC
decision reads:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter Fatima
Jambaro-Franco dated 4 January 2008 is reversed and set aside and a new one is rendered
ordering [petitioners] to pay [respondents] the following:

1. Backwages from 21 January 2007 until finality of this Decision;

2. Separation pay equivalent to one-month salary for every year of service from the date of
employment as appearing in the complaint also up to finality of this Decision; and

3. Salary differentials for the period not yet barred by prescription.

All other claims are dismissed for lack of merit.[16]

Petitioners sought a reconsideration of the decision but the appellate court denied the
same. Hence, this Petition for Review on Certiorari.

Our Ruling

After a careful evaluation of the records of the case, this Court finds no reversible error in
the NLRC decision as affirmed by the Court of Appeals. The petition is denied for lack of
merit.

Placement on floating status as a management prerogative

The Court is mindful of the fact that most contracts for services stipulate that the client may
request the replacement of security guards assigned to it.[17] Indeed, the employer has the
right to transfer or assign its employees from one area of operation to another, "provided
there is no demotion in rank or diminution of salary, benefits, and other privileges, and the
transfer is not motivated by discrimination or bad faith, or effected as a form of
punishment or demotion without sufficient cause."[18] During that period of time when they
are in between assignments or when they are made to wait for new assignments after
being relieved from a previous post, guards are considered on temporary "off-detail" or
under "floating status". It has long been recognized by this Court that the industry practice
of placing security guards on floating status does not constitute dismissal, as the
assignments primarily depend on the contracts entered into by the agency with third
parties[19] and the same is a valid exercise of management prerogative. However, such
practice must be exercised in good faith and courts must be vigilant in assessing the
different situations, especially considering that the security guard does not receive any
salary or any financial assistance provided by law when placed on floating status.[20]

Constructive Dismissal

Though respondents were not per se dismissed on 20 January 2007 when they were
ordered relieved from their posts, we find that they were constructively dismissed when
they were not given new assignments. As previously mentioned, placing security guards
under floating status or temporary off-detail has been an established industry practice. It
must be emphasized, however, that they cannot be placed under floating status
indefinitely; thus, the Court has applied Article 292[21] (formerly Article 286) of the Labor
Code by analogy to set the specific period of temporary off-detail to a maximum of six (6)
months.[22] It must also be clarified that such provision does not entitle agencies to retain
security guards on floating status for a period of not more than six (6) months for whatever
reason. Placing employees on floating status requires the dire exigency of the
employer's bona fide suspension of operation. In security services, this happens when there
is a surplus of security guards over available assignments as when the clients that do not
renew their contracts with the security agency are more than those clients that do.[23]

The crux of the controversy lies in the consequences of the lapse of a significant period of
time without respondents having been reassigned. Petitioner agency faults the
respondents for their repeated failure to comply with the directives to report to the office
for their new assignments. To support its argument, petitioner agency submitted in
evidence notices addressed to respondents, which read:

You are directed to report to the undersigned to clarify your intentions as you have not
been reporting to seek a new assignment after your relief from Interphil.

To this date, we have not received any update from you neither did you update your
government requirements x x x

We are giving you up to May 10, 2007 to comply or we will be forced to drop you from our
roster and terminate your services for abandonment of work and insubordination.

Consider this our final warning.[24] (Emphasis ours)

As for respondents, they maintain that the offers of new assignments were mere empty
promises. Respondents claim that they have been reporting to the office for new
assignments only to be repeatedly turned down and ignored by petitioner's office
personnel.[25]

We rule that such notices were mere afterthoughts. The notices were allegedly sent to
respondents on 24 and 26 April 24 2007, a month after the hearing before the Executive
Labor Arbiter. By the time the notices were sent, a complaint for illegal dismissal with a
prayer for reinstatement was already filed. In fact, the agency, through its representative,
already had the chance to discuss new assignments during the hearing before the Labor
Arbiter. Instead of taking the opportunity to clarify during the hearing that respondents
were not dismissed but merely placed on floating status and instead of specifying details
about the available new assignments, the agency merely gave out empty promises. No
mention was made regarding specific details of these pending new assignments. If
respondent guards indeed had new assignments awaiting them, as what the agency has
 been insinuating since the day respondents were relieved from their posts, the agency
should have identified these assignments during the hearing instead of asking respondents
to report back to the office. The agency's statement in the notices - that respondents have
not clarified their intentions because they have not reported to seek new assignments since
they were relieved from their posts - is specious at best. As mentioned, before these notices
were sent out, a complaint was already filed and a hearing before the Labor Arbiter had
already been conducted. The complaint clarified the intention of respondents. Indeed,
respondents' complaint for illegal dismissal with prayer for reinstatement is inconsistent
with the agency's claim that respondents did not report for reassignment despite the
notices directing them to do so. It is evident that the notices sent by the agency were mere
ostensible offers for new assignments. It was intended to cover the illegality of the
termination of respondents' employment.

Lack of service agreement for a continuous period of 6 months as an authorized cause

for termination

It is significant to note that had the reason for such failure to reassign respondents been
the lack of service agreements for a continuous period of six (6) months, petitioner agency
could have exercised its right to terminate respondents for an authorized cause upon
compliance with the procedural requirements.

On this score, Department Order No. 14, Series of 2001[26] (DO 14-01) of the Department of
Labor and Employment is instructive. Section 9.3 of the same provides:

9.3 Reserved status - x x x

xxxx

If after a period of 6 months, the security agency/employer cannot provide work or give
assignment to the reserved security guard, the latter can be dismissed from service and
shall be entitled to separation pay as described in subsection 6.5

xxxx
In relation thereto, Section 6.5 of DO 14-01 treats such lack of service assignment for a
continuous period of six (6) months as an authorized cause for termination of employment
entitling the security guard to separation pay, to wit:

6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are
entitled to the mandatory benefits as listed below, although the same may not be included
in the monthly cost distribution in the contracts, except the required premiums form their
coverage:

a. Maternity benefit as provided under SS Law;

b. Separation pay if the termination of employment is for authorized cause as provided by

law and as enumerated below:
Half-Month Pay Per Year of Service, but in no case less than One Month Pay if separation pay
is due to:

1. Retrenchment or reduction of personnel effected by management to prevent serious losses;

2. Closure or cessation of operation of an establishment not due to serious losses or financial

reverses;

3. Illness or disease not curable within a period of 6 months and continued employment is
prohibited by law or prejudicial to the employee's health or that of co-employees;
4. Lack of service assignment for a continuous period of 6 months. (Emphasis and
underlining supplied)
xxxx
It bears stressing that the only time a prolonged floating status is considered an authorized
cause for dismissal is when the security agency experiences a surplus of security guards
brought about by lack of clients.[27] We quote with approval the pertinent portion of the
NLRC's decision as affirmed by the appellate court, to wit:

Being placed on floating status is only legitimate when guaranteed by bona fide business
exigencies. In security services, this happens when there is a surplus of security guards
over available assignments as when the clients that do not renew their contracts with the
security agency are more than those clients that do x x x.[28]
Otherwise stated, absent such justification, the placing of a security guard on floating status
is tantamount to constructive dismissal. And, when the floating status is justified, the lapse
of a continuous period of six (6) months results in an authorized cause for termination of
employment, the security guard being entitled, however, to separation pay.

As for the procedural aspect, employer agencies must be reminded that to validly terminate
a security guard for lack of service assignment for a continuous period of six months, the
agency must comply with the provisions of Article 289 (previously Art. 283) of the Labor
Code,[29] "which mandates that a written notice should be served on the employee on
temporary off-detail or floating status and to the DOLE one (1) month before the intended
date of termination."[30] Sec. 9.2 of DO 14-01 provides for a similar procedure, to wit:

9.2 Notice of Termination - In case of termination of employment due to authorized causes

provided in Article 283 and 284 of the Labor Code and in the succeeding subsection, the
employer shall serve a written notice on the security guard/personnel and the DOLE at
least one (1) month before the intended date thereof.
It cannot be denied that the placement of security guards on floating status may be subject
to abuse by agencies, considering that they are not obliged to pay the security guards while
placed on floating status. Recognizing the jurisprudence elaborating on the application of
DO 14-01, we now provide a summary as follows:

The floating status period, wherein the security guards are not paid, should not last longer
than six (6) months as provided by law. Before the lapse of six (6) months, the agency
should have recalled the security guard for a new assignment. If the agency failed to do so
due to the lack of service agreements for a continuous period of six (6) months, an
authorized cause for dismissal as per DO 14-01, the security guard may be considered
permanently retrenched and validly dismissed upon compliance with the procedural
requirements laid down by the Department Order and the Labor Code.[31] It must be
emphasized however, that in order for the dismissal to be valid and in order for the
employer agency to free itself from any liability for illegal dismissal, the justification for the
failure to reassign should be the lack of service agreements for a continuous period of six
(6) months, aside from the other authorized causes provided by the Labor Code.
Corollarily, placing the security guard on floating status in bad faith, as when there is
failure to reassign despite the existence of sufficient service agreements will make the
employer agency liable for illegal dismissal. In such cases, there is no bona fide business
exigency which calls for the temporary retrenchment or laying-off of the security guards.
Lastly, if six (6) months have already lapsed and the employer agency failed to either (a)
reassign the security guard or (b) validly dismiss and give him/her the corresponding
separation pay, the security guard may be considered to have been constructively
dismissed.[32]
On the finding that respondents are entitled to their money claims

In its decision, the Court of Appeals discussed how the NLRC might have erred in its
computations of the wages received by the private respondents. However, despite such
observation, the appellate court dismissed the petition for certiorari, ultimately holding
that the NLRC based its decision on all the evidence presented, with nary an abuse of the
exercise of its discretion. The appellate court found that petitioners failed to discharge
their burden of showing at least an abuse of discretion on the part of the NLRC, when the
latter found that the security guards were underpaid. Petitioners now fault the appellate
court for affirming the NLRC decision declaring them liable for private respondents'
monetary claims.

Petitioners' contention is bereft of merit

In petitioners' Motion for Reconsideration of the NLRC decision, they invested heavily in
the argument about the validity of the dismissal, stating only briefly in the penultimate
paragraph their manifestation to reserve a purported right to submit additional evidence in
a supplemental pleading, if necessary to strengthen their arguments regarding the award of
monetary claims. The Court of Appeals correctly ruled that such scheme subverts the
reglementary periods established by law and more significantly, the NLRC would no longer
have the opportunity to correct itself, assuming errors, since the Motion for
Reconsideration filed before it did not detail the computations regarding monetary
benefits. Said computations were only subsequently raised in their petition before the
appellate court.

In the Court of Appeals, petitioners adopted a similar scheme. In their Petition

for Certiorari, they did not anymore dispute the NLRC's determinations as to the monetary
aspects. Instead, their arguments on the alleged issue of monetary awards were inserted in
their Reply to Comment pleading. The Court of Appeals correctly ruled that such scheme
contradicts elementary due process as the arguments raised were not dealt with in the
comment the Reply supposedly responds to.

From the foregoing, it is quite obvious that the NLRC may not be faulted for relying on the
evidence presented before it when it made its computations for underpayment. Neither
may the appellate court be faulted for declaring that the NLRC did not abuse its discretion.
The task of resolving the issue on monetary claims, purely factual, properly pertains to the
NLRC as the quasi-judicial appellate body to which these documents were presented to
review the arbiter's ruling.[33] The appellate court correctly ruled that the usual appeal in
labor cases is exhausted after the NLRC has decided. Petitioner cannot fault the Court of
Appeals in affirming the NLRC decision despite the alleged computational error as the
special civil action of certiorari is a remedy to correct errors of jurisdiction and not mere
errors of judgment. Consequently, an error of judgment that the court may commit in the
exercise of its jurisdiction is not correctable through the original civil action of certiorari.

The present petition is a Rule 45 petition reviewing a Rule 65 ruling of the Court of
Appeals. This Court's jurisdiction is thus limited to errors of law which the appellate court
might have committed in its Rule 65 ruling.[34] In essence, in ruling for legal correctness,
"we have to view the CA's decision in the same context that the petition for certiorari it
ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the
case, was correct."[35] After a meticulous review of the facts of the case, the records,
relevant laws and jurisprudence, we rule that the Court of Appeals correctly determined
that the NLRC did not abuse its discretion when it held that respondents were
constructively dismissed and entitled to their monetary claims.

WHEREFORE, the petition is DENIED. The assailed 27 August 2010 Decision and 25
 November 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 110905
are AFFIRMED. Accordingly, petitioners Soliman Security Services, Inc. and Teresita L.
Soliman are hereby ORDERED to pay respondents Igmedio C. Sarmiento, Jose Jun Cada,
and Ervin R. Robis, to wit:

1. Backwages from 21 January 2007 until finality of this decision;

2. Separation pay equivalent to one-month salary for every year of service from the date of
employment as appearing in the complaint also up to finality of this decision; and

3. Salary differentials for the period not yet barred by prescription.

All other claims are dismissed for lack of merit.

SO ORDERED.
Case No. 19

SECOND DIVISION

WPP MARKETING COMMUNICATIONS, G.R. No. 169207

INC.,
JOHN STEEDMAN,
MARK WEBSTER, and
NOMINADA LANSANG,
Petitioners,

- versus -

JOCELYN M. GALERA,
Respondent.
x-------------------x
JOCELYN M. GALERA,
Petitioner, G.R. No. 169239

- versus - Present:

CARPIO, Acting C.J.,

Chairperson,
WPP MARKETING BRION,
COMMUNICATIONS, INC., JOHN DEL CASTILLO,
STEEDMAN, ABAD, and
MARK WEBSTER, and PEREZ, JJ.
NOMINADA LANSANG,
Respondents. Promulgated:

March 25, 2010

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

DECISION

CARPIO, Acting C.J.:

The Case
G.R. Nos. 169207 and 169239 are petitions for review[1] assailing the Decision[2] promulgated
on 14 April 2005 as well as the Resolution[3] promulgated on 1 August 2005 of the Court of
Appeals (appellate court) in CA-G.R. SP No. 78721. The appellate court granted and gave due
course to the petition filed by Jocelyn M. Galera(Galera). The appellate courts decision reversed
and set aside that of the National Labor Relations Commission (NLRC), and directed WPP
Marketing Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid
housing benefit, unpaid personal and accident insurance benefits, cash value under the
companys pension plan, 30 days paid holiday benefit, moral damages, exemplary damages, 10%
of the total judgment award as attorneys fees, and costs of the suit.

The Facts

The appellate court narrated the facts as follows:

Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited
from the United States of America by private respondent John Steedman,
Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a
corporation based in Hong Kong, China, to work in the Philippines for private
respondent WPP Marketing Communications, Inc. (WPP), a corporation
registered and operating under the laws of Philippines. GALERA accepted the
offer and she signed an Employment Contract entitled Confirmation of
Appointment and Statement of Terms and Conditions (Annex B to Petition for
Certiorari). The relevant portions of the contract entered into between the
parties are as follows:

Particulars:
Name: Jocelyn M. Galera
Address: 163 Mediterranean Avenue
Hayward, CA 94544

Position: Managing Director

Mindshare Philippines
Annual Salary: Peso 3,924,000
Start Date: 1 September 1999
Commencement Date: 1 September 1999
(for continuous service)
Office: Mindshare Manila

6. Housing Allowance
The Company will provide suitable housing in Manila at a
maximum cost (including management fee and other associated
costs) of Peso 576,000 per annum.

7. Other benefits.
The Company will provide you with a fully maintained company car
and a driver.
The Company will continue to provide medical, health, life and
personal accident insurance plans, to an amount not exceeding
Peso 300,000 per annum, in accordance with the terms of the
respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way
business class air tickets from USA to Manila and the related
shipping and relocation cost not exceeding US$5,000 supported by
proper documentation. If you leave the Company within one year,
you will reimburse the Company in full for all costs of the initial
relocation as described therein.
You will participate in the JWT Pension Plan under the terms of this
plan, the Company reserves the right to transfer this benefit to a
Mindshare Pension Plan in the future, if so required.

8. Holidays
You are entitled to 20 days paid holiday in addition to public
holidays per calendar year to be taken at times agreed with the
Company. Carry-over of unused accrued holiday entitlement into a
new holiday year will not normally be allowed. No payment will be
made for holidays not taken. On termination of your employment,
unless you have been summarily dismissed, you will be entitled to
receive payment for unused accrued holiday pay. Any holiday taken
in excess of your entitlement shall be deducted from your final
salary payment.

9. Leave Due to Sickness or Injury

The maximum provision for sick leave is 15 working days per
calendar year.
 12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark,
trade name, designs, copyrights or get-ups made, discovered or
created by you during the continuance of your employment
hereunder relating to the business of the Company shall belong to
and shall be the absolute property of the Company. If required to
do so by the Company (whether during or after the termination of
your employment) you shall at the expense of the company execute
all instruments and do all things necessary to vest in ownership for
all other rights, title and interests (including any registered rights
therein) in such discovery, invention, improvement in procedure,
trademark, trade name, design, copyright or get-up in the Company
(or its Nominee) absolutely and as sole beneficial owner.

14. Notice.
The first three months of your employment will be a trial period
during which either you or the Company may terminate your
employment on one weeks notice. If at the end of that period, the
Company is satisfied with your performance, you will become a
permanent employee. Thereafter you will give Company and the
Company will give you three months notice of termination of
employment. The above is always subject to the following: (1) the
Companys right to terminate the contract of employment on no or
short notice where you are in breach of contract; (2) your
employment will at any event cease without notice on your
retirement date when you are 60 years of age.

SIGNED JOCELYN M. GALERA 8-16-99

Date of Borth [sic] 12-25-55

Employment of GALERA with private respondent WPP became effective

on September 1, 1999 solely on the instruction of the CEO and upon signing of
the contract, without any further action from the Board of Directors of
private respondent WPP.

Four months had passed when private respondent WPP filed before the Bureau of
Immigration an application for petitioner GALERA to receive a working visa,
wherein she was designated as Vice President of WPP. Petitioner alleged that she
was constrained to sign the application in order that she could remain in the
Philippines and retain her employment.

Then, on December 14, 2000, petitioner GALERA alleged she was verbally
notified by private respondent STEEDMAN that her services had been terminated
from private respondent WPP. A termination letter followed the next day.[4]

On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service
incentive leave pay, 13th month pay, incentive plan, actual and moral damages, and attorneys
fees against WPP and/or John Steedman (Steedman), Mark Webster (Webster)
and Nominada Lansang (Lansang). The case was docketed as NLRC NCR Case No. 30-01-00044-
01.

The Labor Arbiters Ruling

 In his Decision dated 31 January 2002, Labor
Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman, Webster,
and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that Galera was
not only illegally dismissed but was also not accorded due process. Arbiter Madriaga explained,
thus:

[WPP] failed to observe the two-notice rule. [WPP] through

respondent Steedman for a five (5) minute meeting on December 14, 2000 where
she was verbally told that as of that day, her employment was being
terminated. [WPP] did not give [Galera] an opportunity to defend herself and
explain her side. [Galera] was even prohibited from reporting for work that day
and was told not to report for work the next day as it would be awkward for her
and respondent Steedman to be in the same premises after her
termination. [WPP] only served [Galera] her written notice of termination only on
15 December 2001, one day after she was verbally apprised thereof.

The law mandates that the dismissal must be properly done otherwise, the
termination is gravely defective and may be declared unlawful as we hereby hold
[Galeras] dismissal to be illegal and unlawful. Where there is no showing of a
clear, valid and legal cause for the termination of employment, the law considers
the matter a case of illegal dismissal and the burden is on the employer to prove
that the termination was for a valid or authorized cause. The law mandates that
both the substantive and procedural aspects of due process should be
observed. The facts clearly show that respondents were remiss on both
aspects. Perforce, the dismissal is void and unlawful.

xxxx
Considering the work performance and achievements of [Galera] for the year
2000, we do not find any basis for the alleged claim of incompetence by herein
respondents. Had [Galera] been really incompetent, she would not have been able
to generate enormous amounts [sic] of revenues and business for [WPP]. She also
appears to be well liked as a leader by her subordinates, who have come forth in
support of [Galera]. These facts remain undisputed by respondents.

A mans job being a property right duly protected by our laws, an employer who
deprives an employee [of] the right to defend himself is liable for damages
consistent with Article 32 of the Civil Code. To allow an employer to terminate
the employment of his worker based merely on allegations without proof places
the [employee] in an uncertain situation. The unflinching rule in illegal dismissal
cases is that the employer bears the burden of proof.

In the instant case, respondents have not been able to muster evidence to counter
[Galeras] allegations. [Galeras] allegations remain and stand absent proof from
respondents rebutting them. Hence, our finding of illegal dismissal against
respondents who clearly have conspired in bad faith to deprive [Galera] of her
right to substantive and procedural due process.[5]

The dispositive portion of Arbiter Madriagas decision reads as follows:

WHEREFORE, premises considered, we hereby hold herein respondents liable

for illegal dismissal and damages, and award to [Galera], by virtue of her
expatriate status, the following:

a. Reinstatement without loss of seniority rights.

 b. Backwages amounting to $120,000 per year at P50.00 to US $1
exchange rate, 13th month pay, transportation and housing benefits.

c. Remuneration for business acquisitions amounting to Two

Million Eight Hundred Fifty Thousand Pesos (P2,850,000.00) and Media
Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or
a total of not less than One Hundred Thousand US Dollars ($100,000.00).

d. US Tax Protection of up to 35% coverage equivalent to Thirty

Eight Thousand US Dollars ($38,000).

e. Moral damages including implied defamation and punitive

damages equivalent to Two Million Dollars (US$2,000,000.00).

f. Exemplary damages equivalent to One Million Dollars

($1,000,000.00).

g. Attorneys fees of 10% of the total award herein.

SO ORDERED.[6]

The Ruling of the NLRC

The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its
Decision[7] promulgated on 19 February 2003, the NLRC stressed that Galera was WPPs Vice-
President, and therefore, a corporate officer at the time she was removed by the Board of
Directors on 14 December 2000. The NLRC stated thus:
It matters not that her having been elected by the Board to an added position of
being a member of the Board of Directors did not take effect as her May 31, 2000
election to such added position was conditioned to be effective upon approval by
SEC of the Amended By-Laws, an approval which took place only in February 21,
2001, i.e., after her removal on December 14, 2000. What counts is, at the time of
her removal, she continued to be WPPs Vice-President, a corporate officer, on
hold over capacity.

Ms. Galeras claim that she was not a corporate officer at the time of her removal
because her May 31, 2000 election as Vice President for Media,
under WPPs Amended By-Laws, was subject to the approval by the Securities and
Exchange Commission and that the SEC approved the Amended By-Laws only in
February 2001. Such claim is unavailing. Even if Ms. Galeras subsequent election
as Vice President for Media on May 31, 2000 was subject to approval by the SEC,
she continued to hold her previous position as Vice President under the
December 31, 1999 election until such time that her successor is duly elected and
qualified. It is a basic principle in corporation law, which principle is also
embodied in WPPs by-laws, that a corporate officer continues to hold his position
as such until his successor has been duly elected and qualified. When
Ms. Galera was elected as Vice President on December 31, 1999, she was
supposed to have held that position until her successor has been duly elected and
qualified. The record shows that Ms. Galera was not replaced by anyone. She
continued to be Vice President of WPP with the same operational title of
Managing Director for Mindshare and continued to perform the same functions
she was performing prior to her May 31, 2000 election.
 In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the
definition of corporate officer for purposes of intra-corporate controversy was
even broadened to include a Comptroller/Assistant Manager who was appointed
by the General Manager, and whose appointment was later approved by the
Board of Directors. In this case, the position of comptroller was not even
expressly mentioned in the By-Laws of the corporation, and yet, the Supreme
Court found him to be a corporate officer. The Court ruled that

(since) petitioners appointment as comptroller required the

approval and formal action of IBCs Board of Directors to become
valid, it is clear therefore that petitioner is a corporate officer
whose dismissal may be the subject of a controversy cognizable by
the SEC... Had the petitioner been an ordinary employee, such
board action would not have been required.

