PEPSI v. GAL-LANG claim asserted and employee-employer relations to put the case under the provisions of Article 217.

—
It must be stressed that not every controversy involving workers and their employers can be resolved
only by the labor arbiters. This will be so only if there is a “reasonable causal connection” between
Facts:
the claim asserted and employee-employer relations to put the case under the provisions of Article
The private respondents were employees of the petitioner who were suspected of complicity in the 217. Absent such a link, the complaint will be cognizable by the regular courts of justice in the
irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal exercise of their civil and criminal jurisdiction.
complaint for theft against them but this was later withdrawn and substituted with a criminal
complaint for falsification of private documents. On November 26, 1987, after a preliminary Same; Same; Same; Same; Although a controversy is between an employer and an employee, the
investigation conducted by the Municipal Trial Court, the complaint was dismissed. The dismissal was Labor Arbiters have no jurisdiction if the Labor Code is not involved.—ln Molave Motor Sales, Inc. v.
affirmed by the Office of the Provincial Prosecutor. Laron, the same Justice held for the Court that the claim of the plaintiff against its sales manager for
payment of certain accounts pertaining to his purchase of vehicles and automotive parts, repairs of
Meantime, allegedly after an administrative investigation, the private respondents were dismissed by
such vehicles, and cash advances from the corporation was properly cognizable by the Regional Trial
the petitioner company on November 23, 1987. As a result, they filed a complaint for illegal dismissal
Court of Dagupan City and not the labor arbiter, because “although a controversy is between an
before the Labor Arbiter, and demanded reinstatement with damages. They also filed a separate civil
employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved.”
complaint against the petitioners for damages arising from what they claimed to be their malicious
prosecution before the RTC.
Same; Same; Same; Same; No reasonable causal connection between the complaint and the
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no relations of the parties as employer and employees in the case at bar.—The case now before the
jurisdiction over the case because it involved employee-employer relations that were exclusively Court involves a complaint for damages for malicious prosecution which was filed with the Regional
cognizable by the labor arbiter. Trial Court of Leyte by the employees of the defendant company. It does not appear that there is a
“reasonable causal connection” between the complaint and the relations of the parties as employer
The motion was granted. However, the respondent judge, acting on the motion for reconsideration,
and employees. The complaint did not arise from such relations and in fact could have arisen
reinstated the complaint, saying it was “distinct from the labor case for damages now pending before
independently of an employment relationship between the parties. No such relationship or any unfair
the labor courts.”
labor practice is asserted. What the employees are alleging is that the petitioners acted with bad
Issue: faith when they filed the criminal complaint which the Municipal Trial Court said was intended “to
harass the poor employees” and the dismissal of which was affirmed by the Provincial Prosecutor
Whether the trial court has jurisdiction over the case.
“for’ lack of evidence to establish even a slightest probability that all the respondents herein have
Held: committed the crime imputed against them.” This is a matter which the labor arbiter has no
competence to resolve as the applicable law is not the Labor Code but the Revised Penal Code.
Yes. The trial court has jurisdiction over the case.
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to
support their position that the private respondents’ civil complaint for damages falls under the
jurisdiction of the labor arbiter. The Court held at the outset that the case is not in point because
what was involved there was a claim arising from the alleged illegal dismissal of an employee, who
chose to complain to the regular court and not to the labor arbiter.
It must be stressed that not every controversy involving workers and their employers can be resolved
only by the labor arbiters. This will be so only if there is a “reasonable causal connection” between
the claim asserted and employee-employer relations to put the case under the provisions of Article
217. Absent such a link, the complaint will be cognizable by the regular courts of justice in the
exercise of their civil and criminal jurisdiction.
The case at bar involves a complaint for damages for malicious prosecution which was filed with the
Regional Trial Court by the employees of the defendant company. It does not appear that there is a
“reasonable causal connection” between the complaint and the relations of the parties as employer
and employees. The complaint did not arise from such relations. What the employees are alleging is
that the petitioners acted with bad faith when they filed the criminal complaint. This is a matter which
the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the
Revised Penal Code.
_______________________________________________________________________
Civil Law; Labor Law; Jurisdiction; Not every controversy involving workers and their employers can
be resolved only by the labor arbiters; There must be a reasonable causal connection between the
MOLAVE v. LARON 4. Cases involving household services; and
5. CASES ARISING FROM ANY VIOLATION OF ARTICLE 265 OF THIS CODE, INCLUDING QUESTIONS
Facts:
INVOLVING THE LEGALITY OF STRIKES AND LOCKOUTS.
Petitioner is a corporation engaged in the sale and repair of motor vehicles. Private respondent is the
sales manager of PLAINTIFF. At the pre-trial conference, the DEFENDANT raised the question of 6. All other claims arising from employer-employee relations, unless expressly excluded by this Code].
jurisdiction of the Court stating that PLAINTIFF's complaint arose out of employer- (Italics and bracketed portions indicate the deletions, while the amendments introduced are
employee relationship, and he subsequently moved for dismissal. Such complaint was dismissed capitalized).
by the judge because it must be the jurisdiction of the LA and NLRC to decide cases on ER-EE
The dismissal of the case below on the ground that the sum of money and damages sued upon arose from employer-employee
relationship. However, although a controversy is between an employer and an employee, the Labor
relationship was erroneous. Claims arising from employer-employee relations are now limited to those mentioned in
Arbiters have no jurisdiction if the Labor Code is not involved. In this case, PLAINTIFF had sued for
paragraphs 2 and 3 of Article 217. There is no difficulty on our part in stating that those in the case below should not be
monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, and for the purchase
faulted for not being aware of the last amendment to the frequently changing Labor Code.
price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. hence,
the civil has the juris over the matter. The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the latter has not sought
clearance for his separation from the service, will not affect the jurisdiction of respondent Judge to resolve the complaint
Issue: of PLAINTIFF. DEFENDANT could still be liable to PLAINTIFF for payment of the accounts sued for even if he remains an
Whether or not there was still a relationship of employer and employee between the parties. employee of PLAINTIFF.
_______________________________________________________________________
Held:
The dismissal of the case below on the ground that the sum of money and damages sued upon arose Labor Law; Jurisdiction; Civil Courts, not the Labor Arbiter and the NLRC, have jurisdiction over
from employer-employee relationship was erroneous. Claims arising from employer-employee accounts for monies loaned by employer to employee for cost of repair jobs made on an employee’s
relations are now limited to those mentioned in paragraphs 2 and 3 of Article 217. There is no personal cars, and for purchase price of vehicles and parts sold to employee.—In the case below,
difficulty in stating that those in the case below should not be faulted for not being aware of the last PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal
amendment to the frequently changing Labor Code. cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance
to the Labor Code. The cause of action was one under the civil laws, and it does not breach any
The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the provision of the Labor Code or the contract of employment of DEFENDANT. Hence, the civil courts,
latter has not sought clearance for his separation from the service, will not affect the jurisdiction of not the Labor Arbiters and the NLRC, should have jurisdiction.
respondent Judge to resolve the complaint of PLAINTIFF. DEFENDANT could still be liable to
PLAINTIFF for payment of the accounts sued for even if he remains an employee of PLAINTIFF. Same; Same; Same; Claims arising from employer-employee relations limited only to paragraph 2
(involving wages, hours of work and other terms and conditions of employment) and paragraph 3
Issue: (all money claims of workers) of Art 217 of the Labor Code.—The dismissal of the case below on the
WON the RTC has jurisdiction over the case? YES. ground that the sum of money and damages sued upon arose from employer-employee relationship
was erroneous. Claims arising from employer-employee relations are now limited to those mentioned
Held: in paragraphs 2 and 3 of Article 217. There is no difficulty on our part in stating that those in the
case below should not be faulted for not being aware of the last amendment to the frequently
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, changing Labor Code.
and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. The
cause of action was one under the civil laws, and it does not breach any provision of the Labor Code or the contract of
employment of DEFENDANT. Hence, the civil courts, not the Labor Arbiters and the NLRC, should have jurisdiction.