Such being the case, the imperatives of law require that we hold that the Arbiter
below had no jurisdiction over Galeras case as, again, she was a corporate officer
at the time of her removal.

WHEREFORE, the appeals of petitioner from the Decision of Labor

Arbiter Edgardo Madriaga dated January 31, 2002 and his Order dated March 21,
2002, respectively, are granted.The January 31, 2002 decision of the Labor
Arbiter is set aside for being null and void and the temporary restraining order
we issued on April 24, 2002 is hereby made permanent. The complaint of
Jocelyn Galera is dismissed for lack of jurisdiction.

SO ORDERED.[8]

In its Resolution[9] promulgated on 4 June 2003, the NLRC further stated:

We are fully convinced that this is indeed an intra-corporate dispute which is

beyond the labor arbiters jurisdiction. These consolidated cases clearly [involve]
the relationship between a corporation and its officer and is properly within the
definition of an intra-corporate relationship which, under P.D. No. 902-A, is
within the jurisdiction of the SEC (now the commercial courts). Such being the
case, We are constrained to rule that the Labor Arbiter below had no jurisdiction
over Ms. Galeras complaint for illegal dismissal.

WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied
for lack of merit. We reiterate our February 19, 2003 Decision setting aside the
Labor Arbiters Decision dated January 31, 2002 for being null and void.
SO ORDERED.[10]

Galera assailed the NLRCs decision and resolution before the appellate court and raised a lone
assignment of error.

The National Labor Relations Commission acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it reversed the decision of
the Labor Arbiter not on the merits but for alleged lack of jurisdiction.[11]
 The Decision of the Appellate Court

The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled
that the NLRCs dismissal of Galeras appeal is not in accord with jurisprudence. A person could
be considered a corporate officer only if appointed as such by a corporations Board
of Directors, or if pursuant to the power given them by either the Articles of Incorporation or
the By-Laws.[12]

The appellate court explained:

A corporation, through its board of directors, could only act in the manner and
within the formalities, if any, prescribed by its charter or by the general law. If the
action of the Board is ultra vires such is motu proprio void ab initio and without
legal effect whatsoever. The by-laws of a corporation are its own private laws
which substantially have the same effect as the laws of the corporation. They are,
in effect, written into the charter. In this sense, they beome part of the
fundamental law of the corporation with which the corporation and its directors
and officers must comply.

Even if petitioner GALERA had been appointed by the Board of Directors on

December 31, 1999, private respondent WPPs By-Laws provided for only one
Vice-President, a position already occupied by private respondent Webster. The
same defect also stains the Board of Directors appointment of petitioner GALERA
as a Director of the corporation, because at that time the By-Laws provided for
only five directors. In addition, the By-laws only empowered the Board of
Directors to appoint a general manager and/or assistant general manager as
corporate officers in addition to a chairman, president, vice-president and
treasurer. There is no mention of a corporate officer entitled Managing Director.

Hence, when the Board of Directors enacted the Resolutions of December 31,
1999 and May 31, 2000, it exceeded its authority under the By-Laws and are,
therefore, ultra vires.Although private respondent WPP sought to amend these
defects by filing Amended By-Laws with the Securities and Exchange
Commission, they did not validate the ultra viresresolutions because the
Amended By-Laws did not take effect until February 16, 2001, when it was
approved by the SEC. Since by-laws operate only prospectively, they could not
validate the ultra vires resolutions.[13]

The dispositive portion of the appellate courts decision reads:

WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The
assailed Decision of the National Labor Relations Commission is hereby
REVERSED and SET ASIDE and a new one is entered DIRECTING private
respondent WPP MARKETING COMMUNICATIONS, INC. to:

1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per

annum plus three months from her summary December 14, 2000
dismissal up to March 14, 2001 because three months notice is
required under the contract, plus 13th month pay, bonuses and general
increases to which she would have been normally entitled, had she not
been dismissed and had she not been forced to stop working, including
US tax protection of up to 35% coverage which she had been enjoying
as an expatriate;
 2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation
pay (1 years);

3. Pay x x x GALERA any unpaid housing benefit for the 18 months of her
employment in the service to the Company as an expatriate in Manila,
Philippines at the rate of P576,000 per year; unpaid personal and
accident insurance benefits for premiums at the rate of P300,000.00
per year; whatever cash value in the JWT Pension Plan; and thirty days
paid holiday benefit under the contract for the 1 calendar years with
the Company;

4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral

damages;

5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary

damages;

6. Pay [Galera] an amount equivalent to 10% of the judgment award as

attorneys fees;

7. Pay the cost of the suit.

SO ORDERED.[14]

Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial
reconsideration and/or clarification on the same date. The appellate court found no reason to
revise or reverse its previous decision and subsequently denied the motions in a Resolution
promulgated on 1 August 2005.[15]

The Issues

WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:

I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction
over [Galeras] complaint because she was not an employee. [Galera] was a
corporate officer of WPP from the beginning of her term until her removal
from office.

II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC
has jurisdiction over [Galeras] complaint, it should have remanded the case to
the Labor Arbiter for reception of evidence on the merits of the case.

III. [Galera] is an alien, hence, can never attain a regular or permanent working
status in the Philippines.

IV. [Galera] is not entitled to recover backwages, other benefits and damages
from WPP.[16]

On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of
her petition:

The CA decision should be consistent with Article 279 of the Labor Code and
applicable jurisprudence, that full backwages and separation pay (when in lieu of
reinstatement), should be reckoned from time of dismissal up to time of
 reinstatement (or payment of separation pay, in case separation instead of
reinstatement is awarded).

Accordingly, petitioner Galera should be awarded full backwages and separation

pay for the period from 14 December 2000 until the finality of judgment by the
respondents, or, at the very least, up to the promulgation date of the CA decision.

The individual respondents Steedman, Webster and Lansang must be

held solidarily liable with respondent WPP for the wanton and summary
dismissal of petitioner Galera, to be consistent with law and jurisprudence as well
as the specific finding of the CA of bad faith on the part of respondents.[17]

This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16
January 2006.[18]

The Ruling of the Court

In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the
Decision dated 14 April 2005 of the appellate court finding (1) Galera to be a regular employee
of WPP; (2) the NLRC to have jurisdiction over the present case; and (3) WPP to have illegally
dismissed Galera, be affirmed; and (B) the case remanded to the Labor Arbiter for the
computation of the correct monetary award. Despite the OSGs recommendations, we see
that Galeras failure to seek an employment permit prior to her employment poses a serious
problem in seeking relief before this Court. Hence, we settle the various issues raised by the
parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer

Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On
the other hand, WPP, Steedman, Webster and Lansang contend that Galera is a corporate
officer; hence, any controversy regarding her dismissal is under the jurisdiction of the Regional
Trial Court. We agree with Galera.

Corporate officers are given such character either by the Corporation Code or by the
corporations by-laws. Under Section 25 of the Corporation Code, the corporate officers are the
president, secretary, treasurer and such other officers as may be provided in the by-
laws.[19] Other officers are sometimes created by the charter or by-laws of a corporation, or
the board of directors may be empowered under the by-laws of a corporation to create
additional offices as may be necessary.

An examination of WPPs by-laws resulted in a finding that Galeras appointment as a corporate

officer (Vice-President with the operational title of Managing Director of Mindshare) during a
special meeting of WPPs Board of Directors is an appointment to a non-existent corporate
office. WPPs by-laws provided for only one Vice-President. At the time of Galeras appointment
on 31 December 1999, WPP already had one Vice-President in the person of
Webster. Galera cannot be said to be a director of WPP also because all five directorship
positions provided in the by-laws are already occupied. Finally, WPP cannot rely on its
Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-
Laws provided for more than one Vice-President and for two additional directors. Even
though WPPsstockholders voted for the amendment on 31 May 2000, the SEC approved the
amendments only on 16 February 2001. Galera was dismissed on 14 December
2000. WPP,Steedman, Webster, and Lansang did not present any evidence
that Galeras dismissal took effect with the action of WPPs Board of Directors.
The appellate court further justified that Galera was an employee and not a corporate officer by
subjecting WPP and Galeras relationship to the four-fold test: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee with respect to the means and methods by which the work is to
be accomplished. The appellate court found:

x x x Sections 1 and 4 of the employment contract mandate where and how often
she is to perform her work; sections 3, 5, 6 and 7 show that wages she receives
are completely controlled by x x x WPP; and sections 10 and 11 clearly state that
she is subject to the regular disciplinary procedures of x x x WPP.

Another indicator that she was a regular employee and not a corporate officer is
Section 14 of the contract, which clearly states that she is a permanent
employee not a Vice-President or a member of the Board of Directors.

xxxx

Another indication that the Employment Contract was one of regular

employment is Section 12, which states that the rights to any invention,
discovery, improvement in procedure, trademark, or copyright created or
discovered by petitioner GALERA during her employment shall automatically
belong to private respondent WPP. Under Republic Act 8293, also known as the
Intellectual Property Code, this condition prevails if the creator of the work
subject to the laws of patent or copyright is an employee of the one entitled to the
patent or copyright.

Another convincing indication that she was only a regular employee and not a
corporate officer is the disciplinary procedure under Sections 10 and 11 of the
Employment Contract, which states that her right of redress is
through Mindshares Chief Executive Officer for the Asia-Pacific. This implies that
she was not under the disciplinary control of private respondent WPPs Board of
Directors (BOD), which should have been the case if in fact she was a corporate
officer because only the Board of Directors could appoint and terminate such a
corporate officer.

Although petitioner GALERA did sign the Alien Employment Permit from the
Department of Labor and Employment and the application for a 9(g) visa with the
Bureau of Immigrationboth of which stated that she was private respondents
WPP Vice President these should not be considered against
her. Assurming arguendo that her appointment as Vice-President was a valid act,
it must be noted that these appointments occurred afater she was hired as a
regular employee. After her appointments, there was no appreciable change in
her duties.[20]

Whether the Labor Arbiter and the NLRC

have jurisdiction over the present case

Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the
present case. Article 217 of the Labor Code provides:

Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise

provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide x x x the following cases involving all workers,
whether agricultural or non-agricultural:
 1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and other
terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of

damages arising from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code,

including questions involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security,

Medicare and other maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for
reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.

(c) Cases arising from the interpretation of collective bargaining

agreements and those arising from the interpretation or enforcement of
company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration
as may be provided in said agreements.

In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:

The Commissions jurisdiction over all cases enumerated under Section 5 of

Presidential Decree No. 902-A is hereby transferred to the courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases.The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one year from the
enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.

The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:

b) Controversies arising out of intra-corporate or partnership relations, between

and among stockholders, members or associates; between any or all of them and
the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and between such corporation, partnership
or association and the state insofar as it concerns their individual franchise or
right to exist as such entity;

c) Controversies in the election or appointments of directors, trustees, officers or

managers of such corporations, partnerships or associations.
 Whether WPP illegally dismissed Galera

WPPs dismissal of Galera lacked both substantive and procedural due process.

Apart from Steedmans letter dated 15 December 2000 to Galera, WPP failed to prove any just
or authorized cause for Galeras dismissal. Steedmans letter to Galera reads:

The operations are currently in a shamble. There is lack of leadership and

confidence in your abilities from within, our agency partners and some clients.

Most of the staff I spoke with felt they got more guidance and direction
from Minda than yourself. In your role as Managing Director, that is just not
acceptable.

I believe your priorities are mismanaged. The recent situation where you felt an
internal strategy meeting was more important than a new business pitch is a
good example.

You failed to lead and advise on the two new business pitches. In both cases,
those involved sort (sic) Mindas input. As I discussed with you back in July, my
directive was for you to lead and review all business pitches. It is obvious [that]
confusion existed internally right up until the day of the pitch.

The quality output is still not to an acceptable standard, which was also part of
my directive that you needed to focus on back in July.

I do not believe you understand the basic skills and industry knowledge required
to run a media special operation.[21]

WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations
in Steedmans letter. Galera, on the other hand, presented documentary evidence[22]in the form
of congratulatory letters, including one from Steedman, which contents are diametrically
opposed to the 15 December 2000 letter.

The law further requires that the employer must furnish the worker sought to be dismissed
with two written notices before termination of employment can be legally effected: (1) notice
which apprises the employee of the particular acts or omissions for which his dismissal is
sought; and (2) the subsequent notice which informs the employee of the employers decision to
dismiss him. Failure to comply with the requirements taints the dismissal with
illegality.[23] WPPs acts clearly show that Galerasdismissal did not comply with the two-notice
rule.

Whether Galera is entitled to the monetary award

WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because
she is an alien. They further state that there is no guarantee that the Bureau of Immigration and
the Department of Labor and Employment will continue to grant favorable rulings on the
applications for a 9(g) visa and an Alien Employment Permit after the expiry of the validity
of Galeras documents on 31 December 2000. WPPs argument is a circular argument, and
assumes what it attempts to prove. Had WPP not dismissed Galera, there is no doubt in our
minds that WPP would have taken action for the approval of documents required
for Galeras continued employment.

This is Galeras dilemma: Galera worked in the Philippines without a proper work permit but
now wants to claim employees benefits under Philippine labor laws.
 Employment of GALERA with private respondent WPP became effective
on September 1, 1999 solely on the instruction of the CEO and upon signing of
the contract, without any further action from the Board of Directors of
private respondent WPP.

Four months had passed when private respondent WPP filed before the
Bureau of Immigration an application for petitioner GALERA to receive a
working visa, wherein she was designated as Vice President of WPP. Petitioner
alleged that she was constrained to sign the application in order that she could
remain in the Philippines and retain her employment.[24]

The law and the rules are consistent in stating that the employment permit must be
acquired prior to employment. The Labor Code states: Any alien seeking admission to the
Philippines for employment purposes and any domestic or foreign employer who desires to
engage an alien for employment in the Philippines shall obtain an employment permit from the
Department of Labor.[25] Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations
provides:

Employment permit required for entry. No alien seeking employment, whether as a

resident or non-resident, may enter the Philippines without first securing an
employment permit from the Ministry. If an alien enters the country under a non-
working visa and wishes to be employed thereafter, he may only be allowed to be
employed upon presentation of a duly approved employment permit.

Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to sanction the
violation of the Philippine labor laws requiring aliens to secure work permits before their
employment. We hold that the status quo must prevail in the present case and we leave the
parties where they are. This ruling, however, does not bar Galera from seeking relief from other
jurisdictions.

WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and

169239. We SET ASIDE the Decision of the Court of Appeals promulgated on 14 April 2005 as
well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No. 78721.

SO ORDERED.
Case No. 31
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

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.

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.
1002212 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.
 Case No. 1

SECOND DIVISION
G.R. No. 202961, February 04, 2015
EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, ET AL., Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSION, SOLID MILLS, INC., AND/OR PHILIP ANG, Respondents.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employee’s return of
its properties.

Petitioners are respondent Solid Mills, Inc.’s (Solid Mills) employees.1 They are represented by
the National Federation of Labor Unions (NAFLU), their collective bargaining
agent.2chanroblesvirtuallawlibrary

As Solid Mills’ employees, petitioners and their families were allowed to occupy SMI Village, a
property owned by Solid Mills.3 According to Solid Mills, this was “[o]ut of liberality and for the
convenience of its employees . . . [and] on the condition that the employees . . . would vacate the
premises anytime the Company deems fit.”4chanroblesvirtuallawlibrary

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills
would cease its operations due to serious business losses.5 NAFLU recognized Solid Mills’
closure due to serious business losses in the memorandum of agreement dated September 1,
2003.6 The memorandum of agreement provided for Solid Mills’ grant of separation pay less
accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th month pay to the
employees.7 Pertinent portions of the agreement provide:chanRoblesvirtualLawlibrary
WHEREAS, the COMPANY has incurred substantial financial losses and is currently
experiencing further severe financial losses;chanrobleslaw

WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations
on October 10, 2003;chanrobleslaw

WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be
dismissed from employment effective October 10, 2003;chanrobleslaw

In view thereof, the parties agree as follows:chanRoblesvirtualLawlibrary

1. That UNION acknowledges that the COMPANY is experiencing severe financial losses
and as a consequence of which, management is constrained to cease the company’s
operations.
2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is
granted to employees who are dismissed due to closures or cessation of operations NOT
DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the Company has
been experiencing as seen in their audited financial statements, employees ARE NOT
granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant
financial assistance less accountabilities to members of the Union based on length of
service to be computed as follows: (Italics in this paragraph supplied)

Number of days - 12.625 for every year of service

5. In view of the above, the members of the UNION will receive such financial assistance on
an equal monthly installments basis based on the following
schedule:chanRoblesvirtualLawlibrary
 First Check due on January 5, 2004 and every 5th of the month thereafter until
December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union members are entitled to,
specifically those arising from sick and vacation leave benefits and 13th month pay, less
accountabilities based on the following schedule:chanRoblesvirtualLawlibrary

One Time Cash Payment to be distributed anywhere from. . . .

....
7. The foregoing agreement is entered into with full knowledge by the parties of their
rights under the law and they hereby bind themselves not to conduct any concerted
action of whatsoever kind, otherwise the grant of financial assistance as discussed above
will be withheld.8 (Emphasis in the original)

Solid Mills filed its Department of Labor and Employment termination report on September 2,
2003.9chanroblesvirtuallawlibrary

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI
Village.10chanroblesvirtuallawlibrary

Petitioners were no longer allowed to report for work by October 10, 2003.11 They were
required to sign a memorandum of agreement with release and quitclaim before their vacation
and sick leave benefits, 13th month pay, and separation pay would be released.12 Employees
who signed the memorandum of agreement were considered to have agreed to vacate SMI
Village, and to the demolition of the constructed houses inside as condition for the release of
their termination benefits and separation pay.13 Petitioners refused to sign the documents and
demanded to be paid their benefits and separation pay.14chanroblesvirtuallawlibrary

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay.15 They argued that their
accrued benefits and separation pay should not be withheld because their payment is based on
company policy and practice.16 Moreover, the 13th month pay is based on law, specifically,
Presidential Decree No. 851.17 Their possession of Solid Mills property is not an accountability
that is subject to clearance procedures.18 They had already turned over to Solid Mills their
uniforms and equipment when Solid Mills ceased operations.19chanroblesvirtuallawlibrary

On the other hand, Solid Mills argued that petitioners’ complaint was premature because they
had not vacated its property.20chanroblesvirtuallawlibrary

The Labor Arbiter ruled in favor of petitioners.21 According to the Labor Arbiter, Solid Mills
illegally withheld petitioners’ benefits and separation pay.22 Petitioners’ right to the payment
of their benefits and separation pay was vested by law and contract.23 The memorandum of
agreement dated September 1, 2003 stated no condition to the effect that petitioners must
vacate Solid Mills’ property before their benefits could be given to them.24 Petitioners’
possession should not be construed as petitioners’ “accountabilities” that must be cleared first
before the release of benefits.25 Their possession “is not by virtue of any employer-employee
relationship.”26 It is a civil issue, which is outside the jurisdiction of the Labor
Arbiter.27chanroblesvirtuallawlibrary

The dispositive portion of the Labor Arbiter’s decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID
MILLS, INC. and/or PHILIP ANG (President), in solido to pay the remaining 21
complainants:chanRoblesvirtualLawlibrary

1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO

DAVID, BONIFACIO MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS,
RENATO ESTOLANO, REX S. DIMAFELIX, MAURA MILAN, JESSICA BAYBAYON, ALFREDO
MENDOZA, ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA MAHILOM,
MARILOU LINGA, RENATO LINGA their separation pay of 12.625 days’ pay per year of service,
pro-rated 13th month pay for 2003 and accrued vacation and sick leaves, plus 12% interest p.a.
from date of filing of the lead case/judicial demand on 12/08/03 until actual payment and/or
finality;chanrobleslaw

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on

12/19/03 her accrued 13th month pay for 2003, accrued VL/SL total amount of P15,435.16,
likewise, complainant Jerry L. Sesma as he already received his accrued 13th month pay for
2003, SL/VL in the total amount of P10,974.97, shall be paid only their separation pay of 12.625
days’ pay per year of service but also with 12% interest p.a. from date of filing of the lead
case/judicial demand on 12/08/03 until actual payment and/or finality, which computation as
of date, amount to as shown in the attached computation sheet.

3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie
Vergara, Antonio R. Dulo, Sr., Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and
Purificacion Malabanan are DISMISSED WITH PREJUDICE due to amicable settlement,
whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO], [GENOVEVA
PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest
and/or failure to prosecute.

The Computation and Examination unit is directed to cause the computation of the award in
Pars. 2 and 3 above.28 (Emphasis in the original)

Solid Mills appealed to the National Labor Relations Commission.29 It prayed for, among others,
the dismissal of the complaints against it and the reversal of the Labor Arbiter’s
decision.30chanroblesvirtuallawlibrary

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiter’s
dispositive portion, but reversed paragraphs 1 and 2. Thus:chanRoblesvirtualLawlibrary
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is
AFFIRMED in so far as par. 3 thereof is concerned but modified in that paragraphs 1 and 2
thereof are REVERSED and SET ASIDE. Accordingly, the following complainants, namely: Emir
Milan, Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza,
Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica
Baybayon, Alfredo Mendoza, Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesma’s monetary
claims in the form of separation pay, accrued 13th month pay for 2003, accrued vacation and
sick leave pays are held in abeyance pending compliance of their accountabilities to respondent
company by turning over the subject lots they respectively occupy at SMI Village Sucat
Muntinlupa City, Metro Manila to herein respondent company.31

The National Labor Relations Commission noted that complainants Marilou Linga, Renato
Linga, Ismael Mata, and Carlito Damian were already paid their respective separation pays and
benefits.32 Meanwhile, Teodora Mahilom already retired long before Solid Mills’ closure.33 She
was already given her retirement benefits.34chanroblesvirtuallawlibrary

The National Labor Relations Commission ruled that because of petitioners’ failure to vacate
Solid Mills’ property, Solid Mills was justified in withholding their benefits and separation
pay.35 Solid Mills granted the petitioners the privilege to occupy its property on account of
petitioners’ employment.36 It had the prerogative to terminate such privilege.37 The
termination of Solid Mills and petitioners’ employer-employee relationship made it incumbent
upon petitioners to turn over the property to Solid Mills.38chanroblesvirtuallawlibrary

Petitioners filed a motion for partial reconsideration on October 18, 2010,39 but this was denied
in the November 30, 2010 resolution.40chanroblesvirtuallawlibrary
Petitioners, thus, filed a petition for certiorari41 before the Court of Appeals to assail the
National Labor Relations Commission decision of August 31, 2010 and resolution of November
30, 2010.42chanroblesvirtuallawlibrary

On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners’
petition,43 thus:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is hereby ordered DISMISSED.44

The Court of Appeals ruled that Solid Mills’ act of allowing its employees to make temporary
dwellings in its property was a liberality on its part. It may be revoked any time at its
discretion.45 As a consequence of Solid Mills’ closure and the resulting termination of
petitioners, the employer-employee relationship between them ceased to exist. There was no
more reason for them to stay in Solid Mills’ property.46 Moreover, the memorandum of
agreement between Solid Mills and the union representing petitioners provided that Solid Mills’
payment of employees’ benefits should be “less accountabilities.”47chanroblesvirtuallawlibrary

On petitioners’ claim that there was no evidence that Teodora Mahilom already received her
retirement pay, the Court of Appeals ruled that her complaint filed before the Labor Arbiter did
not include a claim for retirement pay. The issue was also raised for the first time on appeal,
which is not allowed.48 In any case, she already retired before Solid Mills ceased its
operations.49chanroblesvirtuallawlibrary

The Court of Appeals agreed with the National Labor Relations Commission’s deletion of
interest since it found that Solid Mills’ act of withholding payment of benefits and separation
pay was proper. Petitioners’ terminal benefits and pay were withheld because of petitioners’
failure to vacate Solid Mills’ property.50chanroblesvirtuallawlibrary

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and
benefits.51 Hence, he should no longer be awarded these claims.52chanroblesvirtuallawlibrary

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners’ motion
for reconsideration.53chanroblesvirtuallawlibrary

Petitioners raise in this petition the following errors:chanRoblesvirtualLawlibrary

I

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT RULED THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE
HELD IN ABEYANCE PENDING COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE SUBJECT LOTS THEY RESPECTIVELY OCCUPY AT SMI
VILLAGE, SUCAT, MUNTINLUPA CITY.
II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT UPHELD THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM
IMPOSED BY THE HONORABLE LABOR ARBITER HERNANDEZ ON THE AMOUNT DUE FROM
THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND ON DECEMBER 8, 2003 UNTIL
ACTUAL PAYMENT AND/OR FINALITY.
III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR

WHEN IT UPHELD THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM
FOR PAYMENT OF RETIREMENT BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE
RECEIVED THE SAME.
 IV

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY

BENEFITS FROM RESPONDENT SOLID MILLS.54

Petitioners argue that respondent Solid Mills and NAFLU’s memorandum of agreement has no
provision stating that benefits shall be paid only upon return of the possession of respondent
Solid Mills’ property.55 It only provides that the benefits shall be “less accountabilities,” which
should not be interpreted to include such possession.56 The fact that majority of NAFLU’s
members were not occupants of respondent Solid Mills’ property is evidence that possession of
the property was not contemplated in the agreement.57 “Accountabilities” should be
interpreted to refer only to accountabilities that were incurred by petitioners while they were
performing their duties as employees at the worksite.58 Moreover, applicable laws, company
practice, or policies do not provide that 13th month pay, and sick and vacation leave pay
benefits, may be withheld pending satisfaction of liabilities by the
employee.59chanroblesvirtuallawlibrary

Petitioners also point out that the National Labor Relations Commission and the Court of
Appeals have no jurisdiction to declare that petitioners’ act of withholding possession of
respondent Solid Mills’ property is illegal.60 The regular courts have jurisdiction over this
issue.61 It is independent from the issue of payment of petitioners’ monetary
benefits.62chanroblesvirtuallawlibrary

For these reasons, and because, according to petitioners, the amount of monetary award is no
longer in question, petitioners are entitled to 12% interest per
annum.63chanroblesvirtuallawlibrary

Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims.
They insist that Teodora Mahilom did not receive her retirement benefits and that Carlito
Damian did not receive his separation benefits.64chanroblesvirtuallawlibrary

Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners’ failure to
turn over respondent Solid Mills’ property “constituted an unsatisfied accountability” for which
reason “petitioners’ benefits could rightfully be withheld.”65 The term “accountability” should
be given its natural and ordinary meaning.66 Thus, it should be interpreted as “a state of being
liable or responsible,” or “obligation.”67 Petitioners’ differentiation between accountabilities
incurred while performing jobs at the worksite and accountabilities incurred outside the
worksite is baseless because the agreement with NAFLU merely stated “accountabilities,”
without qualification.68chanroblesvirtuallawlibrary

On the removal of the award of 12% interest per annum, respondents argue that such removal
was proper since respondent Solid Mills was justified in withholding the monetary
claims.69chanroblesvirtuallawlibrary

Respondents argue that Teodora Mahilom had no more cause of action for retirement benefits
claim.70 She had already retired more than a decade before Solid Mills’ closure. She also
already received her retirement benefits in 1991.71 Teodora Mahilom’s claim was also not
included in the complaint filed before the Labor Arbiter. It was improper to raise this claim for
the first time on appeal. In any case, Teodora Mahilom’s claim was asserted long after the
three-year prescriptive period provided in Article 291 of the Labor
Code.72chanroblesvirtuallawlibrary

Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to

receive monetary benefits again, which he, admittedly, already received from Solid
Mills.73chanroblesvirtuallawlibrary
 I

The National Labor Relations

Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship

The National Labor Relations Commission has jurisdiction to determine, preliminarily, the
parties’ rights over a property, when it is necessary to determine an issue related to rights or
claims arising from an employer-employee relationship.

Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National
Labor Relations Commission, in its appellate jurisdiction, may determine issues involving
claims arising from employer-employee relations. Thus:chanRoblesvirtualLawlibrary
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. – (1) Except as otherwise
provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide within thirty (30) calendar days after the submission of the case by the parties
for decision without extension, even in the absence of stenographic notes, the following cases
involving workers, whether agricultural or non-agricultural:chanRoblesvirtualLawlibrary
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving
the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00), regardless of whether accompanied with a claim for reinstatement.
(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters. (Emphasis supplied)

Petitioners’ claim that they have the right to the immediate release of their benefits as
employees separated from respondent Solid Mills is a question arising from the employer-
employee relationship between the parties.

Claims arising from an employer-employee relationship are not limited to claims by an

employee. Employers may also have claims against the employee, which arise from the same
relationship.

In Bañez v. Valdevilla,74 this court ruled that Article 217 of the Labor Code also applies to
employers’ claim for damages, which arises from or is connected with the labor issue.
Thus:chanRoblesvirtualLawlibrary
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article
217 to claims for damages filed by employees, we hold that by the designating clause “arising
from the employer-employee relations” Article 217 should apply with equal force to the claim
of an employer for actual damages against its dismissed employee, where the basis for the claim
arises from or is necessarily connected with the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.75

Bañez was cited in Domondon v. National Labor Relations Commission.76 One of the issues in
Domondon is whether the Labor Arbiter has jurisdiction to decide an issue on the transfer of
ownership of a vehicle assigned to the employee. It was argued that only regular courts have
jurisdiction to decide the issue.77chanroblesvirtuallawlibrary

This court ruled that since the transfer of ownership of the vehicle to the employee was
connected to his separation from the employer and arose from the employer-employee
relationship of the parties, the employer’s claim fell within the Labor Arbiter’s
jurisdiction.78chanroblesvirtuallawlibrary

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue
raised and must arise from an employer-employee relationship for the labor tribunals to have
jurisdiction.

In this case, respondent Solid Mills claims that its properties are in petitioners’ possession by
virtue of their status as its employees. Respondent Solid Mills allowed petitioners to use its
property as an act of liberality. Put in other words, it would not have allowed petitioners to use
its property had they not been its employees. The return of its properties in petitioners’
possession by virtue of their status as employees is an issue that must be resolved to determine
whether benefits can be released immediately. The issue raised by the employer is, therefore,
connected to petitioners’ claim for benefits and is sufficiently intertwined with the parties’
employer-employee relationship. Thus, it is properly within the labor tribunals’ jurisdiction.

II

Institution of clearance procedures

has legal bases

Requiring clearance before the release of last payments to the employee is a standard
procedure among employers, whether public or private. Clearance procedures are instituted to
ensure that the properties, real or personal, belonging to the employer but are in the possession
of the separated employee, are returned to the employer before the employee’s departure.

As a general rule, employers are prohibited from withholding wages from employees. The
Labor Code provides:

Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or induce
him to give up any part of his wages by force, stealth, intimidation, threat or by any other means
whatsoever without the worker’s consent.

The Labor Code also prohibits the elimination or diminution of benefits.

Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book
shall be construed to eliminate or in any way diminish supplements, or other employee benefits
being enjoyed at the time of promulgation of this Code.

However, our law supports the employers’ institution of clearance procedures before the
release of wages. As an exception to the general rule that wages may not be withheld and
benefits may not be diminished, the Labor Code provides:

Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall
make any deduction from the wages of his employees, except:

1. In cases where the worker is insured with his consent by the employer, and the deduction is
to recompense the employer for the amount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker or his union to check-off has been
recognized by the employer or authorized in writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor
and Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due:

Article 1706. Withholding of the wages, except for a debt due, shall not be made by the
employer.

“Debt” in this case refers to any obligation due from the employee to the employer. It includes
any accountability that the employee may have to the employer. There is no reason to limit its
scope to uniforms and equipment, as petitioners would argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners,
agreed that the release of petitioners’ benefits shall be “less accountabilities.”

“Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of the
term “accountability” does not limit the definition of accountability to those incurred in the
worksite. As long as the debt or obligation was incurred by virtue of the employer-employee
relationship, generally, it shall be included in the employee’s accountabilities that are subject to
clearance procedures.

It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills’
property. However, this alone does not imply that this privilege when enjoyed was not a result
of the employer-employee relationship. Those who did avail of the privilege were employees of
respondent Solid Mills. Petitioners’ possession should, therefore, be included in the term
“accountability.”

Accountabilities of employees are personal. They need not be uniform among all employees in
order to be included in accountabilities incurred by virtue of an employer-employee
relationship.

Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and
they do not claim superior right to it. What can be gathered from the findings of the Labor
Arbiter, National Labor Relations Commission, and the Court of Appeals is that respondent
Solid Mills allowed the use of its property for the benefit of petitioners as its employees.
Petitioners were merely allowed to possess and use it out of respondent Solid Mills’ liberality.
The employer may, therefore, demand the property at will.79chanroblesvirtuallawlibrary

The return of the property’s possession became an obligation or liability on the part of the
employees when the employer-employee relationship ceased. Thus, respondent Solid Mills has
the right to withhold petitioners’ wages and benefits because of this existing debt or liability.
In Solas v. Power and Telephone Supply Phils., Inc., et al., this court recognized this right of the
employer when it ruled that the employee in that case was not constructively dismissed.80
Thus:

There was valid reason for respondents’ withholding of petitioner’s salary for the month of
February 2000. Petitioner does not deny that he is indebted to his employer in the amount of
around P95,000.00. Respondents explained that petitioner’s salary for the period of February 1-
15, 2000 was applied as partial payment for his debt and for withholding taxes on his income;
while for the period of February 15-28, 2000, petitioner was already on absence without leave,
hence, was not entitled to any pay.81

The law does not sanction a situation where employees who do not even assert any claim over
the employer’s property are allowed to take all the benefits out of their employment while they
simultaneously withhold possession of their employer’s property for no rightful reason.
Withholding of payment by the employer does not mean that the employer may renege on its
obligation to pay employees their wages, termination payments, and due benefits. The
employees’ benefits are also not being reduced. It is only subjected to the condition that the
employees return properties properly belonging to the employer. This is only consistent with
the equitable principle that “no one shall be unjustly enriched or benefited at the expense of
another.”82chanroblesvirtuallawlibrary

For these reasons, we cannot hold that petitioners are entitled to interest of their withheld
separation benefits. These benefits were properly withheld by respondent Solid Mills because
of their refusal to return its property.
III

Mahilom and Damian are not

entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora
Mahilom already retired long before respondent Solid Mills’ closure. They found that she
already received her retirement benefits. We have no reason to disturb this finding. This court
is not a trier of facts. Findings of the National Labor Relations Commission, especially when
affirmed by the Court of Appeals, are binding upon this court.83chanroblesvirtuallawlibrary

Moreover, Teodora Mahilom’s claim for retirement benefits was not included in her complaint
filed before the Labor Arbiter. Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito
Damian already received his terminal benefits. Hence, he may no longer claim terminal
benefits.

The fact that respondent Solid Mills has not yet demolished Carlito Damian’s house in SMI
Village is not evidence that he did not receive his benefits. Both the National Labor Relations
Commission and the Court of Appeals found that he executed an affidavit stating that he already
received the benefits.

Absent any showing that the National Labor Relations Commission and the Court of Appeals
misconstrued these facts, we will not reverse these findings.

Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical
power of those with capital when they are left to negotiate with their workers without the
standards and protection of law. In cases such as these, the collective bargaining unit of
workers are able to get more benefits and in exchange, the owners are able to continue with the
program of cutting their losses or wind down their operations due to serious business losses.
The company in this case did all that was required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse.84 It is
not a signal to commit acts of unfairness that will unreasonably infringe on the property rights
of the company. Both labor and employer have social utility, and the law is not so biased that it
does not find a middle ground to give each their due.

Clearly, in this case, it is for the workers to return their housing in exchange for the release of
their benefits. This is what they agreed upon. It is what is fair in the premises.

WHEREFORE, the petition is DENIED. The Court of Appeals’ decision is AFFIRMED.

 Case No. 14

FIRST DIVISION
G.R. No. 220998, August 08, 2016
HOLCIM PHILIPPINES, INC., Petitioner, v. RENANTE J. OBRA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari,1 filed by petitioner Holcim Philippines,
Inc. (petitioner), assailing the Decision2 dated February 13, 2015 and the Resolution3 dated
September 7, 2015 of the Court of Appeals (CA) in CA-G.R. SP No. 136413, which affirmed the
Decision4 dated March 31, 2014 and the Resolution5 dated April 30, 2014 of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 03-000696-14(8) / NLRC CN. RAB-I-09-1102-
13(LU-l), holding that respondent Renante J. Obra (respondent) was illegally dismissed and,
thereby, ordering petitioner to pay him separation pay amounting to P569,772.00 in lieu of
reinstatement.
The Facts

Respondent was employed by petitioner as packhouse operator in its La Union Plant for
nineteen (19) years, from March 19, 19946 until August 8, 2013.7 As packhouse operator,
respondent ensures the safe and efficient operation of rotopackers, auto-bag placers, and
cariramats, as well as their auxiliaries.8 At the time of his dismissal, he was earning a monthly
salary of P29,988.00.9chanrobleslaw

On July 10, 2013, at around 4 o'clock in the afternoon, respondent was about to exit Gate 2 of
petitioner's La Union Plant when the security guard on duty, Kristian Castillo (Castillo), asked
him to submit himself and the backpack he was carrying for inspection.10 Respondent refused
and confided to Castillo that he has a piece of scrap electrical wire in his bag.11 He also
requested Castillo not to report the incident to the management, and asked the latter if
respondent could bring the scrap wire outside the company premises; otherwise, he will return
it to his locker in the Packhouse Office.12 However, Castillo did not agree, which prompted
respondent to turn around and hurriedly go back to the said office where he took the scrap wire
out of his bag.13 Soon thereafter, a security guard arrived and directed him to go to the Security
Office where he was asked to write a statement regarding the incident.14chanrobleslaw

In his statement,15 respondent admitted the incident, but asserted that he had no intention to
steal.16 He explained that the 16-meter electrical wire was a mere scrap that he had asked from
the contractor who removed it from the Packhouse Office.17 He also averred that as far as he
knows, only scrap materials which are to be taken out of the company premises in bulk
required a gate pass and that he had no idea that it was also necessary to takeout a piece of
loose, scrap wire out of the company's premises.18 Respondent also clarified that he hurriedly
turned around because he had decided to just return the scrap wire to the said
office.19chanrobleslaw

On July 16, 2013, respondent received a Notice of Gap20 requiring him to explain within five (5)
days therefrom why no disciplinary action, including termination, should be taken against him
on account of the above-mentioned incident.21 He was also placed on preventive suspension for
thirty (30) days effective immediately.22 In a statement23 dated July 23, 2013, respondent
reiterated that he had no intention to steal from petitioner and that the scrap wire which he had
asked from a contractor was already for disposal anyway.24 He also expressed his remorse over
the incident and asked that he be given a chance to correct his mistake.25cralawred Meetings of
petitioner's Review Committee were thereafter conducted, with respondent and the security
guards concerned in attendance.26chanrobleslaw

On August 8, 2013, petitioner issued a Decision/Resolution Memo27 dismissing from service

respondent for serious misconduct.28 Petitioner found no merit in respondent's claim that he
was unaware that a gate pass is required to take out a piece of scrap wire, pointing out that the
same is incredulous since he had been working thereat for nineteen (19) years already.29 It also
drew attention to the fact that respondent refused to submit his bag for inspection, which,
according to petitioner, confirmed his intention to take the wire for his personal use.30 Further,
petitioner emphasized that respondent's actions violated its rules which, among others, limit
the use of company properties for business purposes only and mandate the employees, such as
respondent, to be fair, honest, ethical, and act responsibly and with integrity.31chanrobleslaw

In a letter32 dated August 14, 2013, respondent sought reconsideration and prayed for a lower
penalty, especially considering the length of his service to it and the lack of intent to
steal.33 However, in a Memo34 dated August 28, 2013, petitioner denied respondent's appeal.
Hence, on September 30, 2013, respondent filed a complaint35 before the NLRC for illegal
dismissal and money claims, docketed as NLRC Case No. (CN) RAB-I-09-1102-13(LU-l), averring
that the penalty of dismissal from service imposed upon him was too harsh since he had acted
in good faith in taking the piece of scrap wire.36 Respondent maintained that there was no
wrongful intent on his part which would justify his dismissal from service for serious
misconduct, considering that the contractor who removed it from the Packhouse Office led him
to believe that the same was already for disposal.37chanrobleslaw

Meanwhile, petitioner countered that respondent's taking of the electrical wire for his personal
use, without authority from the management, shows his intent to gain.38 In addition to this, it
was highlighted that respondent refused to submit himself and his bag for inspection and
attempted to corrupt Castillo by convincing him to refrain from reporting the incident to the
management.39 These, coupled with his sudden fleeing from Gate 2, bolster the charge of
serious misconduct against him.40 With respect to respondent's claim that the contractor who
removed the wire from the Packhouse Office led him to believe that the same was already for
disposal, petitioner pointed out that the contractor's personnel have issued statements belying
respondent's claim and categorically stated that they did not give away any electrical wire to
anyone.41chanrobleslaw
The Labor Arbiter's Ruling

In a Decision42 dated January 24, 2014, the Labor Arbiter (LA) dismissed respondent's
complaint and held that the latter was validly dismissed from service by petitioner for
committing the crime of theft, and therefore, not entitled to reinstatement, backwages, and
other money claims.43chanrobleslaw
The NLRC Ruling

In a Decision44 dated March 31, 2014, the NLRC reversed the LA's ruling and held that the
penalty of dismissal from service imposed upon respondent was unduly harsh since his
misconduct was not so gross to deserve such penalty.45 It found merit in respondent's defense
that he took the scrap wire on the belief that it was already for disposal, noting that petitioner
never denied the same.46 The NLRC also emphasized that petitioner did not suffer any damage
since respondent was not able to take the wire outside the company premises.47 Moreover, he
did not hold a position of trust and confidence and was remorseful of his mistake, as evidenced
by his repeated pleas for another chance.48 These, coupled with the fact that he had been in
petitioner's employ for nineteen (19) years, made respondent's dismissal from service
excessive and harsh.49 Considering, however, the strained relations between the parties, the
NLRC awarded separation pay in favor of respondent in lieu of reinstatement.50chanrobleslaw

Petitioner moved for reconsideration,51 which was, however, denied in a Resolution52 dated
April 30, 2014.
The CA Ruling

In a Decision53 dated February 13, 2015, the CA dismissed the petition for certiorari and
affirmed the ruling of the NLRC. It agreed with the NLRC's observation that respondent was
illegally dismissed, pointing out that petitioner failed to prove that it prohibited its employees
from taking scrap materials outside the company premises. Besides, respondent's taking of the
scrap wire did not relate to the performance of his work as packhouse
operator.54chanrobleslaw

The CA also drew attention to respondent's unblemished record in the company where he had
been employed for nineteen (19) years already, adding too that bad faith cannot be ascribed to
him since he volunteered the information about the scrap wire to Castillo and offered to return
the same if it was not possible to bring it outside of the company premises.55According to the
CA, respondent's acts only constituted a lapse in judgment which does not amount to serious
misconduct that would warrant his dismissal from service.56chanrobleslaw

Dissatisfied, petitioner moved for reconsideration,57 which was denied by the CA in its
Resolution58 dated September 7, 2015; hence, the present petition.

The Issue Before the Court

The sole issue for the Court's resolution is whether or not the CA erred in affirming the ruling of
the NLRC.
The Court's Ruling

The petition is partly meritorious.

There is no question that the employer has the inherent right to discipline, including that of
dismissing its employees for just causes.59 This right is, however, subject to reasonable
regulation by the State in the exercise of its police power.60 Accordingly, the finding that an
employee violated company rules and regulations is subject to scrutiny by the Court to
determine if the dismissal is justified and, if so, whether the penalty imposed is commensurate
to the gravity of his offense.61chanrobleslaw

In this case, the Court agrees with the CA and the NLRC that respondent's misconduct is not so
gross as to deserve the penalty of dismissal from service. As correctly observed by the NLRC,
while there is no dispute that respondent took a piece of wire from petitioner's La Union Plant
and tried to bring it outside the company premises, he did so in the belief that the same was
already for disposal. Notably, petitioner never denied that the piece of wire was already for
disposal and, hence, practically of no value. At any rate, petitioner did not suffer any damage
from the incident, given that after being asked to submit himself and his bag for inspection,
respondent had a change of heart and decided to just return the wire to the Packhouse Office.
Respondent has also shown remorse for his mistake, pleading repeatedly with petitioner to
reconsider the penalty imposed upon him.62chanrobleslaw

Time and again, the Court has held that infractions committed by an employee should merit
only the corresponding penalty demanded by the circumstance.63 The penalty must be
commensurate with the act, conduct or omission imputed to the employee.64chanrobleslaw

In Sagales v. Rustan 's Commercial Corporation,65 the dismissal of a Chief Cook who tried to take
home a pack of squid heads, which were considered as scrap goods and usually thrown away,
was found to be excessive. In arriving at such decision, the Court took into consideration the
fact that the Chief Cook had been employed by the company for 31 years already and the
incident was his first offense. Besides, the value of the squid heads was a negligible sum of
P50.00 and the company practically lost nothing since the squid heads were considered scrap
goods and usually thrown away. Moreover, the ignominy he suffered when he was imprisoned
over the incident, and his preventive suspension for one (1) month was enough punishment for
his infraction.

Similarly, in Farrol v. CA,M66 a district manager of a bank was dismissed after he incurred a
shortage of P5 0,985.3 7, which sum was used to pay the retirement benefits of five (5)
employees of the bank. Despite being able to return majority of the missing amount, leaving a
balance of only P6,995.37, the district manager was dismissed on the ground that under the
bank's rules, the penalty therefor is dismissal. According to the Court, the "dismissal imposed
on [him] is unduly harsh and grossly disproportionate to the infraction which led to the
termination of his services. A lighter penalty would have been more just, if not
humane,"67 considering that it was his first infraction and he has rendered 24 years of service to
the bank.