BP Blg. 227 has amended Article 217 of the Labor Code to read as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission
of the case by the parties for decision, the following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Those that ( involve) WORKERS MAY FILE INVOLVING wages, hours of work and other terms and
conditions of employment;
3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate agreement,
except claims for employees compensation, social security, and maternity benefits;
JAGUAR v. SALES
Facts:
Petitioner Jaguar Security and Investigation Agency ("Jaguar") is a private corporation engaged in the business of
providing security services to its clients, one of whom is Delta Milling Industries, Inc. ("Delta").
Private respondents Rodolfo Sales, Melvin Tamayo, Dionisio Caranyagan, Jesus Silva, Jr., Jaime Moron and Daneth
Fetalvero were hired as security guards by Jaguar. They were assigned at the premises of Delta in Libis, Quezon
City. Caranyagan and Tamayo were terminated by Jaguar on May 26, 1998 and August 21, 1998, respectively.
Allegedly their dismissals were arbitrary and illegal. Sales, Moron, Fetalvero and Silva remained with Jaguar. All
the guard-employees, claim for monetary benefits such as underpayment, overtime pay, rest day and holiday
premium pay, underpaid 13th month pay, night shift differential, five days service and incentive leave pay. In
addition to these money claims, Caranyagan and Tamayo argue that they were entitled to separation pay and back
wages, for the time they were illegally dismissed until finality of the decision. Furthermore, all respondents claim
for moral and exemplary damages.
On September 18, 1998, respondent security guards instituted the instant labor case before the labor arbiter.
On May 25, 1999, the labor arbiter rendered a decision in favor of private respondents Sales, et al., the dispositive
portion of which provides:
"WHEREFORE, judgment is hereby rendered dismissing the charges of illegal dismissal on the part of the
complainants MELVIN R. TAMAYO and DIONISIO C. CARANYAGAN for lack of merit but ordering respondents
JAGUAR SECURITY AND INVESTIGATION AGENCY and DELTA MILLING INDUSTRIES, INC., to jointly and
severally pay all the six complainants, namely: RODOLFO A. SALES, MELVIN R. TAMAYO, JAIME MORON and
DANETH FETALVERO the following money claims for their services rendered from April 24, 1995 to April 24,
1998:
a) wage differentials
b) overtime pay differentials (4 hours a day)
c) rest day pay
d) holiday pay
e) holiday premium pay
f) 13th month pay differentials
g) five days service incentive leave pay per year subject to the exception earlier cited.
The Research and Information Unit of this Commission is hereby directed to compute and quantify the above
awards and submit a report thereon within 15 days from receipt of this decision.
For purposes of any appeal, the appeal bond is tentatively set at P100,000.00.
All other claims are DISMISSED for lack of merit.
SO ORDERED."
On July 1, 1999, petitioner Jaguar filed a partial appeal questioning the failure of public respondent NLRC to resolve
its cross-claim against Delta as the party ultimately liable for payment of the monetary award to the security guards.
In its Resolution dated September 19, 2000, the NLRC dismissed the appeal, holding that it was not the proper
forum to raise the issue. It went on to say that Jaguar, being the direct employer of the security guards, is the one
principally liable to the employees. Thus, it directed petitioner to file a separate civil action for recovery of the
amount before the regular court having jurisdiction over the subject matter, for the purpose of proving the liability
of Delta.
Jaguar sought reconsideration of the dismissal, but the Commission denied the same in its Resolution dated
November 9, 2001.
Petitioner filed a petition for certiorari with the CA, which, in the herein assailed Decision dated October 21, 2002
and Resolution dated February 13, 2004, dismissed the petition for lack of merit.
Issue: Whether or not petitioner may claim reimbursement from Delta Milling through a cross-claim filed with the
labor court?
Held: The Court ruled in the negative.
The jurisdiction of labor courts extends only to cases where an employer-employee relationship exists.
In the present case, there exists no employer-employee relationship between petitioner and Delta Milling. In its
cross-claim, petitioner is not seeking any relief under the Labor Code but merely reimbursement of the monetary
benefits claims awarded and to be paid to the guard employees. There is no labor dispute involved in the cross-
claim against Delta Milling. Rather, the cross-claim involves a civil dispute between petitioner and Delta Milling.
Petitioner's cross-claim is within the realm of civil law, and jurisdiction over it belongs to the regular courts.
Moreover, the liability of Delta Milling to reimburse petitioner will only arise if and when petitioner actually pays
its employees the adjudged liabilities. Payment, which means not only the delivery of money but also the
performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary
debtors to seek reimbursement for the share which corresponds to each of the debtors. In this case, it appears that
petitioner has yet to pay the guard employees.
The petition is DENIED.
____
ESPINO v. NLRC
FACTS:
➔ Petitioner Leslie W. Espino was the Exec. Vice President-Chief Operating Officer of respondent
Phil Airlines (PAL) when his service was terminated in 1990 as a result of the findings of the
panels created by then President Corazon C. Aquino to investigate the administrative charges
filed against him. It appears that petitioner and other several senior officers of PAL were charged
for their involvement in 4 cases, labeled as “Goldair,” “Robelle,” “Kabash/Primavera,” and “Middle
East.”
➔ The PAL Board of Directors issued separate resolutions wherein Espino was considered resign
from the service effective immediately for loss of confidence
➔ Espino filed a complaint for “illegal dismissal” against PAL with the NLRC, Arbitration Branch,
NCR.
➔ PAL argued that board resolutions cannot be reviewed by the NLRC and that the recourse of the
petitioner Espino should have been addressed by way of appeal, to the OP.
➔ Labor Arbiter Cresencio J. Ramos rendered a decision in favor of petitioner Espino
➔ PAL asserted that the Labor Arbiter’s decision is null and void for lack of jurisdiction over the
subject matter as it is the SEC, and not the NLRC which has jurisdiction over involving dismissal
or removal of corporate officers.
➔ NLRC promulgated a resolution and this time ruled in favor of PAL on the ground of lack of
jurisdiction
➔ Petitioner Espino contended that it is the NLRC that has jurisdiction over the case as it involves
the termination of a regular employee and involves claim for backwages and other benefits and
damages
Issue: Whether the NLRC has jurisdiction over the complaint filed by the petitioner for illegal
dismissal
HELD: NO
Under P.D. No. 902-A, it is the Securities and Exchange Commission and not the NLRC that has
original and exclusive jurisdiction over cases involving the removal from employment of corporate
officers. Under the said decree, the SEC has the exclusive and original jurisdiction to hear and decide
cases involving “Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.”
It has been ruled that a corporate officer’s dismissal is always a corporate act and/or an intra-
corporate controversy and that nature is not altered by the reason or wisdom which the Board of
Directors may have in taking such action. Evidently, this intra-corporate controversy must be place
under the specialized competence and expertise of the SEC.
The fact that petitioner sought payment of his backwages, other benefits, as well as damages and
attorney's fees in his complaint for illegal dismissal will not operate to prevent the SEC from exercising
its jurisdiction under PD 902-A. As to the contention of Espino that PAL is estopped from questioning
the jurisdiction of the NLRC, it is well-settled that jurisdiction over the subject matter is conferred by
law and the question of lack of jurisdiction may be raised anytime even on appeal.
WHERFORE, PETITION IS DENIED.
_______________________________________________________________________
Corporation Law; Securities and Exchange Commission; P.D. 902-A; Jurisdiction; Labor Law; NLRC;
It is the Securities and Exchange Commission (SEC) and not the NLRC which has original and
exclusive jurisdiction over cases involving the removal from employment of corporate officers under
P.D. 902-A.—The Court, citing Presidential Decree No. 902-A, laid down the rule in the case of
Philippine School of Business Administration v. Leano, and consequently reiterated in three (3) other
cases that it is the Securities and Exchange Commission (SEC) and not the NLRC which has original
and exclusive jurisdiction over cases involving the removal from employment of corporate officers.