Meanwhile, in the earlier case of Associated Labor Unions-TUCP v. NLRC,68 the dismissal of an
employee, who was caught trying to take a pair of boots, an empty aluminum container, and 15
hamburger patties, was considered excessive. The Court ruled that the employee's dismissal
would be disproportionate to the gravity of the offense committed, considering the value of the
articles he pilfered and the fact that he had no previous derogatory record during his two (2)
years of employment in the company. According to the Court, while the items taken were of
some value, such misconduct was not enough to warrant his dismissal.

As in the foregoing cases, herein respondent deserves compassion and humane understanding
more than condemnation, especially considering that he had been in petitioner's employ for
nineteen (19) years already, and this is the first time that he had been involved in taking
company property, which item, at the end of the day, is practically of no value. Besides,
respondent did not occupy a position of trust and confidence, the loss of which would have
justified his dismissal over the incident. As packhouse operator, respondent's duties are limited
to ensuring the safe and efficient operation of rotopackers, auto-bag placers, and cariramats, as
well as their auxiliaries.69 He is not a managerial employee vested with the powers or
prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions, or
one who, in the normal and routine exercise of his functions, regularly handles significant
amounts of money or property. 70chanrobleslaw

Neither can respondent's infraction be characterized as a serious misconduct which, under

Article 282 (now Article 297) of the Labor Code,71 is a just cause for dismissal. Misconduct is an
improper or wrong conduct, or a transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.72 To constitute a valid cause for dismissal within the text and meaning
of Article 282 (now Article 297) of the Labor Code, the employee's misconduct must be
serious, i.e., of such grave and aggravated character and not merely trivial or unimportant,73 as
in this case where the item which respondent tried to takeout was practically of no value to
petitioner. Moreover, ill will or wrongful intent cannot be ascribed to respondent, considering
that, while he asked Castillo not to report the incident to the management, he also volunteered
the information that he had a piece of scrap wire in his bag and offered to return it if the same
could not possibly be brought outside the company premises sans a gate pass.

The Court is not unaware of its ruling in Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa
(NLM) – KATIPUNAN,74 which was cited in the petition,75 where an employee was dismissed
after being caught hiding six (6) Reno canned goods wrapped in nylon leggings inside her bag.
However, in that case, the main issue was the payment of separation pay and/or financial
assistance and not the validity of the employee's dismissal. Furthermore, unlike the present
case where respondent tried to take a piece of scrap wire, the employee in Reno Foods tried to
steal items manufactured and sold by the company. Her wrongful intent is also evident as she
tried to hide the canned goods by wrapping them in nylon leggings. Here, as earlier adverted to,
respondent volunteered the information that he had a piece of scrap wire in his bag.

In fine, the dismissal imposed on respondent as penalty for his attempt to take a piece of scrap
wire is unduly harsh and excessive. The CA therefore did not err in affirming the NLRC's ruling
finding respondent's dismissal to be invalid. Clearly, the punishment meted against an errant
employee should be commensurate with the offense committed.76 Thus, care should be
exercised by employers in imposing dismissal to erring employees.77 Based on the
circumstances of this case, respondent's dismissal was not justified. This notwithstanding, the
disposition of the CA should be modified with respect to the consequential award of "separation
pay in lieu of reinstatement," which was assailed in the instant petition as one which has "no
factual, legal or even equitable basis."78chanrobleslaw

As a general rule, an illegally dismissed employee is entitled to: (a) reinstatement (or
separation pay, if reinstatement is not viable); and (b) payment of full
backwages.79chanrobleslaw

In this case, the Court cannot sustain the award of separation pay in lieu of respondent's
reinstatement on the bare allegation of the existence of "strained relations" between him and
the petitioner. It is settled that the doctrine on "strained relations" cannot be applied
indiscriminately since every labor dispute almost invariably results in "strained relations;"
otherwise, reinstatement can never be possible simply because some hostility is engendered
between the parties as a result of their disagreement.80 It is imperative, therefore, that strained
relations be demonstrated as a fact and adequately supported by substantial evidence showing
that the relationship between the employer and the employee is indeed strained as a necessary
consequence of the judicial controversy.81chanrobleslaw

Unfortunately, the Court failed to find the factual basis for the award of separation pay to herein
respondent. The NLRC Decision did not state the facts which demonstrate that reinstatement is
no longer a feasible option that could have justified the alternative relief of granting separation
pay.82 Hence, reinstatement cannot be barred, especially, as in this case, when the employee has
not indicated an aversion to returning to work, or does not occupy a position of trust and
confidence in, or has no say in the operation of the employer's business.83 As priorly stated,
respondent had expressed remorse over the incident and had asked to be given the chance to
correct his mistake. He had also prayed for a lower penalty than dismissal, especially
considering his lack of intent to steal, and his unblemished record of 19 years of employment
with petitioner. All these clearly indicate his willingness to continue in the employ of petitioner
and to redeem himself. Considering further that respondent did not occupy a position of trust
and confidence and that his taking of the scrap wire did not relate to the performance of his
work as packhouse operator, his reinstatement remains a viable remedy. The award of
separation pay, therefore, being a mere exception to the rule, finds no application herein.
Accordingly, he should be reinstated to his former position.

Meanwhile, anent the propriety of awarding backwages, the Court observes that respondent's
transgression – even if not deserving of the ultimate penalty of dismissal – warrants the denial
of the said award following the parameters in Integrated Microelectronics, Inc. v. Pionilla.84 In
that case, the Court ordered the reinstatement of the employee without backwages on account
of the following: (a) the fact that the dismissal of the employee would be too harsh a penalty;
and (b) that the employer was in good faith in terminating the employee, viz. :
The aforesaid exception was recently applied in the case of Pepsi-Cola Products, Phils., Inc. v.
Molon[(704 Phil. 120, 144-145 [2013 ]), wherein the Court, citing several precedents, held as
follows:
An illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay[,]
if reinstatement is no longer viable, and backwages. In certain cases, however, the Court has
ordered the reinstatement of the employee without backwages[,] considering the fact that: (1)
the dismissal of the employee would be too harsh a penalty; and (2) the employer was in good
faith in terminating the employee. For instance, in the case of Cruz v. Minister of Labor and
Employment [(205 Phil. 14, 18-19 [1983 ]), the Court ruled as follows:

The Court is convinced that petitioner's guilt was substantially established. Nevertheless, we
agree with respondent Minister's order of reinstating petitioner without backwages instead
of dismissal which may be too drastic. Denial of backwages would sufficiently penalize
her for her infractions. The bank officials acted in good faith. They should be exempt from the
burden of paying backwages. The good faith of the employer, when clear under the
circumstances, may preclude or diminish recovery of backwages. Only employees
discriminately dismissed are entitled to backpay.
Likewise, in the case of Ilogon-Suyoc Mines, Inc. v. [NLRC] [(202 Phil. 850, 856 [1982 ]), the
Court pronounced that "the ends of social and compassionate justice would therefore be served
if private respondent is reinstated but without backwages in view of petitioner's good faith."
The factual similarity of these cases to Remandaban's situation deems it appropriate to render
the same disposition.85 (Emphases supplied)

Having established that respondent's dismissal was too harsh a penalty for attempting to take a
piece of scrap wire that was already for disposal and, hence, practically of no value, and
considering that petitioner was in good faith when it dismissed respondent for his misconduct,
the Court deems it proper to order the reinstatement of respondent to his former position but
without backwages. Respondent was not entirely faultless and therefore, should not profit from
a wrongdoing.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated February 13, 2015 and
the Resolution dated September 7, 2015 of the Court of Appeals in CA-G.R. SP No. 136413 are
hereby AFFIRMED with MODIFICATION deleting the award of separation pay and in lieu
thereof, directing the reinstatement of respondent Renante J. Obra to his former position
without backwages.

SO ORDERED.
 THIRD DIVISION

ATCI OVERSEAS CORPORATION, G.R. No. 178551

AMALIA G. IKDAL and MINISTRY
OF PUBLIC HEALTH-KUWAIT Present:
Petitioners,
CARPIO MORALES, Chairperson, J.,
BRION,
- versus - BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

MA. JOSEFA ECHIN, Promulgated:

Respondent. October 11, 2010

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

DECISION

CARPIO MORALES, J.:

Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in

behalf of its principal-co-petitioner, the Ministry of Public Health of Kuwait (the Ministry), for
the position of medical technologist under a two-year contract, denominated as a Memorandum
of Agreement (MOA), with a monthly salary of US$1,200.00.

Under the MOA,[1] all newly-hired employees undergo a probationary period of one (1)
year and are covered by Kuwaits Civil Service Board Employment Contract No. 2.

Respondent was deployed on February 17, 2000 but was terminated from employment
on February 11, 2001, she not having allegedly passed the probationary period.

As the Ministry denied respondents request for reconsideration, she returned to the
Philippines on March 17, 2001, shouldering her own air fare.

On July 27, 2001, respondent filed with the National Labor Relations Commission
(NLRC) a complaint[2] for illegal dismissal against petitioner ATCI as the local recruitment
agency, represented by petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign
principal.

By Decision[3] of November 29, 2002, the Labor Arbiter, finding that petitioners neither
showed that there was just cause to warrant respondents dismissal nor that she failed to
qualify as a regular employee, held that respondent was illegally dismissed and accordingly
ordered petitioners to pay her US$3,600.00, representing her salary for the three
months unexpired portion of her contract.

On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the Labor Arbiters decision
by Resolution[4] of January 26, 2004. Petitioners motion for reconsideration having been denied
by Resolution[5] of April 22, 2004, they appealed to the Court of Appeals, contending that their
principal, the Ministry, being a foreign government agency, is immune from suit and, as such,
the immunity extended to them; and that respondent was validly dismissed for her failure to
meet the performance rating within the one-year period as required under Kuwaits Civil
Service Laws. Petitioners further contended that Ikdal should not be liable as an officer of
petitioner ATCI.
 By Decision[6] of March 30, 2007, the appellate court affirmed the NLRC Resolution.

In brushing aside petitioners contention that they only acted as agent of the Ministry and
that they cannot be held jointly and solidarily liable with it, the appellate court noted that under
the law, a private employment agency shall assume all responsibilities for the implementation
of the contract of employment of an overseas worker, hence, it can be sued jointly and severally
with the foreign principal for any violation of the recruitment agreement or contract of
employment.

As to Ikdals liability, the appellate court held that under Sec. 10 of Republic Act No. 8042,
the Migrant and Overseas Filipinos Act of 1995, corporate officers, directors and partners of a
recruitment agency may themselves be jointly and solidarily liable with the recruitment agency
for money claims and damages awarded to overseas workers.

Petitioners motion for reconsideration having been denied by the appellate court by
Resolution[7] of June 27, 2007, the present petition for review on certiorari was filed.

Petitioners maintain that they should not be held liable because respondents
employment contract specifically stipulates that her employment shall be governed by the Civil
Service Law and Regulations of Kuwait. They thus conclude that it was patent error for the
labor tribunals and the appellate court to apply the Labor Code provisions governing
probationary employment in deciding the present case.

Further, petitioners argue that even the Philippine Overseas Employment Act (POEA)
Rules relative to master employment contracts (Part III, Sec. 2 of the POEA Rules and
Regulations) accord respect to the customs, practices, company policies and labor laws and
legislation of the host country.

Finally, petitioners posit that assuming arguendo that Philippine labor laws are
applicable, given that the foreign principal is a government agency which is immune from suit,
as in fact it did not sign any document agreeing to be held jointly and solidarily liable, petitioner
ATCI cannot likewise be held liable, more so since the Ministrys liability had not been judicially
determined as jurisdiction was not acquired over it.

The petition fails.

Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the
money claims of Overseas Filipino workers (OFWs) which it deploys abroad by the mere
expediency of claiming that its foreign principal is a government agency clothed with immunity
from suit, or that such foreign principals liability must first be established before it, as agent,
can be held jointly and solidarily liable.

In providing for the joint and solidary liability of private recruitment agencies with their
foreign principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and
assures them of immediate and sufficient payment of what is due them. Skippers United Pacific
v. Maguad[8] explains:

. . . [T]he obligations covenanted in the recruitment agreement entered into

by and between the local agent and its foreign principal are not
coterminous with the term of such agreement so that if either or both of the
parties decide to end the agreement, the responsibilities of such parties towards
the contracted employees under the agreement do not at all end, but the same
extends up to and until the expiration of the employment contracts of the
employees recruited and employed pursuant to the said recruitment
agreement. Otherwise, this will render nugatory the very purpose for which
 the law governing the employment of workers for foreign jobs abroad was
enacted. (emphasis supplied)

The imposition of joint and solidary liability is in line with the policy of the state to protect and
alleviate the plight of the working class.[9] Verily, to allow petitioners to simply invoke the
immunity from suit of its foreign principal or to wait for the judicial determination of the
foreign principals liability before petitioner can be held liable renders the law on joint and
solidary liability inutile.

As to petitioners contentions that Philippine labor laws on probationary employment are not
applicable since it was expressly provided in respondents employment contract, which she
voluntarily entered into, that the terms of her engagement shall be governed by prevailing
Kuwaiti Civil Service Laws and Regulations as in fact POEA Rules accord respect to such rules,
customs and practices of the host country, the same was not substantiated.

Indeed, a contract freely entered into is considered the law between the parties who can
establish stipulations, clauses, terms and conditions as they may deem convenient, including
the laws which they wish to govern their respective obligations, as long as they are not contrary
to law, morals, good customs, public order or public policy.

It is hornbook principle, however, that the party invoking the application of a foreign law
has the burden of proving the law, under the doctrine of processual presumption which, in this
case, petitioners failed to discharge. The Courts ruling in EDI-Staffbuilders Intl., v.
NLRC[10] illuminates:

In the present case, the employment contract signed by Gran specifically

states that Saudi Labor Laws will govern matters not provided for in the
contract (e.g. specific causes for termination, termination procedures, etc.). Being
the law intended by the parties (lex loci intentiones) to apply to the contract,
Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.

In international law, the party who wants to have a foreign law applied to a
dispute or case has the burden of proving the foreign law. The foreign law is
treated as a question of fact to be properly pleaded and proved as the judge
or labor arbiter cannot take judicial notice of a foreign law. He is presumed
to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent Saudi laws on
the matter; thus, the International Law doctrine of presumed-identity
approach or processual presumption comes into play. Where a foreign law is
not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours. Thus, we apply Philippine labor laws in
determining the issues presented before us. (emphasis and underscoring
supplied)

The Philippines does not take judicial notice of foreign laws, hence, they must not only
be alleged; they must be proven. To prove a foreign law, the party invoking it must present a
copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court
which reads:

SEC. 24. Proof of official record. The record of public documents referred to
in paragraph (a) of Section 19, when admissible for any purpose, may be
evidenced by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and accompanied, if the
 record is not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation, consul
general, consul, vice consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which
the record is kept, and authenticated by the seal of his office. (emphasis
supplied)

SEC. 25. What attestation of copy must state. Whenever a copy of a

document or record is attested for the purpose of the evidence, the attestation
must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be. The attestation must be under the
official seal of the attesting officer, if there be any, or if he be the clerk of a court
having a seal, under the seal of such court.

To prove the Kuwaiti law, petitioners submitted the following: MOA between
respondent and the Ministry, as represented by ATCI, which provides that the employee is
subject to a probationary period of one (1) year and that the host countrys Civil Service Laws
and Regulations apply; a translated copy[11] (Arabic to English)of the termination letter to
respondent stating that she did not pass the probation terms, without specifying the grounds
therefor, and a translated copy of the certificate of termination,[12] both of which documents
were certified by Mr. Mustapha Alawi, Head of the Department of Foreign Affairs-Office of
Consular Affairs Inslamic Certification and Translation Unit; and respondents letter[13] of
reconsideration to the Ministry, wherein she noted that in her first eight (8) months of
employment, she was given a rating of Excellent albeit it changed due to changes in her shift of
work schedule.

These documents, whether taken singly or as a whole, do not sufficiently prove that
respondent was validly terminated as a probationary employee under Kuwaiti civil service
laws. Instead of submitting a copy of the pertinent Kuwaiti labor laws duly authenticated
and translated by Embassy officials thereat, as required under the Rules, what
petitioners submitted were mere certifications attesting only to the correctness of the
translations of the MOA and the termination letter which does not prove at all that
Kuwaiti civil service laws differ from Philippine laws and that under such Kuwaiti laws,
respondent was validly terminated. Thus the subject certifications read:

xxxx

This is to certify that the herein attached translation/s from Arabic to

English/Tagalog and or vice versa was/were presented to this Office for review
and certification and the same was/were found to be in order. This Office,
however, assumes no responsibility as to the contents of the document/s.

This certification is being issued upon request of the interested party for
whatever legal purpose it may serve. (emphasis supplied)

Respecting Ikdals joint and solidary liability as a corporate officer, the same is in order
too following the express provision of R.A. 8042 on money claims, viz:

SEC. 10. Money Claims.Notwithstanding any provision of law to the

contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC)
shall have the original and exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving
 Filipino workers for overseas deployment including claims for actual moral,
exemplary and other forms of damages.
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 and underscoring supplied)

WHEREFORE, the petition is DENIED.

SO ORDERED.
Case No. 9

SECOND DIVISION

LEPANTO CERAMICS, INC., G.R. No. 180866

Petitioner,

Present:

CARPIO, J.,
- versus - Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

LEPANTO CERAMICS EMPLOYEES

ASSOCIATION, Promulgated:
Respondent.
March 2, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PEREZ, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45[1] of the 1997 Rules
of Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1)
Decision[2] of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which
affirmed in toto the decision of the Voluntary Arbitrator[3] granting the members of the
respondent association a Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00),
or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002, and the (2)
Resolution[4] of the same court dated 13 December 2007 denying Petitioners Motion for
Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and

operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and
sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar products.[5]

Respondent Lepanto Ceramics Employees Association (respondent Association) is a

legitimate labor organization duly registered with the Department of Labor and Employment. It
is the sole and exclusive bargaining agent in the establishment of petitioner.[6]

In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the
respondent Association.[7]

Subsequently, in September 1999, petitioner and respondent Association entered into a

Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a
Christmas gift package/bonus to the members of the respondent Association. [8] The Christmas
bonus was one of the enumerated existing benefit, practice of traditional rights which shall
remain in full force and effect.
 The text reads:
Section 8. All other existing benefits, practice of traditional rights
consisting of Christmas Gift package/bonus, reimbursement of
transportation expenses in case of breakdown of service vehicle and
medical services and safety devices by virtue of company policies by
the UNION and employees shall remain in full force and effect.

Section 1. EFFECTIVITY

This agreement shall become effective on September 1, 1999 and

shall remain in full force and effect without change for a period of four (4)
years or up to August 31, 2004 except as to the representation aspect which
shall be effective for a period of five (5) years. It shall bind each and every
employee in the bargaining unit including the present and future officers of
the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead,
petitioner gave each of the members of respondent Association Tile Redemption Certificates
equivalent to P3,000.00.[9] The bonus for the year 2002 is the root of the present
dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a
cash advance to interested employees equivalent to one (1) month salary payable in one
year.[10] The respondent Association objected to the P600.00 cash benefit and argued that this
was in violation of the CBA it executed with the petitioner.

The parties failed to amicably settle the dispute. The respondent Association filed a
Notice of Strike with the National Conciliation Mediation Board, Regional Branch No. IV,
alleging the violation of the CBA. The case was placed under preventive mediation. The efforts
to conciliate failed. The case was then referred to the Voluntary Arbitrator for resolution where
the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional practice
of the company to grant its members Christmas bonuses during the end of the calendar year,
each in the amount of P3,000.00 as an expression of gratitude to the employees for their
participation in the companys continued existence in the market. The bonus was either in cash
or in the form of company tiles. In 2002, in a speech during the Christmas celebration, one of
the companys top executives assured the employees of said bonus. However, the Human
Resources Development Manager informed them that the traditional bonus would not be given
as the companys earnings were intended for the payment of its bank loans. Respondent
Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus
had no basis as the same was not a demandable and enforceable obligation. It argued that the
giving of extra compensation was based on the companys available resources for a given year
and the workers are not entitled to a bonus if the company does not make profits. Petitioner
adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and
2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the companys
accumulated losses amounted to over P2.7 billion. Petitioner further argued that the grant of a
one (1) month salary cash advance was not meant to take the place of a bonus but was meant to
show the companys sincere desire to help its employees despite its precarious financial
condition. Petitioner also averred that the CBA provision on a Christmas gift/bonus refers to
alternative benefits. Finally, petitioner emphasized that even if the CBA contained an
unconditional obligation to grant the bonus to the respondent Association, the present difficult
economic times had already legally released it therefrom pursuant to Article 1267 of the Civil
Code.[11]
 The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that
petitioner is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason
that the bonus was given prior to the effectivity of the CBA between the parties and that the
financial losses of the company is not a sufficient reason to exempt it from granting the same. It
stressed that the CBA is a binding contract and constitutes the law between the parties.The
Voluntary Arbitrator further expounded that since the employees had already been
given P600.00 cash bonus, the same should be deducted from the claimed amount of P3,000.00,
thus leaving a balance of P2,400.00. The dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to

pay the members of the complainant union LCEA their respective Christmas
bonus in the amount of three thousand (P3,000.00) pesos for the year 2002 less
the P600.00 already given or a balance of P2,400.00.[12]

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator
in an Order dated 27 June 2003, in this wise:

The Motion for Reconsideration filed by the respondent in the above-

entitled case which was received by the Undersigned on June 26, 2003 is hereby
denied pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary
Arbitration; Amending The Implementing Rules of Book V of the Labor Code of
the Philippines; to wit:

Section 7. Finality of Award/Decision − The decision, order,

resolution or award of the voluntary arbitrator or panel of
voluntary arbitrators shall be final and executory after ten (10)
calendar days from receipt of the copy of the award or decision by
the parties and it shall not be subject of a motion for
reconsideration.[13]

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under
Rule 65 of the Rules of Court docketed as CA-G.R. SP No. 78334.[14] As adverted to earlier, the
Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court
also denied petitioners motion for reconsideration.

In affirming respondent Associations right to the Christmas bonus, the Court of Appeals
held:

In the case at bar, it is indubitable that petitioner offered private

respondent a Christmas bonus/gift in 1998 or before the execution of the 1999
CBA which incorporated the said benefit as a traditional right of the
employees.Hence, the grant of said bonus to private respondent can be deemed a
practice as the same has not been given only in the 1999 CBA. Apparently, this is
the reason why petitioner specifically recognized the grant of a Christmas
bonus/gift as a practice or tradition as stated in the CBA. x x x.

xxxx

Evidently, the argument of petitioner that the giving of a Christmas bonus

is a management prerogative holds no water. There were no conditions specified
in the CBA for the grant of said benefit contrary to the claim of petitioner that the
same is justified only when there are profits earned by the company. As can be
gleaned from the CBA, the payment of Christmas bonus was not contingent upon
the realization of profits. It does not state that if the company derives no profits,
 there are no bonuses to be given to the employees. In fine, the payment thereof
was not related to the profitability of business operations.

Moreover, it is undisputed that petitioner, aside from giving the mandated

13th month pay, has further been giving its employees an additional Christmas
bonus at the end of the year since 1998 or before the effectivity of the CBA in
September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001,
which brought about the filing of the complaint for alleged non-payment of the
2002 Christmas bonus does not involve the exercise of management prerogative
as the same was given continuously on or about Christmas time pursuant to the
CBA. Consequently, the giving of said bonus can no longer be withdrawn by the
petitioner as this would amount to a diminution of the employees existing
benefits.[15]

Not to be dissuaded, petitioner is now before this Court. The only issue before us is
whether or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator
that the petitioner is obliged to give the members of the respondent Association a Christmas
bonus in the amount of P3,000.00 in 2002.[16]

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings
of labor officials, who are deemed to have acquired expertise in matters within their respective
jurisdictions, are generally accorded not only respect but even finality, and bind us when
supported by substantial evidence. This is the rule particularly where the findings of both the
arbitrator and the Court of Appeals coincide.[17]

As a general proposition, an arbitrator is confined to the interpretation and application

of the CBA. He does not sit to dispense his own brand of industrial justice: his award is
legitimate only in so far as it draws its essence from the CBA.[18] That was done in this case.
By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and
paid to an employee for his industry and loyalty which contributed to the success of the
employers business and made possible the realization of profits.[19]

A bonus is also granted by an enlightened employer to spur the employee to greater

efforts for the success of the business and realization of bigger profits.[20]

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be

enforceable, it must have been promised by the employer and expressly agreed upon by the
parties.[21] Given that the bonus in this case is integrated in the CBA, the same partakes the
nature of a demandable obligation. Verily, by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent Association has become more than just an act of generosity
on the part of the petitioner but a contractual obligation it has undertaken.[22]

A CBA refers to a negotiated contract between a legitimate labor organization and the
employer, concerning wages, hours of work and all other terms and conditions of employment
in a bargaining unit. As in all other contracts, the parties to a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided these are
not contrary to law, morals, good customs, public order or public policy.[23]

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the
parties and they are obliged to comply with its provisions.[24] This principle stands strong and
true in the case at bar.

A reading of the provision of the CBA reveals that the same provides for the giving of a
Christmas gift package/bonus without qualification. Terse and clear, the said provision did not
state that the Christmas package shall be made to depend on the petitioners financial standing.
The records are also bereft of any showing that the petitioner made it clear during CBA
negotiations that the bonus was dependent on any condition. Indeed, if the petitioner and
respondent Association intended that the P3,000.00 bonus would be dependent on the
company earnings, such intention should have been expressed in the CBA.

It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that
the 1997 financial crisis in the Asian region adversely affected the Philippine economy.[25]

From the foregoing, petitioner cannot insist on business losses as a basis for
disregarding its undertaking. It is manifestly clear that petitioner was very much aware of the
imminence and possibility of business losses owing to the 1997 financial crisis. In 1998,
petitioner suffered a net loss of P14,347,548.00.[26] Yet it gave a P3,000.00 bonus to the
members of the respondent Association. In 1999, when petitioners very own financial
statement reflected that the positive developments in the economy have yet to favorably affect
the operations of the company,[27] and reported a loss of P346,025,733.00,[28] it entered into the
CBA with the respondent Association whereby it contracted to grant a Christmas gift
package/bonus to the latter. Petitioner supposedly continued to incur losses in the years
2000[29] and 2001. Still and all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give P3,000.00 each to the members of the respondent
Association in the years 1999, 2000 and 2001.

All given, business losses are a feeble ground for petitioner to repudiate its obligation
under the CBA. The rule is settled that any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued or eliminated by the employer. The
principle of non-diminution of benefits is founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to afford labor full protection.[30]
Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or
duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the
contents thereof and was aware of its commitments under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision
may further deplete petitioners resources. Petitioners remedy though lies not in the Courts
invalidation of the provision but in the parties clarification of the same in subsequent CBA
negotiations. Article 253 of the Labor Code is relevant:

Art. 253. Duty to bargain collectively when there exists a collective

bargaining agreement. - When there is a collective bargaining agreement,
the duty to bargain collectively shall also mean that neither party shall
terminate nor modify such agreement during its lifetime. However, either
party can serve a written notice to terminate or modify the agreement at
least sixty (60) days prior to its expiration date. It shall be the duty of both
parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the sixty (60)-day
period and/or until a new agreement is reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The
Decision of the Court of Appeals dated 5 April 2006 and the Resolution of the same court
dated 13 December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.

SO ORDERED.
 Case No. 21

SECOND DIVISION

[G.R. No. 131719. May 25, 2004]

THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF LABOR

AND EMPLOYMENT, AND THE SECRETARY OF FOREIGN AFFAIRS, OWWA
ADMINISTRATOR, and POEA ADMINISTRATOR, petitioners, vs. THE HON. COURT
OF APPEALS and ASIAN RECRUITMENT COUNCIL PHILIPPINE CHAPTER (ARCO-
PHIL.), INC., representing its members: Worldcare Services Internationale, Inc.,
Steadfast International Recruitment Corporation, Dragon International Manpower
Services Corporation, Verdant Manpower Mobilization Corporation, Brent
Overseas Personnel, Inc., ARL Manpower Services, Inc., Dahlzhen International
Services, Inc., Interworld Placement Center, Inc., Lakas Tao Contract Services, Ltd.
Co., and SSC Multiservices, respondents.

DECISION

CALLEJO, SR., J.:

In this petition for review on certiorari, the Executive Secretary of the President of the
Philippines, the Secretary of Justice, the Secretary of Foreign Affairs, the Secretary of Labor and
Employment, the POEA Administrator and the OWWA Administrator, through the Office of the
Solicitor General, assail the Decision[1] of the Court of Appeals in CA-G.R. SP No. 38815 affirming
the Order[2] of the Regional Trial Court of Quezon City dated August 21, 1995 in Civil Case No.
Q-95-24401, granting the plea of the petitioners therein for a writ of preliminary injunction and
of the writ of preliminary injunction issued by the trial court on August 24, 1995.

The Antecedents

Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos
Act of 1995, took effect on July 15, 1995. The Omnibus Rules and Regulations Implementing the
Migrant Workers and Overseas Filipino Act of 1995 was, thereafter, published in the April 7,
1996 issue of the Manila Bulletin. However, even before the law took effect, the Asian
Recruitment Council Philippine Chapter, Inc. (ARCO-Phil.) filed, on July 17, 1995, a petition for
declaratory relief under Rule 63 of the Rules of Court with the Regional Trial Court of Quezon
City to declare as unconstitutional Section 2, paragraph (g), Section 6, paragraphs (a) to (j), (l)
and (m), Section 7, paragraphs (a) and (b), and Sections 9 and 10 of the law, with a plea for the
issuance of a temporary restraining order and/or writ of preliminary injunction enjoining the
respondents therein from enforcing the assailed provisions of the law.

In a supplement to its petition, the ARCO-Phil. alleged that Rep. Act No. 8042 was self-
executory and that no implementing rules were needed. It prayed that the court issue a
temporary restraining order to enjoin the enforcement of Section 6, paragraphs (a) to (m) on
illegal recruitment, Section 7 on penalties for illegal recruitment, and Section 9 on venue of
criminal actions for illegal recruitments, viz:

Viewed in the light of the foregoing discussions, there appears to be urgent an imperative need
for this Honorable Court to maintain the status quo by enjoining the implementation or
effectivity of the questioned provisions of RA 8042, by way of a restraining order otherwise, the
member recruitment agencies of the petitioner will suffer grave or irreparable damage or
injury. With the effectivity of RA 8042, a great majority of the duly licensed recruitment
agencies have stopped or suspended their operations for fear of being prosecuted under the
provisions of a law that are unjust and unconstitutional. This Honorable Court may take judicial
notice of the fact that processing of deployment papers of overseas workers for the past weeks
have come to a standstill at the POEA and this has affected thousands of workers everyday just
because of the enactment of RA 8042. Indeed, this has far reaching effects not only to survival of
the overseas manpower supply industry and the active participating recruitment agencies, the
countrys economy which has survived mainly due to the dollar remittances of the overseas
workers but more importantly, to the poor and the needy who are in dire need of income-
generating jobs which can only be obtained from abroad. The loss or injury that the recruitment
agencies will suffer will then be immeasurable and irreparable. As of now, even foreign
employers have already reduced their manpower requirements from the Philippines due to
their knowledge that RA 8042 prejudiced and adversely affected the local recruitment agencies.

On August 1, 1995, the trial court issued a temporary restraining order effective for a
period of only twenty (20) days therefrom.

After the petitioners filed their comment on the petition, the ARCO-Phil. filed an amended
petition, the amendments consisting in the inclusion in the caption thereof eleven (11) other
corporations which it alleged were its members and which it represented in the suit, and a plea
for a temporary restraining order enjoining the respondents from enforcing Section 6
subsection (i), Section 6 subsection (k) and paragraphs 15 and 16 thereof, Section 8, Section 10,
paragraphs 1 and 2, and Sections 11 and 40 of Rep. Act No. 8042.

The respondent ARCO-Phil. assailed Section 2(g) and (i), Section 6 subsection (a) to (m),
Section 7(a) to (b), and Section 10 paragraphs (1) and (2), quoted as follows:
(g) THE STATE RECOGNIZES THAT THE ULTIMATE PROTECTION TO ALL MIGRANT WORKERS
IS THE POSSESSION OF SKILLS. PURSUANT TO THIS AND AS SOON AS PRACTICABLE, THE
GOVERNMENT SHALL DEPLOY AND/OR ALLOW THE DEPLOYMENT ONLY OF SKILLED
FILIPINO WORKERS.[4]

Sec. 2 subsection (i, 2nd par.)

Nonetheless, the deployment of Filipino overseas workers, whether land-based or sea-based, by

local service contractors and manning agents employing them shall be encourages
(sic). Appropriate incentives may be extended to them.

II. ILLEGAL RECRUITMENT

SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes
referring, contract services, promising or advertising for employment abroad, whether for
profit or not, when undertaken by a non-licensee 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 any such non-licensee 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:

(a) To charge or accept directly or indirectly any amount greater than that specified in the
schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a
worker pay any amount greater than that actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in relation to recruitment
or employment;
(c) To give any false notice, testimony, information or document or commit any act of
misrepresentation for the purpose of securing a license or authority under the Labor Code;
(d) To induce or attempt to induce a worker already employed to quit his employment in order
to offer him another unless the transfer is designed to liberate a worker from oppressive terms
and conditions of employment;
(e) To influence or attempt to influence any person or entity not to employ any worker who has
not applied for employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs harmful to public health or
morality or to the dignity of the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or
by his duly authorized representative;
(h) To fail to submit reports on the status of employment, placement vacancies, remittance of
foreign exchange earnings, separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor and Employment;
(i) To substitute or alter to the prejudice of the worker, employment contracts approved and
verified by the Department of Labor and Employment from the time of actual signing thereof by
the parties up to and including the period of the expiration of the same without the approval of
the Department of Labor and Employment;
(j) For an officer or agent of a recruitment or placement agency to become an officer or member
of the Board of any corporation engaged in travel agency or to be engaged directly or indirectly
in the management of a travel agency;
(k) To withhold or deny travel documents from applicant workers before departure for
monetary or financial considerations other than those authorized under the Labor Code and its
implementing rules and regulations;
(l) Failure to actually deploy without valid reason as determined by the Department of Labor
and Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his
documentation and processing for purposes of deployment, in cases where the deployment
does not actually take place without the workers fault. Illegal recruitment when committed by a
syndicate or in large scale shall be considered an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or
more persons conspiring or confederating with one another. It is deemed committed in large
scale if committed against three (3) or more persons individually or as a group.
The persons criminally liable for the above offenses are the principals, accomplices and
accessories. In case of juridical persons, the officers having control, management or direction of
their business shall be liable.

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 of not
less than two hundred thousand pesos (P200,000.00) nor more than five hundred thousand
pesos (P500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five hundred thousand pesos
(P500,000.00) nor more than one million pesos (P1,000,000.00) 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.

Sec. 8.
Prohibition on Officials and Employees. It shall be unlawful for any official or employee of the
Department of Labor and Employment, the Philippine Overseas Employment Administration
(POEA), or the Overseas Workers Welfare Administration (OWWA), or the Department of
Foreign Affairs, or other government agencies involved in the implementation of this Act, or
their relatives within the fourth civil degree of consanguinity or affinity, to engage, directly or
indirectly, in the business of recruiting migrant workers as defined in this Act. The penalties
provided in the immediate preceding paragraph shall be imposed upon them.(underscoring
supplied)

Sec. 10, pars. 1 & 2.

Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction
to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and
other forms of damages.
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.

SEC. 11. Mandatory Periods for Resolution of Illegal Recruitment Cases. The preliminary
investigations of cases under this Act shall be terminated within a period of thirty (30) calendar
days from the date of their filing. Where the preliminary investigation is conducted by a
prosecution officer and a prima facie case is established, the corresponding information shall be
filed in court within twenty-four (24) hours from the termination of the investigation. If the
preliminary investigation is conducted by a judge and a prima facie case is found to exist, the
corresponding information shall be filed by the proper prosecution officer within forty-eight
(48) hours from the date of receipt of the records of the case.

The respondent averred that the aforequoted provisions of Rep. Act No. 8042 violate
Section 1, Article III of the Constitution.[5] According to the respondent, Section 6(g) and (i)
discriminated against unskilled workers and their families and, as such, violated the equal
protection clause, as well as Article II, Section 12[6] and Article XV, Sections 1[7] and 3(3) of the
Constitution.[8] As the law encouraged the deployment of skilled Filipino workers, only overseas
skilled workers are granted rights. The respondent stressed that unskilled workers also have
the right to seek employment abroad. According to the respondent, the right of unskilled
workers to due process is violated because they are prevented from finding employment and
earning a living abroad. It cannot be argued that skilled workers are immune from abuses by
employers, while unskilled workers are merely prone to such abuses. It was pointed out that
both skilled and unskilled workers are subjected to abuses by foreign employers. Furthermore,
the prohibition of the deployment of unskilled workers abroad would only encourage fly-by-
night illegal recruiters.

According to the respondent, the grant of incentives to service contractors and manning
agencies to the exclusion of all other licensed and authorized recruiters is an invalid
classification. Licensed and authorized recruiters are thus deprived of their right to property
and due process and to the equality of the person. It is understandable for the law to prohibit
illegal recruiters, but to discriminate against licensed and registered recruiters is
unconstitutional.

The respondent, likewise, alleged that Section 6, subsections (a) to (m) is unconstitutional
because licensed and authorized recruitment agencies are placed on equal footing with illegal
recruiters. It contended that while the Labor Code distinguished between recruiters who are
holders of licenses and non-holders thereof in the imposition of penalties, Rep. Act No. 8042
does not make any distinction. The penalties in Section 7(a) and (b) being based on an invalid
classification are, therefore, repugnant to the equal protection clause, besides being excessive;
hence, such penalties are violative of Section 19(1), Article III of the Constitution. [9] It was also
pointed out that the penalty for officers/officials/employees of recruitment agencies who are
found guilty of economic sabotage or large-scale illegal recruitment under Rep. Act No. 8042 is
life imprisonment. Since recruitment agencies usually operate with a manpower of more than
three persons, such agencies are forced to shut down, lest their officers and/or employees be
charged with large scale illegal recruitment or economic sabotage and sentenced to life
imprisonment. Thus, the penalty imposed by law, being disproportionate to the prohibited acts,
discourages the business of licensed and registered recruitment agencies.
 The respondent also posited that Section 6(m) and paragraphs (15) and (16), Sections 8, 9
and 10, paragraph 2 of the law violate Section 22, Article III of the
Constitution[10] prohibiting ex-post facto laws and bills of attainder. This is because the
provisions presume that a licensed and registered recruitment agency is guilty of illegal
recruitment involving economic sabotage, upon a finding that it committed any of the
prohibited acts under the law. Furthermore, officials, employees and their relatives are
presumed guilty of illegal recruitment involving economic sabotage upon such finding that they
committed any of the said prohibited acts.

The respondent further argued that the 90-day period in Section 10, paragraph (1) within
which a labor arbiter should decide a money claim is relatively short, and could deprive
licensed and registered recruiters of their right to due process.The period within which the
summons and the complaint would be served on foreign employees and, thereafter, the filing of
the answer to the complaint would take more than 90 days. This would thereby shift on local
licensed and authorized recruiters the burden of proving the defense of foreign
employers. Furthermore, the respondent asserted, Section 10, paragraph 2 of the law, which
provides for the joint and several liability of the officers and employees, is a bill of attainder and
a violation of the right of the said corporate officers and employees to due process. Considering
that such corporate officers and employees act with prior approval of the board of directors of
such corporation, they should not be liable, jointly and severally, for such corporate acts.

The respondent asserted that the following provisions of the law are unconstitutional:
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.

SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the
complaint, the claims arising out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.

Sec. 40.
The departments and agencies charged with carrying out the provisions of this Act shall, within
ninety (90) days after the effectivity of this Act, formulate the necessary rules and regulations
for its effective implementation.

According to the respondent, the said provisions violate Section 5(5), Article VIII of the
Constitution[11] because they impair the power of the Supreme Court to promulgate rules of
procedure.

In their answer to the petition, the petitioners alleged, inter alia, that (a) the respondent
has no cause of action for a declaratory relief; (b) the petition was premature as the rules
implementing Rep. Act No. 8042 not having been released as yet; (c) the assailed provisions do
not violate any provisions of the Constitution; and, (d) the law was approved by Congress in the
exercise of the police power of the State. In opposition to the respondents plea for injunctive
relief, the petitioners averred that:

As earlier shown, the amended petition for declaratory relief is devoid of merit for failure of
petitioner to demonstrate convincingly that the assailed law is unconstitutional, apart from the
defect and impropriety of the petition. One who attacks a statute, alleging unconstitutionality
must prove its invalidity beyond reasonable doubt (Caleon v. Agus Development Corporation,
207 SCRA 748). All reasonable doubts should be resolved in favor of the constitutionality of a
statute (People v. Vera, 65 Phil. 56). This presumption of constitutionality is based on the
doctrine of separation of powers which enjoin upon each department a becoming respect for
the acts of the other departments (Garcia vs. Executive Secretary, 204 SCRA 516
[1991]). Necessarily, the ancillary remedy of a temporary restraining order and/or a writ of
preliminary injunction prayed for must fall. Besides, an act of legislature approved by the
executive is presumed to be within constitutional bounds (National Press Club v. Commission
on Elections, 207 SCRA 1).[12]

After the respective counsels of the parties were heard on oral arguments, the trial court
issued on August 21, 1995, an order granting the petitioners plea for a writ of preliminary
injunction upon a bond of P50,000. The petitioner posted the requisite bond and on August 24,
1995, the trial court issued a writ of preliminary injunction enjoining the enforcement of the
following provisions of Rep. Act No. 8042 pending the termination of the proceedings:
Section 2, subsections (g) and (i, 2nd par.); Section 6, subsections (a) to (m), and pars. 15 & 16;
Section 7, subsections (a) & (b); Section 8; Section 9; Section 10; pars. 1 & 2; Section 11; and
Section 40 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995. [13]

The petitioners filed a petition for certiorari with the Court of Appeals assailing the order
and the writ of preliminary injunction issued by the trial court on the following grounds:
1. Respondent ARCO-PHIL. had utterly failed to show its clear right/s or that of its member-
agencies to be protected by the injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. Respondent Judge fixed a P50,000 injunction bond which is grossly inadequate to answer for
the damage which petitioner-officials may sustain, should respondent ARCO-PHIL. be finally
adjudged as not being entitled thereto.[14]

The petitioners asserted that the respondent is not the real party-in-interest as petitioner
in the trial court. It is inconceivable how the respondent, a non-stock and non-profit
corporation, could sustain direct injury as a result of the enforcement of the law. They argued
that if, at all, any damage would result in the implementation of the law, it is the licensed and
registered recruitment agencies and/or the unskilled Filipino migrant workers discriminated
against who would sustain the said injury or damage, not the respondent. The respondent, as
petitioner in the trial court, was burdened to adduce preponderant evidence of such irreparable
injury, but failed to do so. The petitioners further insisted that the petition a quo was premature
since the rules and regulations implementing the law had yet to be promulgated when such
petition was filed. Finally, the petitioners averred that the respondent failed to establish the
requisites for the issuance of a writ of preliminary injunction against the enforcement of the
law and the rules and regulations issued implementing the same.

On December 5, 1997, the appellate court came out with a four-page decision dismissing
the petition and affirming the assailed order and writ of preliminary injunction issued by the
trial court. The appellate court, likewise, denied the petitioners motion for reconsideration of
the said decision.

The petitioners now come to this Court in a petition for review on certiorari on the
following grounds:

1. Private respondent ARCO-PHIL. had utterly failed to show its clear right/s or that of its
member-agencies to be protected by the injunctive relief and/or violation of said rights by the
enforcement of the assailed sections of R.A. 8042;
2. The P50,000 injunction bond fixed by the court a quo and sustained by the Court of Appeals is
grossly inadequate to answer for the damage which petitioners-officials may sustain, should
private respondent ARCO-PHIL. be finally adjudged as not being entitled thereto.[15]

On February 16, 1998, this Court issued a temporary restraining order enjoining the
respondents from enforcing the assailed order and writ of preliminary injunction.
 The Issues

The core issue in this case is whether or not the trial court committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in issuing the assailed order and the writ
of preliminary injunction on a bond of only P50,000 and whether or not the appellate court
erred in affirming the trial courts order and the writ of preliminary injunction issued by it.

The petitioners contend that the respondent has no locus standi. It is a non-stock, non-
profit organization; hence, not the real party-in-interest as petitioner in the action. Although the
respondent filed the petition in the Regional Trial Court in behalf of licensed and registered
recruitment agencies, it failed to adduce in evidence a certified copy of its Articles of
Incorporation and the resolutions of the said members authorizing it to represent the said
agencies in the proceedings.Neither is the suit of the respondent a class suit so as to vest in it a
personality to assail Rep. Act No. 8042; the respondent is service-oriented while the
recruitment agencies it purports to represent are profit-oriented. The petitioners assert that
the law is presumed constitutional and, as such, the respondent was burdened to make a case
strong enough to overcome such presumption and establish a clear right to injunctive relief.

The petitioners bewail the P50,000 bond fixed by the trial court for the issuance of a writ of
preliminary injunction and affirmed by the appellate court. They assert that the amount is
grossly inadequate to answer for any damages that the general public may suffer by reason of
the non-enforcement of the assailed provisions of the law. The trial court committed a grave
abuse of its discretion in granting the respondents plea for injunctive relief, and the appellate
court erred in affirming the order and the writ of preliminary injunction issued by the trial
court.

The respondent, for its part, asserts that it has duly established its locus standi and its right
to injunctive relief as gleaned from its pleadings and the appendages thereto. Under Section 5,
Rule 58 of the Rules of Court, it was incumbent on the petitioners, as respondents in the RTC, to
show cause why no injunction should issue. It avers that the injunction bond posted by the
respondent was more than adequate to answer for any injury or damage the petitioners may
suffer, if any, by reason of the writ of preliminary injunction issued by the RTC. In any event, the
assailed provisions of Rep. Act No. 8042 exposed its members to the immediate and irreparable
damage of being deprived of their right to a livelihood without due process, a property right
protected under the Constitution.