Same; Same; Same; Same; Section 5(c), P.D. 902-A specifically provides SEC original and exclusive
jurisdiction over matters concerning the election or appointment of officers of a corporation.—In
intracorporate matters concerning the election or appointment of officers of a corporation, Section 5,
PD 902-A specifically provides; “SEC. 5. In addition to the regulatory and adjudicative functions of
the Securities and Exchange Commission over corporations, partnerships and other forms of
associations registered with it as expressly granted under existing laws and decrees, it shall have
original and exclusive jurisdiction to hear and decide cases involving: x x x x x x x x x (c)
Controversies in the election or appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations”
Same; Same; Same; Same; Generally speaking, the relationship of a person to a corporation,
whether as officer or as agent or employee, is not determined by the nature of the services
performed, but by the incidents of the relationship as they actually exist.—The matter of petitioner’s
not being elected to the office of Executive Vice PresidentChief Operating Officer thus falls squarely
within the purview of Section 5, par. (c) of P.D. 902-A. In the case of PSBA v. Leano, supra, which
involved an Executive Vice-President who was not re-elected to the said position during the election
of officers on September 5, 1981 by the PSBA’s newly elected Board of Directors, the Court
emphatically stated: ‘This is not a case of dismissal. The situation is that of a corporate office having
been declared vacant, and that of TAN’s not having been elected thereafter. The matter of whom to
elect is a prerogative that belongs to the Board, and involves the exercise of deliberate choice and
the faculty of discriminative selection. Generally speaking, the relationship of a person to a
corporation, whether as officer or as agent or employee, is not determined by the nature of the
services performed, but by the incidents of the relationship as they actually exist.”
Same; Same; Same; Same; A corporate officer’s dismissal is always a corporate act.—A corporate
officer’s dismissal is always a corporate act and/or an intra-corporate controversy and that nature is
not altered by the reason or wisdom which the Board of Directors may have in taking such action.
Furthermore, it must be noted that the reason behind the non-election of petitioner to the position
of Executive Vice President-Chief Operating Officer arose from, or is closely connected with, his
involvement in the alleged irregularities in the aforementioned cases which, upon investigation and
recommendation, were resolved by the PAL Board of Directors against him and other senior officers.
Evidently, this intra-corporate ruling places the instant case under the specialized competence and
expertise of the SEC.
Same; Same; Same; Same; The principal function of the SEC is the supervision and control over
corporations, partnerships and associations with the end in view that investment in these entities
may be encouraged and protected, and their activities pursued for the promotion of economic
development.—The jurisdiction of the SEC has likewise been clarified by this Court in the case of
Union Glass and Container Corporation, et al. v. SEC, et al., thus: ‘This grant of jurisdiction must be
viewed in the light of the nature and function of the SEC under the law. Section 3 of PD No. 902-A
confers upon the latter ‘absolute jurisdiction, supervision, and control over all corporations,
partnerships or associations, who are grantees of primary franchise and/or license or permit issued
by the government to operate in the Philippines x x x.’ The principal function of the SEC is the
supervision and control over corporations, partnerships and associations with the end in view that
investment in these entities may be encouraged and protected, and their activities pursued for the
promotion of economic development.
Same; Same; Same; Same; Requisites in order that SEC can take cognizance of a case.—It is in aid
of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly
specified and delimited its jurisdiction to matters intrinsically connected with the regulation of
corporations, partnerships and associations and those dealing with the internal affairs of such
corporations, partnerships or associations. Otherwise stated, in order that the SEC can take
cognizance of a case, the controversy must pertain to any of the following relationships: (a) between
the corporation, partnership or association and the public; (b)) between the corporation, partnership
or association and its stockholders, partners, members, or officers; (c) between the corporation,
partnership or association and the state in so far as its franchise, permit or license to operate is
concerned, and (d) among the stockholders, partners or associates themselves.
Same; Same; Same; Same; The affirmative reliefs and monetary claims sought by petitioner in his
complaint reveal that they are actually part of the perquisites of his elective position; hence,
intimately linked with his relations with the corporation.—The fact that petitioner sought payment of
his backwages, other benefits, as well as moral and exemplary damages and attorney’s fees in his
complaint for illegal dismissal will not operate to prevent the SEC from exercising its jurisdiction
under PD 902-A. While the affirmative reliefs and monetary claims sought by petitioner in his
complaint may, at first glance, mislead one into placing the case under the jurisdiction of the Labor
Arbiter, a closer examination reveals that they are actually part of the perquisites of his elective
position; hence, intimately linked with his relations with the corporation. In Dy v. NLRC, et al., the
Court, confronted with the same issue ruled, thus: “The question of remuneration, involving as it
does, a person who is not a mere employee but a stockholder and officer, an integral part, it might
be said, of the corporation, is not a simple labor problem but a matter that comes within the area of
corporate affairs and management, and is in fact a corporate controversy in contemplation of the
Corporation Code.”
Same; Same; Same; Same; It is still within the competence of and expertise of the SEC to resolve
all matters arising from or closely related with all intra-corporate disputes.—The Court has likewise
ruled in the case of Andaya v. Abadia that in intra-corporate matters, such as those affecting the
corporation, its directors, trustees, officers and shareholders, the issue of consequential damages
may just as well be resolved and adjudicated by the SEC. Undoubtedly, it is still within the
competence and expertise of the SEC to resolve all matters arising from or closely connected with all
intra-corporate disputes.
Same; Same; Same; Same; The issue of jurisdiction is unavailing because estoppel does not apply
to confer jurisdiction upon a tribunal that has none over the cause of action.—It is well-settled that
jurisdiction over the subject matter is conferred by law and the question of lack of jurisdiction may
be raised at anytime even on appeal. The principle of estoppel cannot be invoked to prevent this
Court from taking up the question of jurisdiction, which has been apparent on the face of the
pleadings since the start of the litigation before the Labor Arbiter. In the case of Dy v. NLRC, supra,
the Court, citing the case of Calimlim v. Ramirez reiterated that the decision of a tribunal not vested
with appropriate jurisdiction is null and void. Again, the Court in Southeast Asian Fisheries
Development Center-Aquaculture Department v. NLRC restated the rule that the invocation of
estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to
confer jurisdiction upon a tribunal that has none over the cause of action. The instant case does not
provide an exception to the said rule.
MANEJA v. NLRC
Facts: Maneja (employee) worked for Manila Midtown Hotel(MMH) (employer) as a telephone operator. Maneja was
dismissed by MMH due to violation of their company policy on culpable negligence – negligence or failure to follow specific
instruction(s) or established procedure(s). Maneja filed a complaint for illegal dismissal against MMH. Labor Arbiter Oswald
Lorenzo ruled in favor of Maneja. Lorenzo noted that on the face of the complaint, the issue revolves around the
implementation and interpretation of existing company policies, and as such it is within the jurisdiction of the grievance
procedure under the CBA between MMH and NUWRAIN (the Union in which Maneja is a member), but he still assumed
jurisdiction over the case since termination cases is within his jurisdiction.
Issue: Does the Labor Arbiter have jurisdiction over the case?
Ruling: Yes. Since there has been an actual termination, the matter falls within the jurisdiction of the Labor Arbiter. The
dismissal of Maneja does not call for the interpretation or enforcement of company personnel policies but is a termination
dispute which comes under the jurisdiction of the Labor Arbiter.
It should be explained that “company personnel policies” are guiding principles stated in broad, long-range terms express the
philosophy or beliefs of an organization’s top authority regarding personnel matters. They deal with matters affecting
efficiency and well-being of employees and include, among others, the procedure in the administration of wages, benefits,
promotions, transfer and other personnel movements which are usually not spelled out in the collective agreement. The usual
source of grievances, however, are the rules and regulations governing disciplinary actions.