The respondent contends that the commendable purpose of the law to eradicate illegal
recruiters should not be done at the expense and to the prejudice of licensed and authorized
recruitment agencies. The writ of preliminary injunction was necessitated by the great number
of duly licensed recruitment agencies that had stopped or suspended their business operations
for fear that their officers and employees would be indicted and prosecuted under the assailed
oppressive penal provisions of the law, and meted excessive penalties. The respondent,
likewise, urges that the Court should take judicial notice that the processing of deployment
papers of overseas workers have come to a virtual standstill at the POEA.

The Courts Ruling

The petition is meritorious.

The Respondent Has Locus Standi

To File the Petition in the RTC in
Representation of the Eleven
Licensed and Registered
Recruitment Agencies Impleaded
in the Amended Petition
 The modern view is that an association has standing to complain of injuries to its
members. This view fuses the legal identity of an association with that of its members. [16] An
association has standing to file suit for its workers despite its lack of direct interest if its
members are affected by the action. An organization has standing to assert the concerns of its
constituents.[17]

In Telecommunications and Broadcast Attorneys of the Philippines v. Commission on

Elections,[18] we held that standing jus tertii would be recognized only if it can be shown that the
party suing has some substantial relation to the third party, or that the right of the third party
would be diluted unless the party in court is allowed to espouse the third partys constitutional
claims.

In this case, the respondent filed the petition for declaratory relief under Rule 64 of the
Rules of Court for and in behalf of its eleven (11) licensed and registered recruitment agencies
which are its members, and which approved separate resolutions expressly authorizing the
respondent to file the said suit for and in their behalf. We note that, under its Articles of
Incorporation, the respondent was organized for the purposes inter alia of promoting and
supporting the growth and development of the manpower recruitment industry, both in the
local and international levels; providing, creating and exploring employment opportunities for
the exclusive benefit of its general membership; enhancing and promoting the general welfare
and protection of Filipino workers; and, to act as the representative of any individual, company,
entity or association on matters related to the manpower recruitment industry, and to perform
other acts and activities necessary to accomplish the purposes embodied therein. The respondent
is, thus, the appropriate party to assert the rights of its members, because it and its members
are in every practical sense identical. The respondent asserts that the assailed provisions
violate the constitutional rights of its members and the officers and employees thereof. The
respondent is but the medium through which its individual members seek to make more
effective the expression of their voices and the redress of their grievances.[19]

However, the respondent has no locus standi to file the petition for and in behalf of
unskilled workers. We note that it even failed to implead any unskilled workers in its
petition. Furthermore, in failing to implead, as parties-petitioners, the eleven licensed and
registered recruitment agencies it claimed to represent, the respondent failed to comply with
Section 2 of Rule 63[20] of the Rules of Court. Nevertheless, since the eleven licensed and
registered recruitment agencies for which the respondent filed the suit are specifically named
in the petition, the amended petition is deemed amended to avoid multiplicity of suits.[21]

The Assailed Order and Writ of

Preliminary Injunction Is Mooted
By Case Law

The respondent justified its plea for injunctive relief on the allegation in its amended
petition that its members are exposed to the immediate and irreparable danger of being
deprived of their right to a livelihood and other constitutional rights without due process, on its
claim that a great number of duly licensed recruitment agencies have stopped or suspended
their operations for fear that (a) their officers and employees would be prosecuted under the
unjust and unconstitutional penal provisions of Rep. Act No. 8042 and meted equally unjust and
excessive penalties, including life imprisonment, for illegal recruitment and large scale illegal
recruitment without regard to whether the recruitment agencies involved are licensed and/or
authorized; and, (b) if the members of the respondent, which are licensed and authorized,
decide to continue with their businesses, they face the stigma and the curse of being labeled
illegal recruiters. In granting the respondents plea for a writ of preliminary injunction, the trial
court held, without stating the factual and legal basis therefor, that the enforcement of Rep. Act
No. 8042, pendente lite, would cause grave and irreparable injury to the respondent until the
case is decided on its merits.
 We note, however, that since Rep. Act No. 8042 took effect on July 15, 1995, the Court had,
in a catena of cases, applied the penal provisions in Section 6, including paragraph (m) thereof,
and the last two paragraphs therein defining large scale illegal recruitment committed by
officers and/or employees of recruitment agencies by themselves and in connivance with
private individuals, and imposed the penalties provided in Section 7 thereof, including the
penalty of life imprisonment.[22] The Informations therein were filed after preliminary
investigations as provided for in Section 11 of Rep. Act No. 8042 and in venues as provided for
in Section 9 of the said act. In People v. Chowdury,[23] we held that illegal recruitment is a crime
of economic sabotage and must be enforced.

In People v. Diaz,[24] we held that Rep. Act No. 8042 is but an amendment of the Labor Code
of the Philippines and is not an ex-post facto law because it is not applied retroactively. In JMM
Promotion and Management, Inc. v. Court of Appeals,[25] the issue of the extent of the police
power of the State to regulate a business, profession or calling vis--vis the equal protection
clause and the non-impairment clause of the Constitution were raised and we held, thus:

A profession, trade or calling is a property right within the meaning of our constitutional
guarantees. One cannot be deprived of the right to work and the right to make a living because
these rights are property rights, the arbitrary and unwarranted deprivation of which normally
constitutes an actionable wrong.

Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or
trade has always been upheld as a legitimate subject of a valid exercise of the police power by
the state particularly when their conduct affects either the execution of legitimate
governmental functions, the preservation of the State, the public health and welfare and public
morals. According to the maxim, sic utere tuo ut alienum non laedas, it must of course be within
the legitimate range of legislative action to define the mode and manner in which every one
may so use his own property so as not to pose injury to himself or others.

In any case, where the liberty curtailed affects at most the rights of property, the permissible
scope of regulatory measures is certainly much wider. To pretend that licensing or
accreditation requirements violates the due process clause is to ignore the settled practice,
under the mantle of the police power, of regulating entry to the practice of various trades or
professions. Professionals leaving for abroad are required to pass rigid written and practical
exams before they are deemed fit to practice their trade. Seamen are required to take tests
determining their seamanship. Locally, the Professional Regulation Commission has begun to
require previously licensed doctors and other professionals to furnish documentary proof that
they had either re-trained or had undertaken continuing education courses as a requirement
for renewal of their licenses. It is not claimed that these requirements pose an unwarranted
deprivation of a property right under the due process clause. So long as professionals and other
workers meet reasonable regulatory standards no such deprivation exists.

Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of
the Constitution to support their argument that the government cannot enact the assailed
regulatory measures because they abridge the freedom to contract. In Philippine Association of
Service Exporters, Inc. vs. Drilon, we held that [t]he non-impairment clause of the Constitution
must yield to the loftier purposes targeted by the government. Equally important, into every
contract is read provisions of existing law, and always, a reservation of the police power for so
long as the agreement deals with a subject impressed with the public welfare.
A last point. Petitioners suggest that the singling out of entertainers and performing artists
under the assailed department orders constitutes class legislation which violates the equal
protection clause of the Constitution. We do not agree.

The equal protection clause is directed principally against undue favor and individual or class
privilege. It is not intended to prohibit legislation which is limited to the object to which it is
directed or by the territory in which it is to operate. It does not require absolute equality, but
merely that all persons be treated alike under like conditions both as to privileges conferred
and liabilities imposed. We have held, time and again, that the equal protection clause of the
Constitution does not forbid classification for so long as such classification is based on real and
substantial differences having a reasonable relation to the subject of the particular legislation. If
classification is germane to the purpose of the law, concerns all members of the class, and
applies equally to present and future conditions, the classification does not violate the equal
protection guarantee.[26]

The validity of Section 6 of R.A. No. 8042 which provides that employees of recruitment
agencies may be criminally liable for illegal recruitment has been upheld in People v.
Chowdury:[27]

As stated in the first sentence of Section 6 of RA 8042, the persons who may be held liable for
illegal recruitment are the principals, accomplices and accessories. An employee of a company
or corporation engaged in illegal recruitment may be held liable as principal, together with his
employer, if it is shown that he actively and consciously participated in illegal recruitment. It has
been held that the existence of the corporate entity does not shield from prosecution the
corporate agent who knowingly and intentionally causes the corporation to commit a
crime. The corporation obviously acts, and can act, only by and through its human agents, and it
is their conduct which the law must deter. The employee or agent of a corporation engaged in
unlawful business naturally aids and abets in the carrying on of such business and will be
prosecuted as principal if, with knowledge of the business, its purpose and effect, he
consciously contributes his efforts to its conduct and promotion, however slight his
contribution may be. [28]

By its rulings, the Court thereby affirmed the validity of the assailed penal and procedural
provisions of Rep. Act No. 8042, including the imposable penalties therefor. Until the Court, by
final judgment, declares that the said provisions are unconstitutional, the enforcement of the
said provisions cannot be enjoined.

The RTC Committed Grave Abuse

of Its Discretion Amounting to
Excess or Lack of Jurisdiction in
Issuing the Assailed Order and the
Writ of Preliminary Injunction

The matter of whether to issue a writ of preliminary injunction or not is addressed to the
sound discretion of the trial court. However, if the court commits grave abuse of its discretion
in issuing the said writ amounting to excess or lack of jurisdiction, the same may be nullified via
a writ of certiorari and prohibition.

In Social Security Commission v. Judge Bayona,[29] we ruled that a law is presumed

constitutional until otherwise declared by judicial interpretation. The suspension of the
operation of the law is a matter of extreme delicacy because it is an interference with the
official acts not only of the duly elected representatives of the people but also of the highest
magistrate of the land.

In Younger v. Harris, Jr.,[30] the Supreme Court of the United States emphasized, thus:
Federal injunctions against state criminal statutes, either in their entirety or with respect to
their separate and distinct prohibitions, are not to be granted as a matter of course, even if such
statutes are unconstitutional. No citizen or member of the community is immune from
prosecution, in good faith, for his alleged criminal acts. The imminence of such a prosecution
even though alleged to be unauthorized and, hence, unlawful is not alone ground for relief in
equity which exerts its extraordinary powers only to prevent irreparable injury to the plaintiff
who seeks its aid. 752 Beal v. Missouri Pacific Railroad Corp., 312 U.S. 45, 49, 61 S.Ct. 418, 420,
85 L.Ed. 577.
And similarly, in Douglas, supra, we made clear, after reaffirming this rule, that:
It does not appear from the record that petitioners have been threatened with any injury other
than that incidental to every criminal proceeding brought lawfully and in good faith 319 U.S., at
164, 63 S.Ct., at 881.[31]

The possible unconstitutionality of a statute, on its face, does not of itself justify an
injunction against good faith attempts to enforce it, unless there is a showing of bad faith,
harassment, or any other unusual circumstance that would call for equitable relief. [32] The on its
face invalidation of statutes has been described as manifestly strong medicine, to be employed
sparingly and only as a last resort, and is generally disfavored.[33]

To be entitled to a preliminary injunction to enjoin the enforcement of a law assailed to be

unconstitutional, the party must establish that it will suffer irreparable harm in the absence of
injunctive relief and must demonstrate that it is likely to succeed on the merits, or that there are
sufficiently serious questions going to the merits and the balance of hardships tips decidedly in its
favor.[34] The higher standard reflects judicial deference toward legislation or regulations
developed through presumptively reasoned democratic processes. Moreover, an injunction will
alter, rather than maintain, the status quo, or will provide the movant with substantially all the
relief sought and that relief cannot be undone even if the defendant prevails at a trial on the
merits.[35] Considering that injunction is an exercise of equitable relief and authority, in
assessing whether to issue a preliminary injunction, the courts must sensitively assess all the
equities of the situation, including the public interest.[36] In litigations between governmental and
private parties, courts go much further both to give and withhold relief in furtherance of public
interest than they are accustomed to go when only private interests are involved. [37] Before the
plaintiff may be entitled to injunction against future enforcement, he is burdened to show some
substantial hardship.[38]

The fear or chilling effect of the assailed penal provisions of the law on the members of the
respondent does not by itself justify prohibiting the State from enforcing them against those
whom the State believes in good faith to be punishable under the laws:
Just as the incidental chilling effect of such statutes does not automatically render them
unconstitutional, so the chilling effect that admittedly can result from the very existence of
certain laws on the statute books does not in itself justify prohibiting the State from carrying
out the important and necessary task of enforcing these laws against socially harmful conduct
that the State believes in good faith to be punishable under its laws and the Constitution.[39]

It must be borne in mind that subject to constitutional limitations, Congress is empowered

to define what acts or omissions shall constitute a crime and to prescribe punishments
therefor.[40] The power is inherent in Congress and is part of the sovereign power of the State to
maintain peace and order. Whatever views may be entertained regarding the severity of
punishment, whether one believes in its efficiency or its futility, these are peculiarly questions
of legislative policy.[41] The comparative gravity of crimes and whether their consequences are
more or less injurious are matters for the State and Congress itself to
determine.[42] Specification of penalties involves questions of legislative policy.[43]

Due process prohibits criminal stability from shifting the burden of proof to the accused,
punishing wholly passive conduct, defining crimes in vague or overbroad language and failing
to grant fair warning of illegal conduct.[44] Class legislation is such legislation which denies
rights to one which are accorded to others, or inflicts upon one individual a more severe
penalty than is imposed upon another in like case offending.[45] Bills of attainder are legislative
acts which inflict punishment on individuals or members of a particular group without a
judicial trial. Essential to a bill of attainder are a specification of certain individuals or a group
of individuals, the imposition of a punishment, penal or otherwise, and the lack of judicial
trial.[46]

Penalizing unlicensed and licensed recruitment agencies and their officers and employees
and their relatives employed in government agencies charged with the enforcement of the law
for illegal recruitment and imposing life imprisonment for those who commit large scale illegal
recruitment is not offensive to the Constitution. The accused may be convicted of illegal
recruitment and large scale illegal recruitment only if, after trial, the prosecution is able to
prove all the elements of the crime charged.[47]

The possibility that the officers and employees of the recruitment agencies, which are
members of the respondent, and their relatives who are employed in the government agencies
charged in the enforcement of the law, would be indicted for illegal recruitment and, if
convicted sentenced to life imprisonment for large scale illegal recruitment, absent proof of
irreparable injury, is not sufficient on which to base the issuance of a writ of preliminary
injunction to suspend the enforcement of the penal provisions of Rep. Act No. 8042 and avert
any indictments under the law.[48] The normal course of criminal prosecutions cannot be
blocked on the basis of allegations which amount to speculations about the future.[49]

There is no allegation in the amended petition or evidence adduced by the respondent that
the officers and/or employees of its members had been threatened with any indictments for
violations of the penal provisions of Rep. Act No. 8042. Neither is there any allegation therein
that any of its members and/or their officers and employees committed any of the acts
enumerated in Section 6(a) to (m) of the law for which they could be indicted. Neither did the
respondent adduce any evidence in the RTC that any or all of its members or a great number of
other duly licensed and registered recruitment agencies had to stop their business operations
because of fear of indictments under Sections 6 and 7 of Rep. Act No. 8042. The respondent
merely speculated and surmised that licensed and registered recruitment agencies would close
shop and stop business operations because of the assailed penal provisions of the law. A writ of
preliminary injunction to enjoin the enforcement of penal laws cannot be based on such
conjectures or speculations. The Court cannot take judicial notice that the processing of
deployment papers of overseas workers have come to a virtual standstill at the POEA because
of the assailed provisions of Rep. Act No. 8042. The respondent must adduce evidence to prove
its allegation, and the petitioners accorded a chance to adduce controverting evidence.

The respondent even failed to adduce any evidence to prove irreparable injury because of
the enforcement of Section 10(1)(2) of Rep. Act No. 8042. Its fear or apprehension that, because
of time constraints, its members would have to defend foreign employees in cases before the
Labor Arbiter is based on speculations. Even if true, such inconvenience or difficulty is hardly
irreparable injury.

The trial court even ignored the public interest involved in suspending the enforcement of
Rep. Act No. 8042 vis--visthe eleven licensed and registered recruitment agencies represented
by the respondent. In People v. Gamboa,[50] we emphasized the primary aim of Rep. Act No.
8042:

Preliminarily, the proliferation of illegal job recruiters and syndicates preying on innocent
people anxious to obtain employment abroad is one of the primary considerations that led to
the enactment of The Migrant Workers and Overseas Filipinos Act of 1995.Aimed at affording
greater protection to overseas Filipino workers, it is a significant improvement on existing laws
in the recruitment and placement of workers for overseas employment. Otherwise known as
the Magna Carta of OFWs, it broadened the concept of illegal recruitment under the Labor Code
and provided stiffer penalties thereto, especially those that constitute economic sabotage, i.e.,
Illegal Recruitment in Large Scale and Illegal Recruitment Committed by a Syndicate.[51]

By issuing the writ of preliminary injunction against the petitioners sans any evidence, the
trial court frustrated, albeit temporarily, the prosecution of illegal recruiters and allowed them
to continue victimizing hapless and innocent people desiring to obtain employment abroad as
overseas workers, and blocked the attainment of the salutary policies[52]embedded in Rep. Act
No. 8042. It bears stressing that overseas workers, land-based and sea-based, had been
remitting to the Philippines billions of dollars which over the years had propped the economy.
 In issuing the writ of preliminary injunction, the trial court considered paramount the
interests of the eleven licensed and registered recruitment agencies represented by the
respondent, and capriciously overturned the presumption of the constitutionality of the
assailed provisions on the barefaced claim of the respondent that the assailed provisions of
Rep. Act No. 8042 are unconstitutional. The trial court committed a grave abuse of its discretion
amounting to excess or lack of jurisdiction in issuing the assailed order and writ of preliminary
injunction. It is for this reason that the Court issued a temporary restraining order enjoining the
enforcement of the writ of preliminary injunction issued by the trial court.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the
appellate court is REVERSED AND SET ASIDE. The Order of the Regional Trial Court dated
August 21, 1995 in Civil Case No. Q-95-24401 and the Writ of Preliminary Injunction issued by
it in the said case on August 24, 1995 are NULLIFIED. No costs.

SO ORDERED.
Case No. 39

SECOND DIVISION

SKIPPERS UNITED PACIFIC, INC. and G.R. No. 175558

SKIPPERS MARITIME SERVICES,

INC., LTD., Present:

Brion,

Petitioner

-versus-

SERENO AND NATHANIEL DOZA,

NAPOLEON DE GRACIA,

ISIDRO L. LATA, and

CHARLIE APROSTA, Promulgated:

Respondents. February 8, 2012

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

DECISION

CARPIO, J.:

The Case

This is a Petition for Review under Rule 45 assailing the 5 July 2006 Decision1 and 7 November
2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 88148.3

This arose from consolidated labor case4 filed by seafarers Napoleon De Gracia (De Gracia),
Isidro L. Lata (Lata), Charlie Aprosta (Aprosta), and Nathaniel Doza (Doza) against local
manning agency Skippers United Pacific, Inc. and its foreign principal, Skippers Maritime
Services, Inc., Ltd. (Skippers) for unremitted home allotment for the month of December 1998,
salaries for the unexpired portion of their employment contracts, moral damages, exemplary
damages, and attorneys fees. Skippers, on the other hand, answered with a claim for
reimbursement of De Gracia, Aprosta and Latas repatriation expenses, as well as award of
moral damages and attorneys fees.

De Gracia, Lata, Aprosta and Dozas (De Gracia, et al.) claims were dismissed by
the Labor Arbiter for lack of merit.5The Labor Arbiter also dismissed Skippers
claims.6 De Gracia, et al. appealed7 the Labor Arbiters decision with the
National Labor Relations Commission (NLRC), but the First Division of the NLRC dismissed the
appeal for lack of merit.8 Doza, et al.s Motion for Reconsideration was likewise denied by the
NLRC,9 so they filed a Petition for Certiorari with the Court of Appeals (CA).10
The CA granted the petition, reversed the Labor Arbiter and NLRC Decisions, and awarded to
De Gracia, Lata and Aprosta their unremitted home allotment, three months salary each
representing the unexpired portion of their employment contracts and attorneys fees.11 No
award was given to Doza for lack of factual basis.12 The CA denied Skippers Motion for Partial
Reconsideration.13 Hence, this Petition.

The Facts

Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata, and Aprosta to
work on board the vessel MV Wisdom Star, under the following terms and conditions:

Name: Napoleon O. De Gracia

Position: 3rd Engineer

Contract Duration: 10 months

Basic Monthly Salary: US$800.00

Contract Date: 17 July 199814

Name: Isidro L. Lata

Position: 4th Engineer

Contract Duration: 12 months

Basic Monthly Salary: US$600.00

Contract Date: 17 April 199815

Name: Charlie A. Aprosta

Position: Third Officer

Contract Duration: 12 months

Basic Monthly Salary: US$600.00

Contract Date: 17 April 199816

Paragraph 2 of all the employment contracts stated that: The terms and conditions of the
Revised Employment Contract Governing the Employment of All Seafarers approved per
Department Order No. 33 and Memorandum Circular No. 55, both series of 1996 shall be
strictly and faithfully observed.17 No employment contract was submitted for Nathaniel Doza.

De Gracia, et al. claimed that Skippers failed to remit their respective allotments for almost five
months, compelling them to air their grievances with the Romanian Seafarers Free Union.18 On
16 December 1998, ITF Inspector Adrian Mihalcioiu of the Romanian Seafarers Union sent
Captain Savvas of Cosmos Shipping a fax letter, relaying the complaints of his crew, namely:
home allotment delay, unpaid salaries (only advances), late provisions, lack of laundry services
(only one washing machine), and lack of maintenance of the vessel (perforated and unrepaired
deck).19 To date, however, Skippers only failed to remit the home allotment for the month of
December 1998.20 On 28 January 1999, De Gracia, et al. were unceremoniously discharged from
MV Wisdom Stars and immediately repatriated.21 Upon arrival in the Philippines, De Gracia, et
al. filed a complaint for illegal dismissal with the Labor Arbiter on 4 April 1999 and prayed for
payment of their home allotment for the month of December 1998, salaries for the unexpired
portion of their contracts, moral damages, exemplary damages, and attorneys fees.22

Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998, De Gracia,
smelling strongly of alcohol, went to the cabin of Gabriel Oleszek, Master of MV Wisdom Stars,
and was rude, shouting noisily to the master.23 De Gracia left the masters cabin after a few
minutes and was heard shouting very loudly somewhere down the corridors.24 This incident
was evidenced by the Captains Report sent via telex to Skippers on said date.25

Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers,
namely Aprosta, De Gracia, Lataand Doza, arrived in the masters cabin and demanded
immediate repatriation because they were not satisfied with the ship.26 De Gracia, et al.
threatened that they may become crazy any moment and demanded for all outstanding
payments due to them.27 This is evidenced by a telex of Cosmoship MV Wisdom to Skippers,
which however bears conflicting dates of 22 January 1998 and 22 January 1999.28

Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other seafarers
disembarked under abnormal circumstsances.29 For this reason, it was suggested that Polish
seafarers be utilized instead of Filipino seamen.30 This is again evidenced by a fax
of Cosmoship MV Wisdom to Skippers, which bears conflicting dates of 24 January 1998 and 24
January 1999.31

Skippers, in its Position Paper, admitted non-payment of home allotment for the month of
December 1998, but prayed for the offsetting of such amount with the repatriation expenses in
the following manner:32

Seafarer Repatriation Home Allotment Balance

Expense
De Gracia US$1,340.00 US$900.00 US$440.00
Aprosta US$1,340.00 US$600.00 US$740.00
Lata US$1,340.00 US$600.00 US$740.00

Since De Gracia, et al. pre-terminated their contracts, Skippers claims they are liable for their
repatriation expenses33 in accordance with Section 19(G) of Philippine Overseas Employment
Administration (POEA) Memorandum Circular No. 55, series of 1996 which states:

G. A seaman who requests for early termination of his contract shall be liable for his
repatriation cost as well as the transportation cost of his replacement. The employer may, in
case of compassionate grounds, assume the transportation cost of the seafarers replacement.

Skippers also prayed for payment of moral damages and attorneys fees.34

The Decision of the Labor Arbiter

 The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive portion
declaring:

WHEREFORE, judgment is hereby rendered dismissing herein action for lack of merit.
Respondents claim for reimbursement of the expenses they incurred in the repatriation of
complainant Nathaniel Doza is likewise dismissed.

SO ORDERED.35

The Labor Arbiter dismissed De Gracia, et al.s complaint for illegal dismissal because the
seafarers voluntarily pre-terminated their employment contracts by demanding for immediate
repatriation due to dissatisfaction with the ship.36The Labor Arbiter held that such voluntary
pre-termination of employment contract is akin to resignation,37 a form of termination by
employee of his employment contract under Article 285 of the Labor Code. The Labor Arbiter
gave weight and credibility to the telex of the master of the vessel to Skippers, claiming that
De Gracia, et al. demanded for immediate repatriation.38 Due to the absence of illegal dismissal,
De Gracia, et. al.s claim for salaries representing the unexpired portion of their employment
contracts was dismissed.39

The Labor Arbiter also dismissed De Gracia et al.s claim for home allotment for December
1998.40 The Labor Arbiter explained that payment for home allotment is in the nature of
extraordinary money where the burden of proof is shifted to the worker who must prove he is
entitled to such monetary benefit.41 Since De Gracia, et al. were not able to prove their
entitlement to home allotment, such claim was dismissed.42

Lastly, Skippers claim for reimbursement of repatriation expenses was likewise denied, since
Article 19(G) of POEA Memorandum Circular No. 55, Series of 1996 allows the employer, in
case the seafarer voluntarily pre-terminates his contract, to assume the repatriation cost of the
seafarer on compassionate grounds.43

The Decision of the NLRC

The NLRC, on 28 October 2002, dismissed De Gracia, et al.s appeal for lack of merit and affirmed
the Labor Arbiters decision.44 The NLRC considered De Gracia, et al.s claim for home allotment
for December 1998 unsubstantiated, since home allotment is a benefit which De Gracia, et al.
must prove their entitlement to.45 The NLRC also denied the claim for illegal dismissal because
De Gracia, et al. were not able to refute the telex received by Skippers from the vessels master
that De Gracia, et al. voluntarily pre-terminated their contracts and demanded immediate
repatriation due to their dissatisfaction with the ships operations.46

The Decision of the Court of Appeals

The CA, on 5 July 2006, granted De Gracia, et al.s petition and reversed the decisions of
the Labor Arbiter and NLRC, its dispositive portion reading as follows:

WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution dated
October 28, 2002 and the Order dated August 31, 2004 rendered by the public respondent
NLRC are ANNULLED and SET ASIDE. Let another judgment be entered holding private
respondents jointly and severally liable to petitioners for the payment of:

1. Unremitted home allotment pay for the month of December, 1998 or the equivalent
thereof in Philippine pesos:
 a. De Gracia = US$900.00

b. Lata = US$600.00

c. Aprosta = US$600.00

2. Salary for the unexpired portion of the employment contract or for 3 months for every
year of the unexpired term, whichever is less, or the equivalent thereof in Philippine
pesos:

a. De Gracia = US$2,400.00

b. Lata = US$1,800.00

c. Aprosta = US$1,800.00

3. Attorneys fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED.47

The CA declared the Labor Arbiter and NLRC to have committed grave abuse of discretion when
they relied upon the telex message of the captain of the vessel stating that De Gracia, et al.
voluntarily pre-terminated their contracts and demanded immediate repatriation.48 The telex
message was a self-serving document that does not satisfy the requirement of substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify the conclusion that petitioners indeed voluntarily demanded their
immediate repatriation.49 For this reason, the repatriation of De Gracia, et al. prior to the
expiration of their contracts showed they were illegally dismissed from employment.50

In addition, the failure to remit home allotment pay was effectively admitted by Skippers, and
prayed to be offset from the repatriation expenses.51 Since there is no proof that De Gracia, et al.
voluntarily pre-terminated their contracts, the repatriation expenses are for the account of
Skippers, and cannot be offset with the home allotment pay for December 1998.52

No relief was granted to Doza due to lack of factual basis to support his petition.53 Attorneys
fees equivalent to 10% of the total claims was granted since it involved an action for recovery of
wages or where the employee was forced to litigate and incur expenses to protect his rights and
interest.54

The Issues

Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA
Decision:

a) The Court of Appeals seriously erred in not giving due credence to the masters telex
message showing that the respondents voluntarily requested to be repatriated.

b) The Court of Appeals seriously erred in finding petitioners liable to

pay backwages and the alleged unremitted home allotment pay despite the finding of
the Labor Arbiter and the NLRC that the claims are baseless.

c) The Court of Appeals seriously erred in awarding attorneys fees in favor of

respondents despite its findings that the facts attending in this case do not support the
claim for moral and exemplary damages.55
 The Ruling of this Court

We deny the petition and affirm the CA Decision, but modify the award.

For a workers dismissal to be considered valid, it must comply with both procedural and
substantive due process. The legality of the manner of dismissal constitutes procedural due
process, while the legality of the act of dismissal constitutes substantive due process.56

Procedural due process in dismissal cases consists of the twin requirements of notice and
hearing. The employer must furnish the employee with two written notices before the
termination of employment can be effected: (1) the first notice apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the second notice informs
the employee of the employers decision to dismiss him. Before the issuance of the second
notice, the requirement of a hearing must be complied with by giving the worker an
opportunity to be heard. It is not necessary that an actual hearing be conducted.57

Substantive due process, on the other hand, requires that dismissal by the employer be made
under a just or authorized cause under Articles 282 to 284 of the Labor Code.

In this case, there was no written notice furnished to De Gracia, et al. regarding the cause of
their dismissal. Cosmoshipfurnished a written notice (telex) to Skippers, the local manning
agency, claiming that De Gracia, et al. were repatriated because the latter voluntarily pre-
terminated their contracts. This telex was given credibility and weight by the LaborArbiter and
NLRC in deciding that there was pre-termination of the employment contract akin to
resignation and no illegal dismissal. However, as correctly ruled by the CA, the telex message is
a biased and self-serving document that does not satisfy the requirement of substantial
evidence. If, indeed, De Gracia, et al. voluntarily pre-terminated their contracts, then De Gracia,
et al. should have submitted their written resignations.

Article 285 of the Labor Code recognizes termination by the employee of the employment
contract by serving written notice on the employer at least one (1) month in advance. Given
that provision, the law contemplates the requirement of a written notice of resignation. In the
absence of a written resignation, it is safe to presume that the employer terminated the
seafarers. In addition, the telex message relied upon by the Labor Arbiter and NLRC bore
conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity and
authenticity of the document. In 22 January 1998, De Gracia, et al. were not even employed yet
by the foreign principal. For these reasons, the dismissal of De Gracia, et al. was illegal.

On the issue of home allotment pay, Skippers effectively admitted non-remittance of home
allotment pay for the month of December 1998 in its Position Paper. Skippers sought the
repatriation expenses to be offset with the home allotment pay. However, since De Gracia, et
al.s dismissal was illegal, their repatriation expenses were for the account of Skippers and could
not be offset with the home allotment pay.

Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in the
nature of extraordinary money where the burden of proof is shifted to the worker who must
prove he is entitled to such monetary benefit, Section 8 of POEA Memorandum Circular No. 55,
series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of
the seafarers salary:

The seafarer is required to make an allotment which is payable once a month to his
designated allottee in the Philippines through any authorized Philippine bank. The
master/employer/agency shall provide the seafarer with facilities to do so at no expense
 to the seafarer. The allotment shall be at least eighty percent (80%) of the seafarers
monthly basic salary including backwages, if any. (Emphasis supplied)

Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated the
provisions of above Memorandum Circular No. 55, series of 1996, in the employment contracts.
Since said memorandum states that home allotment of seafarers actually constitutes at least
eighty percent (80%) of their salary, home allotment pay is not in the nature of an
extraordinary money or benefit, but should actually be considered as salary which should be
paid for services rendered. For this reason, such non-remittance of home allotment pay should
be considered as unpaid salaries, and Skippers shall be liable to pay the home allotment pay of
De Gracia, et al. for the month of December 1998.

Damages

As admitted by Skippers in its Position Paper, the home allotment pay for December 1998 due
to De Gracia, Lata and Aprosta is:

Seafarer Home Allotment Pay

De Gracia US$900.00
Aprosta US$600.00
Lata US$600.00

The monthly salary of De Gracia, according to his employment contract, is only US$800.00.
However, since Skippers admitted in its Position Paper a higher home allotment pay for
De Gracia, we award the higher amount of home allotment pay for De Gracia in the amount of
US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso
equivalent of the dollar amount should be computed using the prevailing rate at the time of
termination since it was due and demandable to De Gracia, et al. on 28 January 1999.

Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases
of unjust termination of employment contracts:

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.

The Migrant Workers Act provides that salaries for the unexpired portion of
the employent contract or three (3) months for every year of the unexpired term, whichever is
less, shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in
24 March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court,
in an En Banc Decision, declared unconstitutional the clause or for three months for every year
of the unexpired term, whichever is less and awarded the entire unexpired portion of the
employment contract to the overseas Filipino worker.

On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended Section
10 of the Migrant Workers Act, and once again reiterated the provision of awarding the
unexpired portion of the employent contract or three (3) months for every year of the
unexpired term, whichever is less.

Nevertheless, since the termination occurred on January 1999 before the passage of the
amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the
constitutionality of Section 7 of RA 10022.

The declaration in March 2009 of the unconstitutionality of the clause or for three months for
every year of the unexpired term, whichever is less in RA 8042 shall be given retroactive effect
to the termination that occurred in January 1999 because an unconstitutional clause in the law
confers no rights, imposes no duties and affords no protection. The unconstitutional provision
is inoperative, as if it was not passed into law at all.59

As such, we compute the claims as follows:

Seafarer Contract Contract Repatriation Unexpired Monthly Total Claims

Term Date Date Term Salary
De Gracia 10 months 17 Jul. 28 Jan. 1999 3 months & US$800 US$2933.34
1998 20 days
Lata 12 months 17 Apr. 28 Jan. 1999 2 months & US$600 US$1600
1998 20 days
Aprosta 12 months 17 Apr. 28 Jan. 1999 2 months & US$600 US$1600
1998 20 days

Given the above computation, we modify the CAs imposition of award, and grant to De Gracia, et
al. salaries representing the unexpired portion of their contracts, instead of salaries for three
(3) months.

Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages in
certain cases:

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

 (8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of
this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order named.

Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages:

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for
the public good, in addition to the moral, temperate, liquidated or compensatory damages.

In this case, we agree with the CA in not awarding moral and exemplary damages for lack of
factual basis.

Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and expenses of
litigation:

Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;

(8) In actions for indemnity under workmens compensation and employers liability
laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorneys fees
and expenses of litigation should be recovered.

In all cases, the attorneys fees and expenses of litigation must be reasonable.

Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of
recovery of wages:
 Art. 111. Attorneys fees.

a. In cases of unlawful withholding of wages, the culpable party may be assessed

attorneys fees equivalent to ten percent of the amount of wages recovered.

b. It shall be unlawful for any person to demand or accept, in any judicial or

administrative proceedings for the recovery of wages, attorneys fees which exceed ten
percent of the amount of wages recovered.

Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries
and protect their interest, we agree with the CAs imposition of attorneys fees in the amount of
ten percent (10%) of the total claims.

WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006
with MODIFICATION. Petitioners Skippers United Pacific, Inc. and Skippers Maritime Services
Inc., Ltd. are jointly and severally liable for payment of the following:

1) Unremitted home allotment pay for the month of December 1998 in its equivalent rate in
Philippine Pesos at the time of termination on 28 January 1999:

a. De Gracia = US$900.00

b. Lata = US$600.00

c. Aprosta = US$600.00

2) Salary for the unexpired portion of the employment contract or its current equivalent in
Philippine Pesos:

a. De Gracia = US$2,933.34

b. Lata = US$1,600.00

c. Aprosta = US$1,600.00

3) Attorneys fees and litigation expenses equivalent to 10% of the total claims.

SO ORDERED.
 Case No. 7

FIRST DIVISION

RURAL BANK OF CANTILAN, INC., and G.R. No. 169750

WILLIAM HOTCHKISS III,
Petitioners, Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
-versus- CORONA,
*AZCUNA, and

GARCIA, JJ.

ARJAY RONNEL H. JULVE,

Respondent. Promulgated:

February 27, 2007

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

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari assailing the
Decision[1] of the Court of Appeals (Twenty Second Division, Cagayan de Oro City) dated
September 23, 2004 in CA-G.R. SP No. 77206 and its Resolution of September 6, 2005.
The facts of this case as found by the Court of Appeals are:

On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a
management trainee. Later, he was appointed as planning and marketing officer.
On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued
a memorandum addressed to all its branch managers informing them of the abolition of the
positions of planning and marketing officer and remedial officer; that this was undertaken in
accordance with the banks Personnel Streamlining Program; and that the operations officer
shall absorb the functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been appointed
bookkeeper I at the banks branch in Madrid, Surigao del Sur effective immediately with the
same salary corresponding to his old position. Initially, respondent agreed to accept the
appointment, but eventually, he changed his mind and made the following notation on
Hotchkiss memorandum, thus:

I am withdrawing my signature on this appointment because I feel that this is a

demotion (on the position itself and allowances) and not a lateral transfer as
what the President told me yesterday. I believe I do not deserve a demotion.

Thank you.
On August 9, 2001, Hotchkiss appointed respondent as bookkeeper I and assistant branch head
of the Madridbranch. However, he did not report for work.
On September 11, 2001, Hotchkiss directed respondent to explain why he should not be
sanctioned for his failure to assume his new post at the Madrid branch.
The following day, respondent submitted his written explanation, which partly reads:

I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-
Madrid Branch for the very reason that the papers were not left with me by the
Admin. Officer after she let me read them. Considering that Asst. Branch Head is
a newly-created position, I requested her for a copy of the said papers first so I
can thoroughly study them before making my decision. But she immediately
took them back from me after I told her about this.
On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII,
National Labor Relations Commission (NLRC), Butuan City, a complaint for constructive
dismissal against petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.
On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of which is
partly reproduced below:

WHEREFORE, premises considered, judgment is hereby entered:

1. Declaring complainant as constructively illegally dismissed;

2. Ordering respondents to reinstate complainant to his former or

equivalent position without loss of seniority rights with full backwages
from the time his salary was withheld from him up to the time he is
actually reinstated;

3. To pay complainant his partial backwages in the amount of P57,165.33

computed up to the date of this decision as follows:

A. BACKWAGES FROM 16 Oct 2001 to 15 Jan 2002 (4 months)

(Partial)

P12,192.50 + 1,000 x 4 = P52,768.00

Plus P52,768/13 (13th mo. Pay) = P4,397.33

TOTAL BACKWAGES P57,165.33

and

4. Ordering respondents to pay complainant moral and exemplary

damages in the total amount of P100,000.00plus P15,718.53, as
attorneys fees which is equivalent to 10% of the total monetary award.

Complainants other claims are dismissed for lack of merit.

SO ORDERED.

On appeal by petitioners, the NLRC, in its Resolution dated November 19, 2002, set aside
the Labor Arbiters judgment, thus:

WHEREFORE, foregoing premises considered, the appealed decision is

Vacated and Set Aside. In lieu thereof, a new judgment is rendered dismissing
the above-entitled case for lack of merit.

SO ORDERED.
The NLRC held that respondents reassignment is not a demotion. There was neither
diminution in functions and pay. Thus, he was not constructively dismissed from
employment. Moreover, respondent himself admitted that he decided not to report for work at
his new station. Yet, he continued receiving his salaries and allowances.
Respondent filed a motion for reconsideration but it was denied by the NLRC.
Respondent then filed with the Court of Appeals a petition for certiorari, docketed as CA-
G.R. SP No. 77206.
 On September 23, 2004, the Court of Appeals rendered its Decision granting the petition,
thus:

WHEREFORE, the instant Petition is hereby GRANTED. The NLRC

Resolutions dated 19 November 2002 and26 February 2003 are hereby
ANNULLED and SET ASIDE. The Labor Arbiters Decision dated 14 January 2002 is
hereby REINSTATED.

SO ORDERED.

Petitioners filed a motion for reconsideration. However, it was denied by the appellate
court in its Resolution dated September 6, 2005.
The only issue before us is whether the Court of Appeals erred in holding that
respondent was constructively dismissed from employment.
In resolving this issue, we rely on the following guide posts:
Under the doctrine of management prerogative, every employer has the inherent right to
regulate, according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, the time, place and manner of work, work
supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of
employees.[2] The only limitations to the exercise of this prerogative are those imposed by labor
laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects
the employers right to expect from its employees not only good performance, adequate work,
and diligence, but also good conduct and loyalty.[3] In fact, the Labor Code does not excuse
employees from complying with valid company policies and reasonable regulations for their
governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines:
(a) a transfer is a movement from one position to another of equivalent rank, level or salary
without break in the service or a lateral movement from one position to another of equivalent
rank or salary;[4] (b) the employer has the inherent right to transfer or reassign an employee for
legitimate business purposes;[5] (c) a transfer becomes unlawful where it is motivated by
discrimination or bad faith or is effected as a form of punishment or is a demotion without
sufficient cause;[6] (d) the employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee.[7]
Constructive dismissal is defined as quitting when continued employment is rendered
impossible, unreasonable, or unlikely as the offer of employment involves a demotion in rank
and diminution of pay.[8]
In light of the above guidelines, we agree with the NLRC in ruling that respondent was
not constructively dismissed from employment.
Respondent contends that the abolition of his position as planning and marketing officer
and his appointment as bookkeeper I and assistant branch head of the Madrid Branch is a
demotion. However, a look at the functions of his new position shows the contrary. The
bookkeeper and assistant branch head is not only charged with preparing financial reports and
monthly bank reconciliations, he is also the head of the Accounting Department of a
branch. Under any standard, these are supervisory and administrative tasks which entail great
responsibility. Moreover, respondents transfer did not decrease his pay.
Nor was respondents transfer motivated by ill-will or prejudice on the part of
petitioners. His position was not the only one abolished pursuant to the banks Personnel
Streamlining Program. We recall that the position of remedial officer was likewise
abolished. Petitioners reason was to acquire savings from the salaries it would pay to full-time
personnel in these positions.
Finally, we note that despite respondents refusal to accept the new appointment,
petitioners did not dismiss him. Rather, it was he who opted to terminate his employment when
he purposely failed to report for work.
In fine, we hold that the Court of Appeals erred when it concluded that respondent was
constructively dismissed from employment.
 WHEREFORE, we GRANT the petition and REVERSE the Decision of the Court of
Appeals in CA-G.R. SP No. 77206. The Resolutions of the NLRC dated November 19,
2002 and February 26, 2003, dismissing respondents complaint are AFFIRMED.
SO ORDERED.
Case No. 23
G.R. No. 210308
ASIAN INTERNATIONAL MANPOWER SERVICES, INC., Petitioner,
vs.
DEPARTMENT OF LABOR AND EMPLOYMENT, Respondent.

DECISION

REYES, J.:

This is a Petition for Review on Certiorari1 assailing the Decision2 dated July 9, 2013 of the
Court of Appeals (CA) in CA-G.R. SP No. 123565, which sustained the Order dated April 12, 2011
and Resolution dated December 22, 2011 of the Department of Labor and Employment (DOLE)
in OS-POEA-0142-1013-2008.
The Facts
Rule II, Part VI of the 2002 Philippine Overseas Employment Agency (POEA) Rules and
Regulations Governing the Recruitment and Employment of Land-based Overseas Workers
(2002 POEA Rules) authorizes the filing of a complaint by the POEA upon its own
initiative3 against a recruitment agency suspected of violations of its Rules on the recruitment
and placement of overseas workers. In particular, Section 2(e) of Rule I, Part VI thereof
provides:

SECTION 2. Grounds for imposition of administrative sanctions:

xxxx
e. Engaging in act/s of misrepresentation in connection with recruitment and placement of
workers, such as furnishing or publishing any false notice, information or document in relation
to recruitment or employment;
xxxx
On November 8, 2006, the Anti-Illegal Recruitment Branch of the POEA, pursuant to
Surveillance Order No. 033, Series of 2006, conducted a surveillance of Asian International
Manpower Services, Inc. (AIMS) with office address at 1653 Taft Avenue comer Pedro Gil Street,
Malate, Manila to determine whether it was operating as a recruitment agency despite the
cancellation of its license on August 28, 2006.4 The operatives reported that their surveillance
did not reveal the information needed, so another surveillance was recommended. 5

On February 20, 2007, another surveillance was conducted on the premises of AIMS' office
pursuant to Surveillance Order No. 011. This time the POEA operatives observed that there
were people standing outside its main entrance, and there were announcements of job
vacancies posted on the main glass door of the office. 6 Posing as applicants, the POEA
operatives, Atty. Romelson E. Abbang and Edilberto V. Alogoc, inquired as to the requirements
for the position of executive staff: and a lady clerk of AIMS handed them a flyer. 7 Through the
flyer, they learned that AIMS was hiring hotel workers for deployment to Macau and grape
pickers for California. 8 They also saw applicants inside the office waiting to be attended to. The
POEA operatives later confirmed through the POEA Verification System that AIMS had regained
its license and good standing on December 6, 2006, but that it had no existing approved job
orders yet at that time.9

On March 26, 2007, the POEA issued a Show Cause Order directing AIMS and its covering
surety, Country Bankers Insurance Corporation, to submit their answer or explanation to the
Surveillance Report dated November 8, 2006 of the POEA operatives. 10 However, no copy of
the Surveillance Report dated February 21, 2007 was attached. 11

In compliance thereto, Danilo P. Pelagio, AIMS President, wrote to the POEA on April 3, 2007
maintaining that AIMS was not liable for any recruitment misrepresentation. Invoking the
Surveillance Report dated November 8, 2006, he cited the POEA operatives' own admission that
when they first came posing as applicants, the AIMS staff advised them that it had no job
vacancies for waiters and that its license had been cancelled. He also called POEA's attention to
the notice issued to AIMS, which was received on November 27, 2006, that the cancellation of
its license had been set aside on December 6, 2006; and that the POEA Adjudication Office even
circulated an advise to all its operating units of the restoration of AIMS' license. 12

During the hearing on May 9, 2007, AIMS representative, Rommel Lugatiman (Lugatiman),
appeared, and averring that it had already filed its answer, he then moved for the resolution of
the complaint. 13

In the Order dated June 30, 2008, then POEA Administrator Rosalinda Baldoz ruled that on the
basis of the Surveillance Report dated February 21, 2007 of the POEA operatives, AIMS was
liable for misrepresentation under Section 2(e), Rule I, Part VI of the 2002 POEA Rules, since
the POEA records showed that AIMS had no job orders to hire hotel workers for Macau, nor
grape pickers for California, as its flyer allegedly advertised. The fallo of the order reads:

WHEREFORE, premises considered, we find and so hold [AlMS] liable for violation of Section
2(e), Rule I, Part VI of the [2002 POEA Rules] and is hereby imposed with (sic) the penalty of
suspension of its license for four (4) months or, in lieu thereof, fine amounting to
PHP40,000.00.