________________________________________________________________________
Labor Law; Jurisdiction; Labor Arbiters; Voluntary Arbitration; Grievance Procedure; Collective
Bargaining Agreements; Dismissal of Employees; Termination cases fall under the original and
exclusive jurisdiction of the Labor Arbiters, not voluntary arbitrators.—As can be seen from the
aforequoted Article, termination cases fall under the original and exclusive jurisdiction of the Labor
Arbiter. It should be noted, however, that in the opening paragraph there appears the phrase:
“Except as otherwise provided under this Code x x x.” It is paragraph (c) of the same Article which
respondent Commission has erroneously interpreted as giving the voluntary arbitrator jurisdiction
over the illegal dismissal case. However, Article 217(c) should be read in conjunction with Article 261
of the Labor Code which grants to voluntary arbitrators original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the collective
bargaining agreement and those arising from the interpretation or enforcement of company
personnel policies. Note the phrase “unresolved grievances.” In the case at bar, the termination of
petitioner is not an unresolved grievance.
Same; Same; Same; Same; Same; Same; Same; Where the dispute is just in the interpretation,
implementation or enforcement stage, it may be referred to the grievance machinery set up in the
Collective Bargaining Agreement or by voluntary arbitration, but where there is already actual
termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter.—The stance of the
Solicitor General in the Sanyo case is totally the reverse of its posture in the case at bar. In Sanyo,
the Solicitor General was of the view that a distinction should be made between a case involving
“interpretation or implementation of Collective Bargaining Agreement” or interpretation or
“enforcement” of company personnel policies, on the one hand and a case involving termination, on
the other hand, It argued that the dismissal of the private respondents does not involve an
“interpretation or implementation” of a Collective Bargaining Agreement or “interpretation or
enforcement” of company personnel policies but involves “termination.” The Solicitor General further
said that where the dispute is just in the interpretation, implementation or enforcement stage, it may
be referred to the grievance machinery set up in the Collective Bargaining Agreement or by voluntary
arbitration. Where there was already actual termination, i.e., violation of rights, it is already
cognizable by the Labor Arbiter. We fully agree with the theory of the Solicitor General in the Sanyo
case, which is radically opposite to its position in this case.
Same; Same; Same; Same; Same; Same; Same; Only disputes involving the union and the company
shall be referred to the grievance machinery or voluntary arbitrators.—Moreover, the dismissal of
petitioner does not fall within the phrase “grievances arising from the interpretation or
implementation of collective bargaining agreement and those arising from the interpretation or
enforcement of company personnel policies,” the jurisdiction of which pertains to the grievance
machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. It is to be stressed
that under Article 260 of the Labor Code, which explains the function of the grievance machinery and
voluntary arbitrator, “(T)he parties to a Collective Bargaining Agreement shall include therein
provisions that will ensure the mutual observance of its terms and conditions. They shall establish a
machinery for the adjustment and resolution of grievances arising from the interpretation or
implementation of their Collective Bargaining Agreement and those arising from the interpretation or
enforcement of company personnel policies.” Article 260 further provides that that parties to a CBA
shall name or designate their respective representative to the grievance machinery and if the
grievance is unsettled in that level, it shall automatically be referred to the voluntary arbitrators
designated in advance by the parties to a CBA of the union and the company. It can thus be deduced
that only disputes involving the union and the company shall be referred to the grievance machinery
or voluntary arbitrators.
Same; Same; Same; Same; Same; Same; Words and Phrases; “Company Personnel Policies,”
Explained.—It should be explained that “company personnel policies” are guiding principles stated in
broad, long-range terms that express the philosophy or beliefs of an organization’s top authority
regarding personnel matters. They deal with matters affecting efficiency and well-being of employees
and include, among others, the procedure in the administration of wages, benefits, promotions,
transfer and other personnel movements which are usually not spelled out in the collective
agreement. The usual source of grievances, however, are the rules and regulations governing
disciplinary actions.
Same; Same; Pleadings and Practice; Estoppel; The issue of jurisdiction is mooted by a party’s active
participation in the proceedings.—Clearly, estoppel lies. The issue of jurisdiction was mooted by
herein private respondent’s active participation in the proceedings below. In Marquez vs. Secretary
of Labor, the Court said: “x x x. The active participation of the party against whom the action was
brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where
the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide
by the resolution of the case and will bar said party from later on impugning the court or body’s
jurisdiction.”
Same; Dismissals; Requisites for Valid Dismissal.—The requisites of a valid dismissal are (1) the
dismissal must be for any of the causes expressed in Article 282 of the Labor Code, and (2) the
employee must be given an opportunity to be heard and to defend himself. The substantive and
procedural laws must be strictly complied with before a worker can be dismissed from his employment
because what is at stake is not only the employee’s position but his livelihood.
Same; Same; Social Justice; Presumption of Good Faith; Our norms of social justice demand that we
credit employees with the presumption of good faith in the performance of their duties.—Given the
factual circumstances of the case, we cannot deduce dishonesty from the act and omission of
petitioner. Our norms of social justice demand that we credit employees with the presumption of
good faith in the performance of their duties, especially petitioner who has served private respondent
since 1985 up to 1990 without any tinge of dishonesty and was even named “Model Employee” for
the month of April, 1989.
Same; Same; Dismissal must be based on a clear and not on an ambiguous or ambivalent ground— sanctioned by Article 2219, No. 10 of the Civil Code, which allows recovery of such damages in actions
any ambiguity or ambivalence on the ground relied upon by an employer in terminating the services referred to in Article 21.
of an employee denies the latter his full right to contest its legality.—Petitioner has been charged
with a very serious offense—dishonesty. This can irreparably wreck her life as an employee for no
employer will take to its bosom a dishonest employee. Dismissal is the supreme penalty that can be
meted to an employee and its imposition cannot be justified where the evidence is ambivalent. It
must, therefore, be based on a clear and not on an ambiguous or ambivalent ground. Any ambiguity
or ambivalence on the ground relied upon by an employer in terminating the services of an employee
denies the latter his full right to contest its legality. Fairness cannot countenance such ambiguity or
ambivalence.
Same; Same; Due Process; Well-settled is the dictum that the twin requirements of notice and
hearing constitute the essential elements of due process in the dismissal of employees.—Well-settled
is the dictum that the twin requirements of notice and hearing constitute the essential elements of
due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer
must furnish the employee with two written notices before the termination of employment can be
effected: (a) the first apprises the employee of the particular acts or omissions for which his dismissal
is sought; and, (b) the second informs the employee of the employer’s decision to dismiss him. The
requirement of a hearing, on the other hand, is complied with as long as there was an opportunity
to be heard, and not necessarily that an actual hearing was conducted.
Same; Same; Same; Consultations or conferences may not be a substitute for the actual holding of
a hearing.—An examination of the record reveals that no hearing was ever conducted by private
respondent before petitioner was dismissed. While it may be true that petitioner submitted a written
explanation, no hearing was actually conducted before her employment was terminated. She was not
accorded the opportunity to fully defend herself. Consultations or conferences may not be a substitute
for the actual holding of a hearing. Every opportunity and assistance must be accorded to the
employee by the management to enable him to prepare adequately for his defense, including legal
representation. Considering that petitioner denied having allegedly taken the second P500.00 deposit
of the Japanese guest which was eventually found; and, having made the alteration of the date on
the second RLDC merely to reflect the true date of the transaction, these circumstances should have
at least warranted a separate hearing to enable petitioner to fully ventilate her side. Absent such
hearing, petitioner’s right to due process was clearly violated.
Same; Same; Same; A worker’s employment is property in the constitutional sense.—It bears
stressing that a worker’s employment is property in the constitutional sense. He cannot be deprived
of his work without due process of law. Substantive due process mandates that an employee can
only be dismissed based on just or authorized causes. Procedural due process requires further that
he can only be dismissed after he has been given an opportunity to be heard. The import of due
process necessitates the compliance of these two aspects.
Same; Same; Damages; Where the termination of the services of an employee is attended by fraud
or bad faith on the part of the employer, as when the latter knowingly made false allegations of a
supposed valid cause when none existed, moral and exemplary damages may be awarded in favor
of the former.—The award of moral and exemplary damages to petitioner is also warranted where
there is lack of due process in effecting the dismissal. Where the termination of the services of an
employee is attended by fraud or bad faith on the part of the employer, as when the latter knowingly
made false allegations of a supposed valid cause when none existed, moral and exemplary damages
may be awarded in favor of the former. The anti-social and oppressive abuse of its right to investigate
and dismiss its employees constitute a violation of Article 1701 of the New Civil Code which prohibits
acts of oppression by either capital or labor against the other, and Article 21 on human relations. The
grant of moral damages to the employees by reason of such conduct on the part of the company is
SANYO v. CANIZARES characterized by arbitrariness (Manila Mandarin Employee Union v. NLRC, G.R. No. 76989, 29 Sept.
1987, 154 SCRA 368) and always with due process.
Facts:
Same; Same; Same; The law grants to voluntary arbitrators original and exclusive jurisdiction to
 PSSLU (union) had an existing CBA with Sanyo.
hear and decide all unresolved grievances arising from the interpretation or implementation of the
 The CBA contained a union security clause. (aka employees must be members of the union for continued
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
employment)
company personnel policies.—The reference to a Grievance Machinery and Voluntary Arbitrators for
 PSSLU wrote Sanyo that the membership of certain employees have been cancelled for anti-union, activities,
the adjustment or resolution of grievances arising from the interpretation or implementation of their
economic sabotage, threats, coercion and intimidation, disloyalty and for joining another union called KAMAO.
CBA and those arising from the interpretation or enforcement of company personnel policies is
 In accordance with the security clause of the CBA, Sanyo dismissed these employees. mandatory. The law grants to voluntary arbitrators original and exclusive jurisdiction to hear and
 The dismissed employees filed a complaint with the NLRC for illegal dismissal. Named respondent were PSSLU and decide all unresolved grievances arising from the interpretation or implementation of the Collective
Sanyo. Bargaining Agreement and those arising from the interpretation or enforcement of company
 PSSLU filed a motion to dismiss the complaint alleging that the Labor Arbiter was without jurisdiction over the personnel policies.
case, relying on Article 217(c) of the Labor Code which provides that cases arising from the interpretation or
implementation of the CBA shall be disposed of by the labor arbiter by referring the same to the grievance Same; Same; Same; Procedure of referring certain grievances originally and exclusively to the
machinery and voluntary arbitration. grievance machinery and to a panel of voluntary arbitrators include not only grievances arising from
 Nevertheless, the Labor Arbiter assumed jurisdiction the interpretation or implementation of the CBA but applies as well to those arising from the
implementation of company personnel policies.—The procedure introduced in RA 6715 of referring
ISSUE: certain grievances originally and exclusively to the grievance machinery and when not settled at this
Whether or not the Labor Arbiter has jurisdiction over the case. level, to a panel of voluntary arbitrators outlined in CBA’s does not only include grievances arising
from the interpretation or imple-mentation of the CBA but applies as well to those arising from the
HELD: implementation of company personnel policies. No other body shall take cognizance of these cases.
 We hold that the Labor Arbiter and not the Grievance Machinery provided for in the CBA has the jurisdiction to
hear and decide the case.
 While it appears that the dismissal of the private respondents was made upon the recommendation of PSSLU
pursuant to the union security clause provided in the CBA, We are of the opinion that these facts do not come
within the phrase "grievances arising from the interpretation or implementation of (their) Collective Bargaining
Agreement
 THE RULE IS: only disputes involving the union and the company shall be referred to the grievance machinery or
voluntary arbitrators.
o In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents.
o No grievance between them exists which could be brought to a grievance machinery.
o The problem or dispute in the present case is between the union and the company on the one hand
and some union and non-union members who were dismissed, on the other hand.
o The dispute has to be settled before an impartial body. The grievance machinery with members
designated by the union and the company cannot be expected to be impartial against the dismissed
employees.
 Since there has already been an actual termination, the matter falls within the jurisdiction of the Labor Arbiter.
_______________________________________________________________________________

Labor Law; Collective Bargaining Agreement; Dismissal; Enforcement of the union security clause in
the CBA is authorized by law provided that enforcement should not be characterized by arbitrariness
and always with due process.—It was provided in the CBA executed between PSSLU and Sanyo that
a member’s voluntary resignation from membership, willful refusal to pay union dues and his/her
forming, organizing, joining, supporting, affiliating or aiding directly or indirectly another labor union
shall be a cause for it to demand his/her dismissal from the company. The demand for the dismissal
and the actual dismissal by the company on any of these grounds is an enforcement of the union
security clause in the CBA. This act is authorized by law provided that enforcement should not be
PANTRANCO v NLRC
Facts:
Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined the
Pantranco Employees Association, PTGWO. He continued in petitioner’s employ until August 12, 1989,
when he was retired at the age of 52 after having rendered twenty five year’s service. The basis of
his retirement was the compulsory retirement provision of the collective bargaining agreement
between the petitioner and the aforenamed union. Private respondent received P49, 300.00 as
retirement pay.
Private respondent filed a complaint for illegal dismissal against petitioner with the Sub-Regional
Arbitration Branch of the respondent Commission in Dagupan City. The complaint was consolidated
with two other cases of illegal dismissal having similar facts and issues, filed by other employees,
non union members.
Issue:
Is a Collective Bargaining Agreement provision allowing compulsory retirement before age 60 but
after twenty five years of service legal and enforceable?
Who has jurisdiction over a case involving such a question -- the labor arbiter or arbitrators
authorized by such CBA?
Ruling:
On the first issue:
The bone of contention in this case is the provision on compulsory retirement after 25 years of
service. Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement between
petitioner company and the union states:
"Section 1. The COMPANY shall formulate a retirement plan with the following main features:
xxx xxx xxx
(e) The COMPANY agrees to grant the retirement benefits herein provided to regular employees
who may be separated from the COMPANY for any of the following reasons:
xxx xxx xxx
Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to
the COMPANY, whichever comes first, and the employee shall be compulsory retired and paid the
retirement benefits herein provided."
Art. 287 of the Labor Code as worded permits employers and employees to fix the applicable
retirement age at below 60 years. Moreover, providing for early retirement does not constitute
diminution of benefits. In almost all countries today, early retirement, i.e., before age 60, is
considered a reward for services rendered since it enables an employee to reap the fruits of his labor
— particularly retirement benefits, whether lump-sum or otherwise — at an earlier age, when said
employee, in presumably better physical and mental condition, can enjoy them better and longer. As
a matter of fact, one of the advantages of early retirement is that the corresponding retirement
benefits, usually consisting of a substantial cash windfall, can early on be put to productive and
profitable uses by way of income-generating investments, thereby affording a more significant
measure of financial security and independence for the retiree who, up till then, had to contend with
life's vicissitudes within the parameters of his fortnightly or weekly wages. Thus we are now seeing
many CBAs with such early retirement provisions. And the same cannot be considered a diminution
of employment benefits.
It is also further argued that, being a union member, private respondent is bound by the CBA because
its terms and conditions constitute the law between the parties. The parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which according
to their nature, may be in keeping with good faith, usage and law. It binds not only the union but
also its members. Thus, the Solicitor General said:
"Private respondent cannot therefore claim illegal dismissal when he was compulsory retired after
rendering twenty-five (25) years of service since his retirement is in accordance with the CBA."
A CBA incorporates the agreement reached after negotiations between employer and bargaining
agent with respect to terms and conditions of employment. A CBA is not an ordinary contract. "(A)s
a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines which
governs the relations between labor and capital, (it) is not merely contractual in nature but impressed
with public interest, thus it must yield to the common good. As such, it must be construed liberally
rather than narrowly and technically, and the courts must place a practical and realistic construction
upon it, giving due consideration to the context in which it is negotiated and purpose which it is
intended to serve."