SO ORDERED.14

AIMS filed a motion for reconsideration before the DOLE. It alleged that its right to due process
was violated because the POEA did not furnish it with a copy of the Surveillance Report dated
February 21, 2007, which was the basis of the POEA Administrator's factual findings. 15
In an Order dated April 12, 2011, the DOLE affirmed the order of the POEA, asserting that due
process was observed. It cited AIMS's letter-answer to POEA's Show Cause Order dated April 3,
2007 denying POEA's charge of misrepresentation. It likewise cited the hearing held on May 9,
2007 wherein AIMS 's representative, Lugatiman, after manifesting that it had filed its answer,
merely moved that the case be deemed submitted for resolution instead of availing of the
hearing to rebut the allegations of misrepresentation against it.16

AIMS moved for reconsideration from the DOLE ruling, which the DOLE denied on December
22, 2011. 17
On January 3, 2012, AIMS filed a petition for certiorari in the CA, docketed as CA-G.R. SP No.
123565, upon the following grounds:

THE [DOLE] GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF

JURISDICTION WHEN IT DID NOT HEED THE PLEA OF [AIMS] FOR COMPLIANCE WITH THE
DUE PROCESS OF LAW, AT LEAST REMANDING THE CASE TO THE POEA TO ENABLE [AIMS]
TO ANSWER SQUARELY TI-IE [SURVEILLANCE REPORT DATED FEBRUARY 21, 2007] AND ALL
OTHER EVIDENCE ALONG WITH IT.

THE [DOLE] GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF

JURISDICTION WHEN IT AFFIRMED THE ORDER OF THE POEA IN RULING THAT [AIMS] IS
GUILTY OF THE OFFENSE CHARGED DESPITE THE LACK OF SUBSTANTIAL EVIDENCE TO
SUPPORT THE FINDINGS. 18

In its Decision19 dated July 9, 2013, the CA dismissed AIMS's charge of denial of due process for
failure of POEA to furnish it with a copy of the Surveillance Report dated February 21, 2007. It
held that AIMS' misrepresentation with regard to the recruitment of workers for non-existent
overseas jobs was supported by substantial evidence.

In the case at bench, AIMS['s] failure to receive a copy of Surveillance Report dated 21 February
2007 does not amount to denial of due process. True, in the Show Cause Order, only the
Surveillance Report dated 8 November 2006 and the Affidavit of the operatives who conducted
the surveillance were attached to the same. Hence, when AIMS filed a Letter in reply to the
Show Cause Order, it answered only the contents of Surveillance Report dated 8 November
2006. However, it is undisputed that on 9 May 2007, POEA scheduled a preliminary hearing
'where Lugatiman, AIMS representative, appeared. Lugatiman was obviously informed of the
charges against AIMS. Instead of rebutting the allegations of the operatives in the two (2)
Surveillance Reports, Lugatiman failed to clarify the issues or the charges and merely
manifested that AIMS already filed an answer and thus moved for the resolution of the
Complaint against it. Clearly, AIMS was given the opportunity to be heard and to present its side
but failed to make use of the same. Thus, AIMS cannot feign denial of due process.

Further, the charge of misrepresentation against AIMS is supported by substantial evidence. It

is well settled that in administrative proceedings as in the case before the POEA, only
substantial evidence is needed or such relevant evidence as a reasonable mind may accept as
adequate to support a conclusion.

Section 2(e) of Rule I, Part VI of the 2002 POEA Rules reads:

"SECTION 2. Grounds for imposition of administrative sanctions:

xxxx
6. Engaging in act/s of misrepresentation in connection with recruitment and placement of
workers, such as furnishing or publishing any false notice, information or document in relation
to recruitment or employment;
x x x x"
In this case, AIMS committed misrepresentation in connection with recruitment and placement
of workers when it offered various job openings in Macau as hotel workers and for U.S.A. as
grape pickers although it knew that it had no existing approved job orders. AIMS
misrepresented to its applicants that it had the valid authority and capacity to defloy workers
to the said places in violation of the 2002 POEA Rules.20 (Citations omitted and underlining
ours)
In this petition, AIMS insists that its right to due process was violated because it was never
furnished with a copy of the POEA Surveillance Report dated February 21, 2007, upon which
both the POEA and DOLE anchored their factual finding that it misrepresented to job applicants
that it had existing job orders.

Ruling of the Court

The petition is granted.

"[T]he essence of due process is simply an opportunity to be heard or, as applied to

administrative proceedings, an opportunity to explain one's side or an opportunity to seek a
reconsideration of the action or ruling complained of. In the application of the principle of due
process, what is sought to be safeguarded is not lack of previous notice but the denial of the
opportunity to be heard."21

"Due process is satisfied when a person is notified of the charge against him and given an
opportunity to explain or defend himself."22 "The observance of fairness in the conduct of an
investigation is at the very heart of procedural due process."23 As long as he is given the
opportunity to defend his interests in due course, he is not denied due process. 24 In
administrative proceedings, the filing of charges and giving reasonable opportunity to the
person charged to answer the accusations against him constitute the minimum requirements of
due process.25

According to the CA, AIMS was "obviously informed of the charges" against it during the May 9,
2007 preliminary hearing at the POEA, where its representative Lugatiman appeared. But
instead of rebutting the allegations of the POEA operatives in their Surveillance Reports,
Lugatiman "failed to clarify the issues or the charges and merely manifested that AIMS already
filed an answer and thus moved for the resolution of the Complaint against it." Thus, the CA
concluded that AIMS was given opportunity to be heard and to present its side but it failed to
make use of the said opportunity. 26
The Court does not agree. In concluding that, through Lugatiman, AIMS was "obviously
informed of the charges" during the preliminary hearing, the CA overlooked the crucial fact
that, as the POEA itself admitted, it did not furnish AIMS with a copy of its Surveillance Report
dated February 21, 2007, which contains the factual allegations of misrepresentation
supposedly committed by AIMS. It is incomprehensible why the POEA would neglect to furnish
AIMS with a copy of the said report, since other than the fact that AIMS was represented at the
hearing on May 9, 2007, there is no showing that Lugatiman was apprised of the contents
thereof. In fact, as AIMS now claims, the alleged recruitment flyer distributed to its applicants
was not even presented.

Since AIMS was provided with only the Surveillance Report dated November 8, 2006, it could
only have been expected to respond to the charge contained in the Show Cause Order. Thus, in
its answer, it needed only to point to the POEA operatives' own admission in their Surveillance
Report dated November 8, 2006 that when they came posing as job applicants, the staff of AIMS
advised them that it had no job vacancies for waiters and that its license had been cancelled. As
POEA now also admits, AIMS 's license to recruit was restored on December 6, 2006.

The CA faulted AIMS for failing to avail itself of the opportunity to rebut the allegations of the
POEA operatives in the two Surveillance Reports, as well as "to clarify the issues or the
charges," during the May 9, 2007 preliminary hearing.27 Considering that AIMS was not
furnished with the Surveillance Report dated February 21, 2007, it cannot be expected to
second-guess what charges and issues it needed to clarify or rebut in order to clear
itself.1âwphi1 Needless to say, its right to due process consisting of being informed of the
charges against it has been grossly violated.

Moreover, AIMS also points out that the flyer advertising the jobs in Macau and California was
never presented or made part of the record, and neither was the AIMS lady clerk who allegedly
distributed the same even identified, as AIMS demanded. Besides, granting that AIMS did
advertise with flyers for hotel workers or grape pickers, for which it allegedly had no existing
approved job orders, it is provided in Sections I and 2 of Rule VII (Advertisement for Overseas
Jobs), Part II of the 2002 POEA Rules28 that the said activity is permitted for manpower pooling
purposes, without need of prior approval from the POEA, upon the following conditions: (1) it is
done by a licensed agency; (2) the advertisement indicates in bold letters that it is for
manpower pooling only; (3) no fees are collected from the applicants; and ( 4) the name,
address and POEA license number of the agency, name and worksite of the prospective
registered/accredited principal and the skill categories and qualification standards are
indicated.

It is true that in administrative proceedings, as in the case below, only substantial evidence is
needed, or such relevant evidence as a reasonable mind may accept as adequate to support a
conclusion.29 Unfortunately, there is no evidence against AIMS to speak of, much less
substantial evidence. Clearly, AIMS 's right to be informed of the charges against it, and its right
to be held liable only upon substantial evidence, have both been gravely violated.

WHEREFORE, premises considered, the petition is GRANTED. Accordingly, the Decision dated
July 9, 2013 and Resolution dated December 6, 2013 of the Court of Appeals in CA-G.R. SP No.
123565, are REVERSED and SET ASIDE.

SO ORDERED.
 Case No. 35
SECOND DIVISION
[G.R. No. 124617. April 28, 2000]
PHILIPPINE AEOLUS AUTOMOTIVE UNITED CORPORATION and/or FRANCIS
CHUA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and ROSALINDA C.
CORTEZ, respondents.

DECISION
BELLOSILLO, J.:

This petition seeks to set aside the Decision of 15 February 1996 and the Resolution of 28
March 1996 of public respondent National Labor Relations Commission in NLRC NCR CA No.
009753-95 (NLRC NCR Case No. 00-12-08759-94) which modified the decision of the Labor
Arbiter finding petitioners not guilty of illegal dismissal.

Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a corporation duly

organized and existing under Philippine laws, petitioner Francis Chua is its President while
private respondent Rosalinda C. Cortez was a company nurse[1] of petitioner corporation until
her termination on 7 November 1994. Jlexj

On 5 October 1994 a memorandum was issued by Ms. Myrna Palomares, Personnel Manager of
petitioner corporation, addressed to private respondent Rosalinda C. Cortez requiring her to
explain within forty-eight (48) hours why no disciplinary action should be taken against her (a)
for throwing a stapler at Plant Manager William Chua, her superior, and uttering invectives
against him on 2 August 1994; (b) for losing the amount of P1,488.00 entrusted to her by Plant
Manager Chua to be given to Mr. Fang of the CLMC Department on 23 August 1994; and, (c) for
asking a co-employee to punch-in her time card thus making it appear that she was in the office
in the morning of 6 September 1994 when in fact she was not. The memorandum however was
refused by private respondent although it was read to her and discussed with her by a co-
employee. She did not also submit the required explanation, so that while her case was pending
investigation the company placed her under preventive suspension for thirty (30) days
effective 9 October 1994 to 7 November 1994.

On 20 October 1994, while Cortez was still under preventive suspension, another
memorandum was issued by petitioner corporation giving her seventy-two (72) hours to
explain why no disciplinary action should be taken against her for allegedly failing to process
the ATM applications of her nine (9) co-employees with the Allied Banking Corporation. On 21
October 1994 private respondent also refused to receive the second memorandum although it
was read to her by a co-employee. A copy of the memorandum was also sent by the Personnel
Manager to private respondent at her last known address by registered mail. Jurismis
Meanwhile, private respondent submitted a written explanation with respect to the loss of
the P1,488.00 and the punching-in of her time card by a co-employee.

On 3 November 1994 a third memorandum was issued to private respondent, this time
informing her of her termination from the service effective 7 November 1994 on grounds of
gross and habitual neglect of duties, serious misconduct and fraud or willful breach of trust.[2]
On 6 December 1994 private respondent filed with the Labor Arbiter a complaint for illegal
dismissal, non-payment of annual service incentive leave pay, 13th month pay and damages
against PAAUC and its president Francis Chua.[3]

On 10 July 1995 the Labor Arbiter rendered a decision holding the termination of Cortez as
valid and legal, at the same time dismissing her claim for damages for lack of merit.[4]
On appeal to the NLRC, public respondent reversed on 15 February 1996 the decision of the
Labor Arbiter and found petitioner corporation guilty of illegal dismissal of private respondent
Cortez. The NLRC ordered petitioner PAAUC to reinstate respondent Cortez to her former
position with back wages computed from the time of dismissal up to her actual reinstatement.[5]
On 11 March 1996 petitioners moved for reconsideration. On 28 March 1996 the motion was
denied;[6] hence, this petition for certiorari challenging the NLRC Decision and Resolution.
The crux of the controversy may be narrowed down to two (2) main issues: whether the NLRC
gravely abused its discretion in holding as illegal the dismissal of private respondent, and
whether she is entitled to damages in the event that the illegality of her dismissal is sustained.

The Labor Code as amended provides specific grounds by which an employer may validly
terminate the services of an employee,[7] which grounds should be strictly construed since a
persons employment constitutes "property" under the context of the constitutional protection
that "no person shall be deprived of life, liberty or property without due process of law" and, as
such, the burden of proving that there exists a valid ground for termination of employment
rests upon the employer.[8] Likewise, in light of the employee's right to security of tenure,
where a penalty less punitive than dismissal will suffice, whatever missteps may have been
committed by labor ought not to be visited with a consequence so severe.[9]

A perusal of the termination letter indicates that private respondent was discharged from
employment for "serious misconduct, gross and habitual neglect of duties and fraud or willful
breach of trust." Specifically –justice

1. On August 2, 1994, you committed acts constituting gross disrespect to your

superior Mr. William Chua, the Plant Manager.
2. On August 23, 1994, the Plant Manager entrusted you the amount of P1,488.00
to be sent to CLMC for Mr. Fang but the money was allegedly lost in your
possession and was not recovered.
3. On September 6, 1994, you caused someone else to punch-in your time card to
show that you were at work when in fact you were doing a personal errand for
Richard Tan. As per time card you were in at 8:02 A.M. but you only arrived at
12:35 P.M.
4. On July 28, 1994, you received an amount of P900.00 from Miss Lucy Lao to
open an ATM card of nine (9) employees. On September 24, 1994, one of the
employees complained by the name of Tirso Aquino about the status of his ATM
Card and upon query from the bank it was found out that no application and no
deposit for said person has been made. Likewise, it was found out that you did
not open the ATM Card and deposit the P800.00 for the 8 other employees. It
turned out that said deposit was made after a month later.[10]

As to the first charge, respondent Cortez claims that as early as her first year of employment her
Plant Manager, William Chua, already manifested a special liking for her, so much so that she
was receiving special treatment from him who would oftentimes invite her "for a date," which
she would as often refuse. On many occasions, he would make sexual advances - touching her
hands, putting his arms around her shoulders, running his fingers on her arms and telling her
she looked beautiful. The special treatment and sexual advances continued during her
employment for four (4) years but she never reciprocated his flirtations, until finally, she
noticed that his attitude towards her changed. He made her understand that if she would not
give in to his sexual advances he would cause her termination from the service; and he made
good his threat when he started harassing her. She just found out one day that her table which
was equipped with telephone and intercom units and containing her personal belongings was
transferred without her knowledge to a place with neither telephone nor intercom, for which
reason, an argument ensued when she confronted William Chua resulting in her being charged
with gross disrespect.[11]

Respondent Cortez explains, as regards the second charge, that the money entrusted to her for
transmittal was not lost; instead, she gave it to the company personnel in-charge for proper
transmittal as evidenced by a receipt duly signed by the latter.[12]
With respect to the third imputation, private respondent admits that she asked someone to
punch-in her time card because at that time she was doing an errand for one of the company's
officers, Richard Tan, and that was with the permission of William Chua. She maintains that she
did it in good faith believing that she was anyway only accommodating the request of a
company executive and done for the benefit of the company with the acquiescence of her boss,
William Chua. Besides, the practice was apparently tolerated as the employees were not getting
any reprimand for doing so.[13]

As to the fourth charge regarding her alleged failure to process the ATM cards of her co-
employees, private respondent claims that she has no knowledge thereof and therefore denies
it. After all, she was employed as a company nurse and not to process ATM cards for her co-
employees.

The Supreme Court, in a litany of decisions on serious misconduct warranting dismissal of an

employee, has ruled that for misconduct or improper behavior to be a just cause for dismissal
(a) it must be serious; (b) must relate to the performance of the employees duties; and, (c) must
show that the employee has become unfit to continue working for the employer.[14]The act of
private respondent in throwing a stapler and uttering abusive language upon the person of the
plant manager may be considered, from a lay man's perspective, as a serious misconduct.
However, in order to consider it a serious misconduct that would justify dismissal under the
law, it must have been done in relation to the performance of her duties as would show her to
be unfit to continue working for her employer. The acts complained of, under the circumstances
they were done, did not in any way pertain to her duties as a nurse. Her employment
identification card discloses the nature of her employment as a nurse and no other.[15] Also, the
memorandum informing her that she was being preventively suspended pending investigation
of her case was addressed to her as a nurse.[16]

As regards the third alleged infraction, i.e., the act of private respondent in asking a co-
employee to punch-in her time card, although a violation of company rules, likewise
does not constitute serious misconduct. Firstly, it was done by her in good faith considering that
she was asked by an officer to perform a task outside the office, which was for the benefit of the
company, with the consent of the plant manager. Secondly, it was her first time to commit such
infraction during her five (5)-year service in the company. Finally, the company did not lose
anything by reason thereof as the offense was immediately known and corrected. Es m
On alleged infraction No. 4, as may be gleaned from and admitted in the memorandum of
petitioners to private respondent dated 20 October 1994[17] and the notice of termination dated
3 November 1994, the money entrusted to her was in fact deposited in the respective accounts
of the employees concerned, although belatedly. We agree with the submission of the Solicitor
General that -Es msc

The mere delay/failure to open an ATM account for nine employees is not
sufficient, by itself, to support a conclusion that Rosalinda is guilty of gross and
habitual neglect of duties. First, petitioner did not show that opening an ATM is
one of her primary duties as company nurse. Second, petitioner failed to show that
Rosalinda intentionally, knowingly, and purposely delayed the opening of ATM
accounts for petitioners employees. It is of common knowledge that a bank
imposes upon an applicant certain requirements before an ATM account can be
opened, i.e. properly filled up application forms, identification cards, minimum
deposit etc. In the instant case, petitioner did not prove that the delay was caused
by Rosalindas neglect or willful act (emphasis supplied).[18]

Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or
the entire absence of care. It evinces a thoughtless disregard of consequences without exerting
any effort to avoid them.[19] The negligence, to warrant removal from service, should not merely
be gross but also habitual. Likewise, the ground "willful breach by the employee of the trust
reposed in him by his employer" must be founded on facts established by the employer who
must clearly and convincingly prove by substantial evidence the facts and incidents upon which
loss of confidence in the employee may fairly be made to rest.[20] All these requirements
prescribed by law and jurisprudence are wanting in the case at bar.
On the issue of moral and exemplary damages, the NLRC ruled that private respondent was not
entitled to recover such damages for her failure to prove that petitioner corporation had been
motivated by malice or bad faith or that it acted in a wanton, oppressive or malevolent manner
in terminating her services. In disbelieving the explanation proffered by private respondent
that the transfer of her table was the response of a spurned lothario, public respondent quoted
the Labor Arbiter –

Complainants assertion that the cause of the altercation between her and the
Plant Manager where she threw a stapler to him and uttered invectives against
him was her refusal to submit to his advances to her which started from her early
days of employment and lasted for almost four years, is hardly believable. For
indeed, if there was such harassment, why was there no complaints (sic) from her
during that period? Why did she stay there for so long? Besides, it could not have
taken that period for the Plant Manager to react. This assertion of the
complainant deserves no credence at all.[21]

Public respondent in thus concluding appears baffled why it took private respondent more than
four (4) years to expose William Chua's alleged sexual harassment. It reasons out that it would
have been more prepared to support her position if her act of throwing the stapler and uttering
invectives on William Chua were her immediate reaction to his amorous overtures. In that case,
according to public respondent, she would have been justified for such outburst because she
would have been merely protecting her womanhood, her person and her rights. Esmm is
We are not persuaded. The gravamen of the offense in sexual harassment is not the violation of
the employee's sexuality but the abuse of power by the employer. Any employee, male or
female, may rightfully cry "foul" provided the claim is well substantiated. Strictly speaking,
there is no time period within which he or she is expected to complain through the proper
channels. The time to do so may vary depending upon the needs, circumstances, and more
importantly, the emotional threshold of the employee.

Private respondent admittedly allowed four (4) years to pass before finally coming out with her
employer's sexual impositions. Not many women, especially in this country, are made of the
stuff that can endure the agony and trauma of a public, even corporate, scandal. If petitioner
corporation had not issued the third memorandum that terminated the services of private
respondent, we could only speculate how much longer she would keep her silence. Moreover,
few persons are privileged indeed to transfer from one employer to another. The dearth of
quality employment has become a daily "monster" roaming the streets that one may not be
expected to give up one's employment easily but to hang on to it, so to speak, by all tolerable
means. Perhaps, to private respondent's mind, for as long as she could outwit her employer's
ploys she would continue on her job and consider them as mere occupational hazards. This
uneasiness in her place of work thrived in an atmosphere of tolerance for four (4) years, and
one could only imagine the prevailing anxiety and resentment, if not bitterness, that beset her
all that time. But William Chua faced reality soon enough. Since he had no place in private
respondent's heart, so must she have no place in his office. So, he provoked her, harassed her,
and finally dislodged her; and for finally venting her pent-up anger for years, he "found" the
perfect reason to terminate her.

In determining entitlement to moral and exemplary damages, we restate the bases therefor. In
moral damages, it suffices to prove that the claimant has suffered anxiety, sleepless nights,
besmirched reputation and social humiliation by reason of the act complained of.[22] Exemplary
damages, on the other hand, are granted in addition to, inter alia, moral damages "by way of
example or correction for the public good"[23] if the employer "acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner."[24]

Anxiety was gradual in private respondent's five (5)-year employment. It began when her plant
manager showed an obvious partiality for her which went out of hand when he started to make
it clear that he would terminate her services if she would not give in to his sexual advances.
Sexual harassment is an imposition of misplaced "superiority" which is enough to dampen an
employee's spirit in her capacity for advancement. It affects her sense of judgment; it changes
her life. If for this alone private respondent should be adequately compensated. Thus, for the
anxiety, the seen and unseen hurt that she suffered, petitioners should also be made to pay her
moral damages, plus exemplary damages, for the oppressive manner with which petitioners
effected her dismissal from the service, and to serve as a forewarning to lecherous officers and
employers who take undue advantage of their ascendancy over their employees. Ex sm
All told, the penalty of dismissal is too excessive and not proportionate to the alleged
infractions committed considering that it does not appear that private respondent was an
incorrigible offender or that she inflicted serious damage to the company, nor would her
continuance in the service be patently inimical to her employers interest.[25] Even the
suspension imposed upon her while her case was pending investigation appears to be
unjustified and uncalled for.

WHEREFORE, the Decision of public respondent National Labor Relations Commssion finding
the dismissal of private respondent Rosalinda C. Cortez to be without just cause and ordering
petitioners Philippine Aeolus Automotive United Corporation and/or Francis Chua to pay her
back wages computed from the time of her dismissal, which should be fullback wages, is
AFFIRMED. However, in view of the strained relations between the adverse parties, instead of
reinstatement ordered by public respondent, petitioners should pay private respondent
separation pay equivalent to one (1) month salary for every year of service until finality of this
judgment. In addition, petitioners are ordered to pay private respondent P25,000.00 for moral
damages and P10,000.00 for exemplary damages. Costs against petitioners.

SO ORDERED.