Being a product of negotiation, the CBA between the petitioner and the union intended the provision
on compulsory retirement to be beneficial to the employees-union members, including herein private
respondent. When private respondent ratified the CBA with the union, he not only agreed to the CBA
but also agreed to conform to and abide by its provisions. Thus, it cannot be said that he was illegally
dismissed when the CBA provision on compulsory retirement was applied to his case.
On the second issue:
In Sanyo Philippines Workers Union — PSSLU vs. Cañizares, a case cited by the petitioner,
this Court ruled:
“x x x Hence, only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the union
and the company on the one hand and some union and non-union members who were dismissed, on
the other hand. The dispute has to be settled before an impartial body. The grievance machinery
with members designated by the union and the company cannot be expected to be impartial against
the dismissed employees. Due process demands that the dismissed workers’ grievances be ventilated
before an impartial body. Since there has already been an actual termination, the matter falls within
the jurisdiction of the Labor Arbiter.”
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the
union and petitioner company because both have previously agreed upon the provision on
"compulsory retirement" as embodied in the CBA. Also, it was only private respondent on his own it read as follows: “ART. 287. Retirement.—Any employee may be retired upon reaching the
who questioned the compulsory retirement. Thus, the case is properly denominated as a "termination retirement age established in the collective bargaining agreement or other applicable employment
dispute" which comes under the jurisdiction of labor arbiters. contract. x x x x x x x x x In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years
_______________________________________________________________________________ or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said establishment may retire x x x.”
Labor Law; Termination; A termination dispute comes under the jurisdiction of Labor Arbiters.—
Applying the same rationale to the case at bar, it cannot be said that the “dispute” is between the Same; Same; CBA; Contracts; The intention and spirit of the law is to give employers and employees
union and petitioner company because both have previously agreed upon the provision on a free hand to determine and agree upon the terms and conditions of retirement.—The aforequoted
“compulsory retirement” as embodied in the CBA. Also, it was only private respondent on his own provision makes clear the intention and spirit of the law to give employers and employees a free
who questioned the compulsory retirement. Thus, the case is properly denominated as a “termination hand to determine and agree upon the terms and conditions of retirement. Providing in a CBA for
dispute” which comes under the jurisdiction of labor arbiters. Therefore, public respondent did not compulsory retirement of employees after twenty-five (25) years of service is legal and enforceable
commit a grave abuse of discretion in upholding the jurisdiction of the labor arbiter over this case. so long as the parties agree to be governed by such CBA. The law presumes that employees know
what they want and what is good for them absent any showing that fraud or intimidation was
Same; Retirement; Article 287 of the Labor Code as worded permits employers and employees to fix employed to secure their consent thereto.
the applicable retirement age at below 60 years.—We agree with petitioner and the Solicitor General.
Art. 287 of the Labor Code as worded permits employers and employees to fix the applicable
retirement age at below 60 years. Moreover, providing for early retirement does not constitute
diminution of benefits. In almost all countries today, early retirement, i.e., before age 60, is
considered a reward for services rendered since it enables an employee to reap the fruits of his
labor—particularly retirement benefits, whether lump-sum or otherwise—at an earlier age, when said
employee, in presumably better physical and mental condition, can enjoy them better and longer. As
a matter of fact, one of the advantages of early retirement is that the corresponding retirement
benefits, usually consisting of a substantial cash windfall, can early on be put to productive and
profitable uses by way of in-come-generating investments, thereby affording a more significant
measure of financial security and independence for the retiree who, up till then, had to contend with
life’s vicissitudes within the parameters of his fortnightly or weekly wages. Thus we are now seeing
many CBAs with such early retirement provisions. And the same cannot be considered a diminution
of employment benefits.
Same; Same; Collective Bargaining Agreement; Contract; A CBA incorporates the agreement reached
after negotiations between employer and bargaining agent with respect to terms and conditions of
employment.—A CBA incorporates the agreement reached after negotiations between employer and
bargaining agent with respect to terms and conditions of employment. A CBA is not an ordinary
contract. “(A)s a labor contract within the contemplation of Article 1700 of the Civil Code of the
Philippines which governs the relations between labor and capital, (it) is not merely contractual in
nature but impressed with public interest, thus it must yield to the common good. As such, it must
be construed liberally rather than narrowly and technically, and the courts must place a practical and
realistic construction upon it, giving due consideration to the context in which it is negotiated and
purpose which it is intended to serve.”
Same; Same; Same; Same; It cannot be said that private respondent was illegally dismissed when
the CBA provision on compulsory retirement was applied to his case.—Being a product of negotiation,
the CBA between the petitioner and the union intended the provision on compulsory retirement to be
beneficial to the employees-union members, including herein private respondent. When private
respondent ratified the CBA with the union, he not only agreed to the CBA but also agreed to conform
to and abide by its provisions. Thus, it cannot be said that he was illegally dismissed when the CBA
provision on compulsory retirement was applied to his case.
Same; Same; RA 7641 known as “The Retirement Pay Law” which went into effect on January 7,
1993 amended Art. 287 of the Labor Code.—Incidentally, we call attention to Republic Act No. 7641,
known as “The Retirement Pay Law,” which went into effect on January 7, 1993. Although passed
many years after the compulsory retirement of herein private respondent, nevertheless, the said
statute sheds light on the present discussion when it amended Art. 287 of the Labor Code, to make
SANTOS v. SERVIER
Facts: Petitioner Ma. Isabel T. Santos, as the Human Resource Manager of Servier Philippines,
attended a meeting of all human resource managers of respondent, held in Paris, France together
with her family. During her stay in Paris, she was hospitalized due to "alimentary allergy," as she had
recently ingested a meal of mussels which resulted in a concomitant uticarial eruption. All
hospitalization expenses were paid by respondent. When she came back in the Philippines and
underwent medical evaluation, the physician concluded that she had not fully recovered mentally and
physically. This prompted respondent to terminate petitioner‘s services. As a consequence thereof,
respondent offered a retirement package. Of the promised retirement benefits amounting to
P1,063,841.76, only P701,454.89 was released to petitioner‘s husband, the balance thereof was
withheld for taxation purposes. Petitioner then filed a case for unpaid balance of the retirement
package. The LA dismissed the complaint. However, it refused to rule on the legality of the deductions
made by respondent from petitioner‘s total retirement benefits for taxation purposes, as the issue
was beyond the jurisdiction of the NLRC. On appeal, NLRC set aside the ruling of LA. They emphasized
that petitioner was not retired from the service; rather, she was dismissed from employment due to
a disease/disability under Article 2842 of the Labor Code. In view of her non- entitlement to
retirement benefits, the amounts received by petitioner should then be treated as her separation
pay. CA affirmed the same.
Issue: Whether determination of legality of taxable benefits was beyond the labor tribunal‘s
jurisdiction.
Ruling: No. Contrary to the Labor Arbiter and NLRC‘s conclusions, petitioner‘s claim for illegal
deduction falls within the tribunal‘s jurisdiction. It is noteworthy that petitioner demanded the
completion of her retirement benefits, including the amount withheld by respondent for taxation
purposes. The issue of deduction for tax purposes is intertwined with the main issue of whether or
not petitioner‘s benefits have been fully given her. It is, therefore, a money claim arising from the
employer-employee relationship, which clearly falls within the jurisdiction of the Labor Arbiter and
the NLRC.
Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for the exclusion
of retirement benefits from gross income, thus for the retirement benefits to be exempt from the
withholding tax, the taxpayer is burdened to prove the concurrence of the following elements: (1) a
reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee
has been in the service of the same employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of his retirement; and (4) the benefit
had been availed of only once.
retirement plan and/or in the Collective Bargaining Agreement.—We have declared in Aquino v.
National Labor Relations Commission, 206 SCRA 118 (1992), that the receipt of retirement benefits
does not bar the retiree from receiving separation pay. Separation pay is a statutory right designed
to provide the employee with the wherewithal during the period that he/she is looking for another
employment. On the other hand, retirement benefits are intended to help the employee enjoy the
remaining years of his life, lessening the burden of worrying about his financial support, and are a
form of reward for his loyalty and service to the employer. Hence, they are not mutually exclusive.
However, this is only true if there is no specific prohibition against the payment of both benefits in
the retirement plan and/or in the Collective Bargaining Agreement (CBA).
Same; Same; Same; There being a provision in the Retirement Plan, petitioner is entitled only
to either the separation pay under the law or retirement benefits under the Plan, and not both.—In
the instant case, the Retirement Plan bars the petitioner from claiming additional benefits on top of
that provided for in the Plan. x x x There being such a provision, as held in Cruz v. Philippine Global
Communications, Inc., 430 SCRA 184 (2004), petitioner is entitled only to either the separation pay
under the law or retirement benefits under the Plan, and not both.
Same; Jurisdiction; Labor Arbiters; National Labor Relations Commission; Illegal Deduction;
The issue of deduction for tax purposes is a money claim arising from the employer-employee
relationship, which clearly falls within the jurisdiction of the Labor Arbiter and the National Labor
Relations Commission (NLRC).—Contrary to the Labor Arbiter and NLRC’s conclusions, petitioner’s
claim for illegal deduction falls within the tribunal’s jurisdiction. It is noteworthy that petitioner
demanded the completion of her retirement benefits, including the amount withheld by respondent
for taxation purposes. The issue of deduction for tax purposes is intertwined with the main issue of
whether or not petitioner’s benefits have been fully given her. It is, therefore, a money claim arising
from the employer-employee relationship, which clearly falls within the jurisdiction of the Labor
Arbiter and the NLRC.
Same; Retirement Benefits; Exemption from Withholding Tax; Requisites for the Retirement Benefits
to be Bxempt from the Withholding Tax.—For the retirement benefits to be exempt from the
withholding tax, the taxpayer is burdened to prove the concurrence of the following elements: (1) a
reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee
has been in the service of the same employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of his retirement; and (4) the benefit
had been availed of only once.

Petitioner was qualified for disability retirement. At the time of such retirement, petitioner was only
41 years of age; and had been in the service for more or less eight (8) years. As such, the above
provision is not applicable for failure to comply with the age and length of service requirements.
Therefore, respondent cannot be faulted for deducting from petitioner‘s total retirement benefits the
amount of P362,386.87, for taxation purposes.

_______________________________________________________________________________

Labor Law; Retirement Benefits; Separation Pay; The receipt of retirement benefits does not
bar the retiree from receiving separation pay; Retirement benefits and separation pay are not
mutually exclusive unless there is no specific prohibition against the payment of both benefits in the
SENTINEL v. BAUTISTA
Facts:
• Porfirio M. Bautista was hired as Legal Officer by Sentinel
• In the course of his employment, Bautista handled a number of cases for which he was paid fifteen
(15%) per cent on amounts recovered except for the four cases in question which, according to
Bautista, he deferred the billing and collection of his percentage on said cases... because of his
awareness of the tight financial condition of the company
• On March 29, 1979, petitioner applied for clearance to... terminate employment with the Ministry
of Labor and Employment but which was opposed by Bautista on May 31, 1979.
• Bautista questioned the legality of his dismissal and at the same time asserted his claim for unpaid
legal fee
• Dissatisfied with the portion awarding the money claim, petitioner appealed to the National Labor
Relations Commission and argued that the Labor Arbiter erred in assuming that Bautista was
entitled to... the legal fees irrespective of the means by which he effected recoveries for the
company.
Issues:
the money claim is civil in character cognizable only by regular courts and therefore beyond the
jurisdiction and competence of the Labor Arbiter
Ruling:
• The Calderon case, however, is no longer controlling because the law upon which said decision was
based, Article 217 of the Labor Code as amended by PD No. 1367, has been superceded by PD No.
1691 which took effect May 1, 1980 and which restored to the Labor Arbiters original... and
exclusive jurisdiction over claims, monetary or otherwise, provided by law or by appropriate
agreement, arising from employer-employee relations, except those expressly excluded there...
therefrom.[5]
• Although the cause of action arose when PD No. 1367 was then the prevailing law and upon which
the Calderon case was premised, said Decree was no longer applicable when the case was resolved
by the National Labor Relaions Commission on August 29, 1980. The law then in force... was PD
No. 1691.
• Article 217 as amended by PD No. 1367 and PD No. 1691 was again amended by Batas Pambansa
Bilang 130 which took effect August 21, 1981. On June 1, 1982, said Article 217 was amended
anew by Batas Pambansa Bilang 227 vesting on Labor Arbiters jurisdiction over cases that...
workers may file involving wages, hours of work and other terms and conditions of employment
and all money claims of workers, except claims for employees' compensation, social security,
medicare and maternity benefits.
• the claim of 15% legal fees arose out of employer-employee relationship and clearly falls within the
coverage of Article 217 as amended by PD No. 1691 and Batas Pambansa Bilang 227
_______________________________________________________________________________
Labor Law; NLRC; Employer-employee relationship, no cessation of, by his timely opposition to
application for authority to terminate his employment.—It is alleged that at the time Bautista
instituted his money claim by way of opposition, the employer-employee relationship has ceased.
The allegation is without basis. Bautista filed a timely opposition to the application for authority to
terminate his employment. The employer-employee tie certainly existed at that point of time.
Although Bautista did not seek reinstatement, he demanded compliance with one of the express
terms of his employment, thus the dispute is one arising from employer-employee relationship.
Same; Same; Money Claims; Jurisdiction; Calderon vs. Court of Appeals case, no longer controlling,
as PD 1367 superseded by PD 1691 which restored to Labor Arbiters original and exclusive jurisdiction
over monetary and other claims.—The Calderon case, however, is no longer controlling because the
law upon which said decision was based, Article 217 of the Labor Code as amended by PD No. 1367,
has been superseded by PD No. 1691 which took effect May 1, 1980 and which restored to the Labor
Arbiters original and exclusive jurisdiction over claims, monetary or otherwise, provided by law or by
appropriate agreement, arising from employer-employee relations, except those expressly excluded
therefrom.
Same; Same; Same; Same; PD 1691; Cause of action which arose when PD 1367 was the prevailing
law and upon which the Calderon case was premised, cannot prevail over the law in force when the
case was resolved by the NLRC which was PD 1691.—Although the cause of action arose when PD
No. 1367 was then the prevailing law and upon which the Calderon case was premised, said Decree
was no longer applicable when the case was resolved by the National Labor Relations Commission on
August 29, 1980. The law then in force was PD No. 1691.
Same; Same; Same; Same; Same; BP 227 amending PD 1367, and PD 1691 as amended by BP 130,
vests on Labor Arbiters jurisdiction over money claims involving employer-employee relationship.—
Article 217 as amended by PD No. 1367 and PD No. 1691 was again amended by Batas Pambansa
Bilang 130 which took effect August 21, 1981. On June 1, 1982, said Article 217 was amended anew
by Batas Pambansa Bilang 227 vesting on Labor Arbiters jurisdiction over cases that workers may
file involving wages, hours of work and other terms and conditions of employment and all money
claims of workers, except claims for employees’ compensation, social security, medicare and
maternity benefits.
Same; Same; Same; Same; Same; Same; Legal fees of attorney-employee which arose out of
employer-employee relationship clearly falls under Art. 217 of the Labor Code, as amended by PD
1691 and BP 227.—Undoubtedly, the claim of 15% legal fees arose out of employer-employee
relationship and clearly falls within the coverage of Article 217 as amended by PD No. 1691 and Batas
Pambansa Bilang. 227.
Same; Same; Same; Same; Same; Same; PD 1691 and BP 227, considered curative statutes and
are given retroactive effect; Reason.—In Garcia vs. Martinez, promulgated May 28, 1979, PD No.
1367 was held to be an amendatory decree in the nature of a curative statute with retrospective
application to a pending proceeding which cured the lack of jurisdiction of the Court of First Instance
of Davao City over a complaint for damages allegedly arising from the dismissal of a radio station
manager which was filed on August 2, 1976. PD No. 1691 and BP No. 227 are likewise curative
statutes which cured the lack of jurisdiction of the Labor Arbiter at the start of the proceeding and
should be given retrospective application to this pending proceedings, as the precise purpose of the
amendments was to settle once and for all the conflict of jurisdiction between regular courts and
labor agencies.
Same; Same; Same; Estoppel; Employer estopped from questioning jurisdiction of Labor Arbiter to
award money claim for its failure to object to the employee’s money claim.—Moreover, petitioner is
estopped from questioning the jurisdiction of the Labor Arbiter to award the money claim considering
that in the position paper it submitted to the Labor Arbiter, it never objected but in fact remained
silent as to the claim which was asserted not only in the opposition for termination of employment
but also raised as an issue at the conciliation hearing.
Same; Same; Same; Same; Categorizing a money claim for legal fees as involving both a labor
controversy and a civil dispute would result in split jurisdiction; Intent of law making authority not
to deprive Labor Arbiters and the NLRC of jurisdiction to award damages in labor cases; Reason.—
Furthermore, to state that this case involves both a labor controversy and a civil dispute would be to
sanction split jurisdiction which is obnoxious to the orderly administration of justice. In a number of
cases this Court expounded on this holding that evidently, the lawmaking authority had second
thoughts about depriving Labor Arbiters and the National Labor Relations Commission of the
jurisdiction to award damages in labor cases because that setup means duplicity of suits, splitting
the cause of action and possible conflicting findings and conclusions by two tribunals of one and the
same claim.
PAL v. NLRC (1996)
Labor Law; Employer-Employee Relationship; Elements.—We have pronounced in numerous
cases that in determining the existence of an employer-employee relationship, the following elements
are generally considered: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control the employee’s conduct.
Same; Same; Security Guards; Jurisdiction; The Labor Arbiter has no jurisdiction over a claim
filed where no employer-employee relationship existed between a company and the security guards
assigned to it by a security service contractor.—Even if we disregard the explicit covenant in said
agreement that “there exists no employer-employee relationship between CONTRACTOR and/or his
guards on the one hand, and PAL on the other” all other considerations confirm the fact that PAL was
not the security guards’ employer. Analogous to the instant case is Canlubang Security Agency Corp.
vs. NLRC. Considering then that no employer-employee relationship existed between PAL and the
security guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-
06008-90.
Same; Same; Same; Indirect Employers; Read together, Articles 106 and 109 of the Labor
Code simply mean that the party with whom an independent contractor deals is solidarily liable with
the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered
a direct employer.—The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption
of jurisdiction on the pretext that PAL was the indirect employer of the security guards under Article
107 in relation to Articles 106 and 109 of the Labor Code and, therefore, it is solidarily liable with
USSI. We agree with the Solicitor General that these Articles are inapplicable to PAL under the facts
of this case. While USSI is an independent contractor under the security service agreement and PAL
may be considered an indirect employer, that status did not make PAL the employer of the security
guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be
considered an indirect employer only for purposes of unpaid wages since Article 106, which is
applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect
employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109
simply mean that that party with whom an independent contractor deals is solidarily liable with the
latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a
direct employer.
Same; Same; Same; Same; Words and Phrases; “Wage,” Defined.—The term “wage” is
defined in Article 97(f) of the Labor Code as “the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.”
Same; Same; Same; Same; A breach of a security service agreement could only give rise to
damages under the Civil Code, which is cognizable by the appropriate regular court of justice.—No
valid claim for wages or separation pay can arise from the security service agreement in question by
reason of its termination at the instance of PAL. The agreement contains no provision for separation
pay. A breach thereof could only give rise to damages under the Civil Code, which is cognizable by
the appropriate regular court of justice.
Same; Same; Same; Same; The Labor Arbiter commits grave abuse of discretion if he
disregards the rule he is bound to observe, such as when he fails to resolve forthwith a motion to
dismiss grounded on lack of jurisdiction, improper venue, res judicata or prescription.—The Labor
Arbiter’s lack of jurisdiction was too obvious from the allegations in the complaint and its annex (the
security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor Arbiter then should
have forthwith resolved the motion to dismiss and the supplemental motion to dismiss. As correctly
pointed out by PAL, under Section 15 of Rule V of the New Rules of Procedure of the NLRC, any
motion to dismiss on the ground of lack of jurisdiction, improper venue, res judicata, or prescription
shall be immediately resolved by the Labor Arbiter by a written order. Yet, the Labor Arbiter did not,
and it was only in his decision that he mentioned that the resolution of the motion to dismiss “was
deferred until this case is decided on the merits” because the ground therefor was not “indubitable.”
On this score the Labor Arbiter acted with grave abuse of discretion for disregarding the rules he was
bound to observe.
Same; Appeals; Pleadings and Practice; Negligence; Belief in good faith by an employer as to
the exact date of its receipt of a decision renders excusable any negligence it might have committed;
The higher interest of justice favors a relaxation of the rule on perfection of appeals in labor cases
where there is a delay of only one day in the filing of the appeal, considered along with the fact that
the Labor Arbiter had no jurisdiction over the subject matter of the claim and that the security guards
are not in fact entitled to separation pay under the security service agreement.—We shall now turn
to the issue of tardiness of the appeal. The record does indeed show that on the original copy of the
Notice of Judgment/Final Order, there is stamped by the PAL Legal Department the date of its receipt
of the decision, viz., “AUG. 23 1991.” It is not also denied by respondents that on the right upper
hand corner of PAL’s copy of the Notice of Judgment/Final Orders, there is stamped the date of receipt
thereof by PAL Legal Department, viz., “AUG. 26 1991.” PAL explained how this discrepancy occurred
and how its counsel was misled into believing that PAL received a copy of the decision only on 26
August 1991. This belief in good faith rendered excusable any negligence it might have committed.
Besides, the delay in the perfection of the appeal was only one day. Considering that the Labor Arbiter
had no jurisdiction over the subject matter of NLRC-NCR Case No. 00-11-06008-90 and that the 16
security guards are not in fact entitled to separation pay under the security service agreement, the
higher interest of justice favors a relaxation of the rule on perfection of appeals in labor cases.
Same; Same; Same; While it is an established rule that the perfection of an appeal in the
manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure
to perfect an appeal has the effect of rendering the judgment final and executory, it is equally settled
that the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse
tardiness in the taking of the appeal.—While it is an established rule that the perfection of an appeal
in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and
failure to perfect an appeal has the effect of rendering the judgment final and executory, it is equally
settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to
excuse tardiness in the taking of the appeal. Among the acceptable reasons recognized by this Court
are (a) counsel’s reliance on the footnote of the notice of the decision of the Labor Arbiter that “the
aggrieved party may appeal . . . within ten (10) working days”; (b) fundamental consideration of
substantial justice; (c) prevention of miscarriage of justice or of unjust enrichment, as where the
tardy appeal is from a decision granting separation pay which was already granted in an earlier final
decision; and (d) special circumstances of the case combined with its legal merits or the amount and
the issue involved. A one-day delay in the perfection of the appeal was excused in Pacific Asia
Overseas Shipping Corp. vs. NLRC, Insular Life Assurance Co. vs. NLRC, and City Fair Corp. vs. NLRC.
Same; Same; Same; The Labor Arbiter’s lack of jurisdiction — so palpably clear on the face
of the complaint — and the perpetuation of unjust enrichment if the appeal is disallowed are enough
combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases.—
In the instant case, the Labor Arbiter’s lack of jurisdiction — so palpably clear on the face of the
complaint — and the perpetuation of unjust enrichment if the appeal is disallowed are enough
combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases.