Labor Relations Digest

1.Metro Transit v. NLRC, 307 SCRA 747

Facts: Private respondent Victorio T. Turing was a train operator of the light rail transit system
of Metro Transit. He was hired on November 22, 1984 at a monthly salary of P4,150.00. On
March 29, 1990, he was dismissed for abandonment of work.
Earlier, on January 9, 1990, private respondent had been suspended for three days for having
been absent, without leave, for ten (10) days . On February 14, 1990, he applied for leave of
absence for three (3) days but after his leave had expired, he failed to report for work.
On March 6, 1990, the company's social worker, Emma Luciano, went to see him at his home
address but did not find him. She later learned that private respondent had gone to Calamba,
Laguna. Nonetheless, private respondent, on the same day, informed petitioner that he would be
reporting for work on March 15, 1990.
As a matter of fact, he returned to work on March 12, 1990, explaining that he had been absent
because of domestic problems. However, on March 29, 1990, private respondent was dismissed
for abandonment of work.
LA rendered a decision declaring the complainant Victorio Turing was illegally dismissed.
On appeal, the Labor Arbiter's decision was affirmed by the NLRC.
Issue: Whether or not private respondent is guilty of abandonment of work
Held: NO. It is settled that findings of fact made by labor arbiters, when affirmed by the NLRC,
are entitled not only to great respect but even finality and are binding on this Court if they are
supported by substantial evidence.
Indeed, for abandonment of work to be a just and valid ground for dismissal, there must be a
deliberate and unjustified refusal on the part of an employee to resume his employment. The
burden of proof is on the employer to show an unequivocal intent on the part of the employee to
discontinue employment. 8 To warrant a finding of abandonment, there must be evidence not
only of the failure of an employee to report for work or his absence without valid or justifiable
reason, but also of his intention to sever the employer-employee relationship. The second
element is the more determinative favor, being manifested by overt acts.
To be sure, considering the reason for his absence, private respondent cannot be said to have
abandoned his work. Indeed, petitioner has adduced no proof of overt acts on the part of private
respondent showing clearly and unequivocably his intention to abandon his work. To the
contrary, the evidence shows that when the social worker Emma M. Luciano conducted a home
visit, private respondent declared his intention to return to work on March 15, 1990.
As a matter of fact, he reported for work on March 12. In his letters to petitioner dated March 12
and 13, 1990, he expressed regrets for his absences. Then, after learning that he had been
dismissed, private respondent filed a complaint for illegal dismissal. All these belie petitioner's
allegation that private respondent had abandoned his job. We have ruled in several cases 10 that
a timely filing of an illegal dismissal case negates abandonment.

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However, it is one thing to say that private respondent did not abandon his work. It is quite
another to say that he is likewise not guilty of absence without leave (AWOL). No matter what
marital problems private respondent had, he had no excuse for not informing his employer of the
reason for his failure to report for work. The record shows that he went on leave for three days
on February 17, 20, and 21, 1990, but after his leave had expired, he did not report for work.
Considering that just a month before, on January 9, 1990, he had been suspended for precisely
being absent without leave, private respondent should have taken care that his absence was not
considered habitual, at least by sending word to his employer that this time he had a good
excuse.

2.Icawat v. NLRC, G.R. No. 133573, June 20, 2000

Facts: On December 27, 1994, private respondent lost his driver’s license. To secure a new one,
he sought the petitioner’s permission to go on vacation leave. After obtaining his license, private
respondent reported for work but was informed by petitioners that another driver had already
taken his place. Respondents filed a complaint 4 for illegal dismissal against herein petitioners
before the Department of Labor and Employment (DOLE) praying that he be reinstated and be
paid his 13th month pay and service incentive leave credits.
Petitioners contended that private respondent is not a regular employee but only an alternate
driver; that he drives the jeepney only on Tuesdays, Thursdays and Saturdays on a half day
shifting basis; that in October 1994, private respondent went on vacation and came back to work
only after three months; and that petitioners told him that they have already hired regular drivers.
LA ruled in favor of the respondents. NLRC affirmed.
Issue: WON there is abandonment
Held: No.
To constitute abandonment, two elements must concur:
(1) the failure to report for work or absence without valid or justifiable reason, and
(2) a clear intention to sever the employer-employee relationship, with the second element as the
more determinative factor and being manifested by some overt acts. Mere absence is not
sufficient.
To prove abandonment, the employer must show that the employee deliberately and
unjustifiably refused to resume his employment without any intention of returning.

Private respondent, after his vacation leave, immediately reported back for work but was not
allowed by the petitioners on the ground that he was already replaced by regular drivers. After he

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 Labor Relations Digest

was notified of his termination, private respondent lost no time in filing the case for illegal
dismissal against petitioners. He cannot, therefore, by any reasoning, be said to have abandoned
his work or had no intention of going back to work. It would be illogical for him to have left his
job and later on file said complaint.

3.Farrol v. CA, G.R. No. 133259, February 10. 2000

Facts: Petitioner Wenifredo Farrol was employed as station cashier at respondent RCPI's
Cotabato City station. On June 18, 1993, respondent RCPI's district manager in Cotabato City
informed their main office that "Peragram funds" from said branch were used for the payment of
retirement benefits of five employees. On October 1, 1993, petitioner verified as correct RCPI's
Field Auditor's report that there was a shortage of P50,985.37 in their branch's Peragram, Petty
and General Cash Funds. The next day, petitioner paid to RCPI P25,000.00 of the cash shortage.
On October 10, 1993, RCPI required petitioner to explain why he should not be dismissed from
employment. Two days thereafter, petitioner wrote a letter to the Field Auditor stating that the
missing funds were used for the payment of the retirement benefits earlier referred to by the
branch manager and that he had already paid P25,000.00 to RCPI. After making two more
payments of the cash shortage to RCPI, petitioner was informed by the district manager that he is
being placed under preventive suspension. Thereafter, he again paid two more sum's on different
dates to RCPI leaving a balance of P6,995.37 of the shortage.
Respondent RCPI claims that it sent a letter to petitioner on November 22, 1993 informing him
of the termination of his services as of November 20, 1993. Unaware of the termination letter,
petitioner requested that he be reinstated considering that the period of his preventive suspension
had expired.
Sometime in September 1995, petitioner manifested to RCPI his willingness to settle his case
provided he is given his retirement benefits. However, RCPI informed petitioner that his
employment had already been terminated earlier as contained in the letter dated November 22,
1993. The conflict was submitted to the grievance committee. Despite the lapse of more than two
years, the case remained unresolved before the grievance committee, hence, it was submitted for
voluntary arbitration.
After hearing, the Voluntary Arbitrator ruled that petitioner was illegally dismissed from
employment and ordered RCPI to pay him backwages, separation pay, 13th month pay and sick
leave benefits.6 Aggrieved, RCPI filed a petition for certiorari before the Court of Appeals (CA),
which reversed the ruling of the arbitrator and dismissed the complaint for illegal dismissal.
Upon denial of petitioner's motion for reconsideration by the CA, he filed the instant petition for
review on certiorari on the grounds that his dismissal was illegal because he was not afforded
due process and that he "cannot be held liable for the loss of trust and confidence reposed in
him" by RCPI.
Issue: WON there is illegal dismissal

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 Labor Relations Digest

Held: Yes. In cases involving the illegal termination of employment, it is fundamental that the
employer must observe the mandate of the Labor Code, i.e., the employer has the burden of
proving that the dismissal is for a cause provided by the law10 and that it afforded the employee
an opportunity to be heard and to defend himself.

The employer must comply with the twin requirements of two notices and hearing. The first
notice is that which apprises the employee of the particular acts or omissions for which his
dismissal is sought, and after affording the employee an opportunity to be heard, a subsequent
notice informing the latter of the employer's decision to dismiss him from work.

As regards the first notice, RCPI simply required petitioner to "explain in writing why he failed
to account" for the shortage and demanded that he restitute the same. On the assumption that the
foregoing statement satisfies the first notice, the second notice not "clearly" cite the reasons for
the dismissal, contrary to the requirements set by the above-quoted Section 6 of Book V, Rule
XIV of the Omnibus Rules.
A perusal of RCPI's dismissal notice reveals that it merely stated a conclusion to the effect that
the withholding was deliberately done to hide alleged malversation or misappropriation without,
however, stating the circumstances in support thereof. It further mentioned that the position of
cashier requires utmost trust and confidence but failed to allege the breach of trust on the part of
petitioner and how the alleged breach was committed. On the assumption that there was indeed a
breach, there is no evidence that petitioner was a managerial employee of respondent RCPI. It
should be facts noted that the term 'trust and managerial employees.15 It may not even be
presumed that when there is a shortage, there is also a corresponding breach of trust. Cash
shortages in a cashier's work may happen, and when there is no proof that the same was
deliberately done for a fraudulent or wrongful purpose, it cannot constitute breach of trust so as
to render the dismissal from work invalid.

4.Deles v. NLRC, G.R. No. 121348, March 9. 2000

Facts: Respondent company operates a pipeline system which transports petroleum products
from the refineries. Petitioner was employed by respondent company as shift supervisor...
assigned at its joint terminal facility in Pandacan, Manila, where he was the highest ranking
officer at the terminal during his shift. His primary task was to oversee the entire pipeline
operation in the terminal. Admittedly, he was a member of the management team. petitioner
instructed his chief operator (Yumul) to effect a batch change from the kerosene tank to the
aviation fuel tank when the joint terminal... facility turbine meter registers 2,944 barrels of
kerosene delivered.

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 Labor Relations Digest

Apparently, Yumul failed to execute correctly petitioner's order. Instead of effecting the batch
change at the prescribed reading of 2,944 barrels, Yumul caused the batch change when the
reading already... reached 3,341 barrels. When informed of the incident, respondent company
required petitioner to explain why he should not be charged administratively for neglect of duty

Concomitantly, petitioner was placed under preventive suspension pending the outcome of the
investigation. Similarly, Yumul and Espejon were asked to explain for having been... remiss in
their duties respondent company conducted a joint formal investigation of the cases... respondent
company found petitioner, Yumul and Espejon guilty as charged... informed petitioner that he
was found to have violated the section on Neglect of Duty of respondent company's Code of
Discipline and for this violation he was meted the penalty of three (3) months suspension

Believing that suspension for three months was too harsh, petitioner sought reconsideration of
the penalty imposed. Subsequently, he filed a complaint before the NLRC, questioning the
legality of his suspension. Respondent company received reports that petitioner allowed the entry
of two "bar girls" at the terminal at an unholy hour (4:00 A.M.) on February 23, 1993...
respondent company required petitioner to explain in writing why he should not be held liable
for: (1) neglect of duty as he allowed unauthorized persons in a restricted area, and; (2)
dishonesty as he misrepresented to management that the two women are his... relatives.
Unfortunately, petitioner failed to submit his written explanation.

Respondent company conducted a formal inquiry on the matter which was attended by petitioner.
It was discovered that petitioner tampered with the automatic shutdown feature of Gravitometer
No. 5 at the terminal on March 19, 1993.

The abovementioned gravitometer is equipped with a safety feature which triggers the automatic
closure of the joint terminal facility pressure control valve... by disabling the automatic shutdown
feature of said gravitometer, LPG could pass through the line to the gasoline... tank undetected,
and since the gasoline tank is not designed to accommodate LPG, the possibility of an explosion
is enhanced... respondent company again asked petitioner to explain why he should not be
administratively sanctioned... petitioner was placed under preventive suspension effective June
24, 1993, pending the outcome of the probe on the latest charges against him. Meanwhile, on
July 24, 1993, petitioner was reinstated in the payroll

After conducting formal investigation, respondent company terminated the employment of

petitioner.

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Having been dismissed, petitioner amended his complaint by including the charge of illegal
dismissal with a claim for unpaid wages.

Labor Arbiter Potenciano Canizares, Jr., dismissed petitioner's complaint for lack of merit.

the NLRC upheld the labor arbiter's finding that petitioner's suspension for three months is a
reasonable... disciplinary measure. The labor tribunal also ruled that respondent company has
sufficient basis to lose its trust and confidence on petitioner. However, it modified the decision
of the labor arbiter by including therein an indemnity in an amount equivalent to petitioner's
one... month salary for alleged failure of herein respondent company to strictly comply with due
process requirements prior to termination... whether or not public respondent committed grave
abuse of discretion in affirming the decision of the labor arbiter finding that petitioner's
suspension is legal and that his dismissal is for valid and just cause on account of loss of...
confidence.

Issue: WON there is illegal dissmissal

Ruling: YES. Regarding the legality of petitioner's suspension, petitioner was found remiss in his
duties in connection with the wrong batch change operation on March 19, 1993. On its face,
petitioner's contention would require the Court to delve into the findings of fact a quo. This we
cannot do. In the review of NLRC decisions through a special civil action for certiorari, we are
confined only to issues of want of jurisdiction and grave... abuse of discretion on the part of the
labor tribunal.

Nevertheless, in this case, we note that the labor arbiter used every reasonable means to ascertain
the facts by giving the parties ample opportunity to present evidence. After both parties were
heard, they filed their respective affidavits, position papers and memoranda. The labor arbiter
properly found that despite considering these documentary evidence, averments of Flaviano
Santos in his affidavit indicting petitioner for tampering with the gravitometer and admitting the
wrongdoing stand on solid ground

5.Dela Cruz v. NLRC, 268 SCRA 458

Facts: The factual antecedents in this case are succinctly summarized in the Manifestation and
Motion of the Office of the Solicitor General, as follows:

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Petitioner Gloria de la Cruz was hired by respondent Company in 1975 as a laboratory aide.
Prior to her dismissal, she was assigned at the Production Department where she was in charge
of printing the product codes, labels and foils of the company products.
On June 11, 1992, the management called a meeting where the employees were informed that
due to heavy volume of work, availment of vacation leaves was being temporarily suspended and
sick leaves could be availed of only if the sickness or injury occurred within company premises.
Despite the above directive, petitioner went on sick leave from June 16 to 30, 1992. When
petitioner reported for work on July 1, 1992, the Company’s security guard barred her from
entering the premises and handed to her a memorandum, signed by Antonio Bautista, apprising
her of her temporary lay-off from July 1-15, 1992 allegedly due to continuous daily brownout
On July 16, 1992, petitioner resumed her normal work. As she was preparing to go home, her
immediate supervisor accosted her why she was keeping her folding umbrella in a bag marked
"Pliva," which was exclusively used in packaging Pliva products being manufactured by
respondent Company for a foreign client. Petitioner reasoned out that it was the bag she asked
from a co-employee, Tessa Gajete.

In a Memorandum dated July 17, 1992, the Company’s personnel officer directed petitioner to
explain why she should not be penalized for unauthorized possession of company property,
equipment and supply punishable by outright dismissal.
In the course of the administrative investigation, petitioner was placed under preventive
suspension. When the investigation was completed, respondent Company terminated the services
of petitioner, for violating the Company Code of Discipline, specifically the provision on
dishonesty.
Consequently, petitioner filed a complaint against the Company and Antonio Bautista for illegal
temporary lay-off, illegal dismissal with damages and attorney’s fees.
Issue: WON the dismissal valid
Held: Yes.
A lay-off, used interchangeably with "retrenchment," is a recognized prerogative of
management. It is the termination of employment resorted to by the employer, through no fault
of nor with prejudice to the employees, during periods of business recession, industrial
depression, seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program, or the introduction of new
methods or more efficient machinery, or of automation. Simply put, it is an act of the employer
of dismissing employees because of losses in operation of a business, lack of work, and
considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court. 8 The requisites of a valid retrenchment are covered by Article 283 of the
Labor Code

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On the issue of illegal dismissal, we likewise find for the petitioner.

In termination cases, the burden of proving just and valid cause for dismissing an employee from
his employment rests upon the employer, and the latter’s failure to do so results in a finding that
the dismissal is unjustified.
The private respondents could only rely on the perceived conflicting explanations of the
petitioner as to how she came into possession of the "Pliva" bag. They did not believe that it was
taken from the garbage can and wanted to impress us that it was taken from the pile of said bags
as testified to by one of its employees. The alleged weakness of the petitioner’s defense cannot
operate to relieve nor discharge the private respondents of their burden in termination cases.
Akin to the prosecution in a criminal case, the employer’s cause stands or falls on the strength of
its evidence, not on the weakness of the employee’s/accused’s defense. Here, the private
respondents were unable to convincingly refute the following observations of the Office of the
Solicitor General in its Manifestation and Motion.

6.Gonzales v. NLRC, March 26. 2001

Facts: Lorlene Gonzales was a Grade 6 teacher in Ateneo de Davao University from 1974 to
1993, when she was terminated.
In1991, the Grade School Headmaster sent her a letter informing her of 2 complaints from
parents of her students for alleged use of corporal punishment. She demanded to know who the
parents were because Ateneo wouldn’t tell her. When she found out that Ateneo was soliciting
complaints from parents of her students, she demanded an investigation.
Ateneo sent her a notice of investigation, schedule, Committee composition, affidavits of the
parents, and the ruleso f procedure. She refused to take part in the investigation unless the rules
of procedure were revised. The committee, under advice of counsel, did not revise the rules,
since it had been used for a different teacher in the past. The investigation went on, without her
participation. In 1993, she was asked to tender her resignation, otherwise she would be
considered resigned. Lorlene filed for illegal dismissal with the LA. The LA found that she was
indeed illegally dismissed because although she was afforded due process, Ateneo failed to
establish substantial evidence as to Lorlene’s guilt.
It was established that she is a very good teacher, equipped with the appropriate educational
qualifications, trainings, seminars and work experiences. Such fact was affirmed by her present
and former students, their parents, colleagues and the former headmaster of the grade school. As
a matter of fact, 6 out of the nine 9 students and their parents/guardians retracted and withdrew
their statements.- NLRC reversed LA’s decision, saying the dismissal was valid and legal.
ISSUE: WON dismissal was valid and legal
HELD: NO. In view of the foregoing, the conclusion of the NLRC is unwarranted.

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No due process – The committee refused to revise the rules of procedure. As a result, Lorlene
wasn’t afforded a chance defend herself and to examine / cross-examine the accusers. Failure to
prove by substantial evidence – The evidence of Ateneo didn’t measure up to the standard laid
down in Ang Tibay v CIR: "substantial evidence is more than mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion."
Lorlene’s evidence – She was able to prove that she’s a competent and dedicated teacher of
Ateneo for 17 years. Employment is not merely a contractual relationship; it has assumed the
nature of property right. It may spell the difference whether or not a family will have food on
their table, roof over their heads and education for their children. It is for this reason that the
State has taken up measures to protect employees from unjustified dismissals. It is also because
of this that the right to security of tenure is not only a statutory right but, more so, a
constitutional right.

7.Sulpicio Lines v. Guide, G.R. No. 149930, February 22, 2002

Facts: The incident which gave rise to the case at bar happened on September 15, 1996. It started
after Gulde and Manapat picked up private respondent SLIs cargoes from Nasipit Port delivery
to its warehouse in Butuan City. It appears that two (2) persons by the name of Doming and Etat
boarded their truck while they were in Nasipit. Manapat knew of the same since he was riding at
the back of the truck.
Manapat added that he did not do anything to stop Domeng and Etat for fear for his life because
they have weapons.Thereafter, SLI reported the incident to the police and petitioner Gulde and
Manapat were investigated.
Based on the foregoing facts, the Labor Arbiter ruled in favor of petitioner finding that
respondents dismissal from employment was valid. On appeal, the NLRC initially reversed the
decision of the Labor Arbiter. In its decision of April 30, 1998, the NLRC declared that
respondent was illegally dismissed and ordered petitioner to reinstate him

Issue: WON dismissal is valid

Held: No. The basic requisite for dismissal on the ground of loss of trust and confidence is that
the employee concerned must be one holding a position of trust and confidence. However, loss
of confidence must not be indiscriminately used as a shield by the employer against a claim that
the dismissal of an employee was arbitrary.6 Loss of confidence as a just cause for termination
of employment is premised on the fact that the employee concerned holds a position of
responsibility or trust and confidence. He must be invested with confidence on delicate matters,
such as custody handling or care and protection of the property and assets of the employer. And,
in order to constitute a just cause for dismissal, the act complained of must be work-related and
shows that the employee concerned is unfit to continue to work for the employer.

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Further, well-settled is the rule that for loss of trust and confidence to be a valid ground for
dismissal of an employee, it must be substantial and founded on clearly established facts
sufficient to warrant the employees separation from employment.
In this case, contrary to the allegations of petitioner, there is no sufficient evidence to show that
respondent conspired with the thieves in stealing four (4) pieces of basketball from petitioners
truck.

8.National Bookstore v. CA, G.R. No. 146741, February 27, 2002

Facts: Petitioner National Bookstore, Inc., employed private respondent Marietta M. Ymasa on
14 February 1980 and private respondent Edna L. Gabriel on 2 September 1979. On 28 August
1992 when both claimed to have been illegally dismissed from employment, private respondents
Ymasa and Gabriel were Cash Custodian and Head Cashier of petitioner National Bookstore,
respectively.
Respondents lost the money entrusted to them. Petitioner National Bookstore, after finding the
explanations of private respondents unsatisfactory, notified them on 29 August 1992 of the
termination of their services for gross neglect of duty and loss of confidence to take effect
immediately and without prejudice to appropriate legal action that the Management may take for
the restitution of the missing Company funds.

On 4 February 1993 private respondents filed a complaint for illegal dismissal against petitioner
National Bookstore and/or its President Alfredo C. Ramos before the Labor Arbiter who ruled in
favor of private respondents on 20 June 1994.

Issue: WON dismissal is valid

Held: No. The onus of proving that the dismissal of the employee was for a valid and authorized
cause rests on the employer10 and failure to discharge the same would mean that the dismissal
was not justified and therefore illegal.
The requisites for a valid dismissal are:
(a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard
and to defend himself; and,
(b) the dismissal must be for a valid cause as provided in Art. 28212 of the Labor Code13 or for
any of the authorized causes under Arts. 28314 and 28415 of the same Code.
Anent the first requisite, the employer must furnish the employee with two (2) written notices:
(a) a written notice containing a statement of the cause for the termination to afford the employee

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ample opportunity to be heard and defend himself with the assistance of his representative, if he
so desires; and, (b) if the employer decides to terminate the services of the employee, the
employer must notify him in writing of the decision to dismiss him, stating clearly the reasons
therefor.

9.Santos v. NLRC, 287 SCRA 117

Facts: Santos, a married man, was employed as a teacher by the private respondent Hagonoy
Institute Inc. from June 1980 until his dismissal on June 1, 1991. Likewise working as a teacher
for the private respondent was Mrs. Arlene T. Martin, also married. In the course of their
employment, the couple fell in love. Thereafter, rumors regarding the couple's relationship
spread, especially among the faculty members and school officials.
Concerned about the rumors, on November 3, 1990, the private respondent advised Mrs. Martin
to take a leave of absence which she ignored, as she continued to report for work. Consequently,
on November 9, 1990, she was barred from reporting for work and was not allowed to enter the
private respondent's premises, effectively dismissing her from her employment.
In view of her termination from the service, on November 13, 1990, Mrs. Martin filed a case for
illegal dismissal before the NLRC Regional Arbitration Branch No. III, San Fernando,
Pampanga 2 against the private respondent. After the parties had submitted their respective
evidence and position paper, Labor Arbiter Ariel Santos rendered a decision dismissing the
complaint.
On appeal, the NLRC in a decision dated February 26, 1993, reversed the labor arbiter's ruling.
Issue: WON dismissal is valid
Held: Yes, the crux of the controversy is whether the illicit relationship between the petitioner
and Mrs. Martin could be considered immoral as to constitute just cause to terminate an
employee under Article 282 of the Labor Code.

We have consistently held that in order to constitute a valid dismissal, two requisites must
concur:
(a) the dismissal must be for any of the causes expressed in Art. 282 of the Labor Code, and
(b) the employee must be accorded due process, basic of which are the opportunity to be heard
and defend himself.

Petitioner’s dismissal was for a just and valid cause, the grant of financial assistance by the
NLRC is without any factual and legal basis. In PLDT v. NLRC, SC held that:

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We hold henceforth separation pay shall be as a measure of social justice only in these instances
where the employee is validly dismissed for cause other than serious misconduct or those
reflecting his moral character. Where the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or illicit sexual relationship with a
fellow worker, the employer may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the ground of social justice.
The above ruling has consistently been applied in terminating an employee when it involves his
moral character.

10.Libres v. NLRC, May 28, 1999

Facts:Petitioner Carlos G. Libres, an electrical engineer, was holding a managerial position with
National Steel Corporation (NSC) as Assistant Manager. He was then asked to comment
regarding the charge of sexual harrassment filed against him by the VP's secretary Capiral. This
was included with a waiver of his right tobe heard once he didn't comment.

On 14 August 1993 petitioner submitted his written explanation denying the accusation against
him and offering to submit himself for clarificatory interrogation.

The Management Evaluation Committee said that "touching a female subordinate's hand and
shoulder, caressing her nape and telling other people that Capiral was the one who hugged and
kissed or that she responded to the sexual advances are unauthorized acts that damaged her
honor." They suspended Libres for 30 days without pay.

He filed charges against the corporation in the Labor Arbiter, but the latter held that the company
acted with due process and that his punishment was only mild.
Moreover, he assailed the NLRC decision as without basis due to the massaging of her shoulders
never “discriminated against her continued employment,” “impaired her rights and privileges
under the Labor Code,” or “created a hostile, intimidating or offensive environment.”

He claimed that he wasn't guaranteed due process because he wasn't given the right be heard.
This was due to his demand for personal confrontation not being recognized by the MEC.
In the Supreme Court, petitioner assailed the failure of the NLRC to strictly apply RA No. 7877
or the law against sexual harassment to the instant case. Moreover, petitioner also contends that
public respondent’s reliance on Villarama v. NLRC and Golden Donuts was misplaced. He
draws attention to victim Divina Gonzaga’s immediate filing of her letter of resignation in the

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Villarama case as opposed to the one year delay of Capiral in filing her complaint against him.
He now surmises that the filing of the case against him was merely an afterthought and not borne
out of a valid complaint, hence, the Villarama case should have no bearing on the instant case.

Issue: Was Libres accorded due process when the MEC denied his request for personal
confrontatiom?

Held: Yes. On not strictly applying RA 7877- Republic Act No. 7877 was not yet in effect at the
time of the occurrence of the act complained of. It was still being deliberated upon in Congress
when petitioner’s case was decided by the Labor Arbiter. As a rule, laws shall have no
retroactive effect unless otherwise provided, or except in a criminal case when their application
will favor the accused. Hence, the Labor Arbiter have to rely on the MEC report and the
common connotation of sexual harassment as it is generally understood by the public. Faced
with the same predicament, the NLRC had to agree with the Labor Arbiter. In so doing, the
NLRC did not commit any abuse of discretion in affirming the decision of the Labor Arbiter.

On the Villarama afterthought-it was both fitting and appropriate since it singularly addressed
the issue of a managerial employee committing sexual harassment on a subordinate. The
disparity in the periods of filing the complaints in the two (2) cases did not in any way reduce
this case into insignificance. On the contrary, it even invited the attention of the Court to focus
on sexual harassment as a just and valid cause for termination. Whereas petitioner Libres was
only meted a 30-day suspension by the NLRC, Villarama, in the other case was penalized with
termination. As a managerial employee, petitioner is bound by more exacting work ethics. He
failed to live up to his higher standard of responsibility when he succumbed to his moral
perversity. And when such moral perversity is perpetrated against his subordinate, he provides a
justifiable ground for his dismissal for lack of trust and confidence.

On the question of due process- Requirements were sufficiently complied with. Due process as a
constitutional precept does not always and in all situations require a trial type proceeding. Due
process is satisfied when a person is notified of the charge against him and given an opportunity
to explain or defend himself. The essence of due process is simply 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.

It is undeniable that petitioner was given a Notice of Investigation informing him of the charge
of sexual harassment as well as advising him to submit a written explanation regarding the
matter; that he submitted his written explanation to his superior. The VP further allowed him to

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 Labor Relations Digest

air his grievance in a private session He was given more than adequate opportunity to explain his
side and air his grievances.

Personal confrontation was not necessary. Homeowners v NLRC- litigants may be heard through
pleadings, written explanations, position papers, memoranda or oral arguments.

11.Starlite Plastic industrial Corp. v. NLRC, 171 SCRA 315

Facts: Private respondent GOMEZ was employed as a factory worker by STARLITE sometime
in March 1981. On 22 June 1984, STARLITE dismissed him on the ground that he was caught
attempting to steal one ballast costing P80.00. STARLITE reported the matter to the police on 19
July 1984, after grievance meetings failed to resolve the controversy. A criminal complaint was
filed against GOMEZ, but the investigating fiscal dismissed the same saying that STARLITE
failed to establish a prima facie case against GOMEZ. On 13 August 1983, private respondent
GOMEZ filed a complaint for illegal dismissal against STARLITE. After the parties submitted
their respective position papers, the Labor Arbiter rendered his decision on 15 January 1985
dismissing the complaint for lack of merit. GOMEZ appealed the decision to the public
respondent NLRC which in a decision dated 18 February 1987 reversed the ruling of the Labor
Arbiter.
Issue: WON the dismissal is valid
Held: At the outset, the Court finds it necessary to emphasize that contrary to the tenor of the
Labor Arbiter's decision, a dismissed employee is not required to prove his innocence of the
charges levelled against him by his employer. The Court has laid down the rule that in
termination cases, the burden of proving the just cause of dismissing an employee rests on the
employer and his failure to do so would result in a finding that the dismissal is unjustified.

12.MSMG-UWP v. Ramos, G.R. No. 113907, February 28. 2000

Facts: The petitioners were terminated by the company but the NLRC upheld the dismissal. Later
on, the SC reversed the decision and ordered all of them reinstated and paid full backwages but it
also held that the officers of the company shouldn’t be held liable. This is the subject of this
motion for partial record as the union argues that it was the officers who made the decision to
terminate the employees. Petitioners further contend that while the case was pending, the
company began removing its machineries and equipment from its plant and began diverting jobs
intended for the regular employees to its sub-contractor/satellite branches.
ISSUE: W/N the officers should be held liable for the illegal dismissed.
HELD: The SC ruled that the officers cannot be held liable because a crop has a personality
separate and distinct from those acting in its behalf. The rule is that obligations incurred by the
corp, through its directors, officers and employees are its sole liabilities. In labor cases, corporate

pg. 14 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

directors and officers are solidarily liable with the corporation for the termination of employment
or corporate employees done with malice or in bad faith.
Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose of some
moral obliquity and conscious doing of wrong; it means breach of a known duty thru some
motive or interest or will; it part wages of the nature of fraud.
In this case, there is nothing on record to show that the officers acted in patent bad faith or were
guilty of gross negligence in terminating the services of petitioners so as to warrant personal
liability.

13.Salaw v. NLRC, 202 SCRA 7

Facts: Espero Santos Salaw, was employed by the private respondents in September 1967 as a
credit investigator-appraiser. His duties included inspecting, investigating, appraising, and
identifying the company's foreclosed assets; giving valuation to its real properties, and verifying
the genuineness and encumbrances of the titles of properties mortgaged to the respondents.
On November 27, 1984, the Criminal Investigation Service (CIS) of the Philippine Constabulary,
National Capital Region, extracted from the petitioner — without the assistance of counsel — a
Sworn Statement which made it appear that the petitioner, in cahoots with a co-employee,
Reynaldo Madrigal, a supervisor in charge of the acquired assets of respondent Associated Bank,
sold twenty sewing machines and electric generators which had been foreclosed by the
respondent bank from Worldwide Garment and L.P. Money Garment, for P60,000.00, and
divided the proceeds thereof in equal shares of P30,000.00 between the two of them.
On December 5, 1984, the petitioner was requested by private respondent Rollie Tuazon, the
bank manager, to appear before the bank's Personnel Discipline and Investigation Committee
(PDIC) which would be meeting the following day, December 6, 1984, at 9:00 a.m., in
connection with the Worldwide case.
On April 1, 1985, the petitioner was terminated from his employment effective March 27, 1985,
for alleged serious misconduct or willful disobedience and fraud or willful breach of the trust
reposed on him by the private respondents.
Subsequently, the petitioner filed with the NLRC on April 17, 1985, a complaint for illegal
dismissal against respondent Bank, Jose R. Tengco, and Rollie Tuazon.
LA favored Salaw. NLRC reversed.

Issue: WON the dismissal is valid

Held: No

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 Labor Relations Digest

Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by
his employer are two-fold: the substantive and the procedural. Not only must the dismissal be for
a valid or authorized cause as provided by law (Articles 279, 281, 282-284, New Labor Code),
but the rudimentary requirements of due process — notice and hearing — must also be observed
before an employee may be dismissed. One does not suffice; without their concurrence, the
terminate would, in the eyes of the law, be illegal.
The inviolability of notice and hearing for a valid dismissal an employee can not be over-
emphasized. Those twin requirements constitute essential elements of due process in cases
employee dismissal.
Considering further that the admission by the petitioner which was extracted from him by the
Criminal Investigate Service of the Philippine Constabulary (National Capital Region) without
the assistance of counsel and which was made the sole basis for his dismissal, can not be
admitted in evidence against him, then, the finding of guilt of the PDIC, which was affirmed by
the public respondent NLRC; has no more leg stand on.
Significantly, the dismissal of the petitioner from his employment was characterized by undue
haste. The law is clear that even in the disposition of labor cases, due process must not be
subordinated to expediency or dispatch. Otherwise, the dismissal of the employee will be tainted
with illegality. On this point, we have ruled consistently.

14.Wenphil Corp. v. NLRC, 170 SCRA 69

Facts: Private respondent Mallare had an altercation with a co-employee. The following day, the
Operations Manager served them memorandum of suspension and in the afternoon of that same
day, Mallare was dismissed from work. Labor Arbiter dismissed Mallare’s petition for unfair
labor practice for lack of merit. NLRC reversed the decision and ordered the reinstatement of
Mallare with full backwages of one year without qualification and deduction.
Issue: Whether or not an employee dismissed for just cause but without due process be reinstated
to work.
Held: The basic requirement of due proves is that which hears before it condemns, proceeds
upon inquiry and renders judgment only after trial. The dismissal of an employee must be for a
just cause and after due process.
Petitioner committed an infraction of the second requirement thus it must be imposed a sanction
for its failure to give a formal notice and conduct an investigation as required by law before
dismissing Mallare from employment. Petitioner must indemnify the dismissed employee which
depends on the facts of each case and the gravity of the omission committed by the employer.
Where the private respondent appears to be of violent temper, caused trouble during office hours
and even defied his supervisors as they tried to pacify him, he should not be rewarded with re-
employment and backwages. The dismissal of the respondent should be maintained.

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 Labor Relations Digest

15.China City Restaurant Corp. v. NLRC, 217 SCRA 443

Facts: Petitioner China City Restaurant (petitioner, for brevity) employed private respondents
Monico Dieto and Julinito Cablay (private respondents, for brevity) as chief steamer and roasting
helper, respectively.
On October 17, 1988, Abe Fuentes, a steamer helper at petitioner's restaurant, was detained at the
Makati Municipal Jail for allegedly stealing dried scallops worth two thousand pesos (P2,000.00)
belonging to the petitioner. On January 20, 1989, after posting bail paid by the petitioner, Abe
Fuentes gave a statement at the Intelligence and Special Operations Group, SPD, implicating the
private respondents.
Abe Fuentes alleged that as early as April 1988, he, in conspiracy with private respondents, had
been bringing out from the restaurant dried scallops wrapped in plastic, by mixing them with
leftovers thrown into the thrash can. They were sold at Ongpin, Binondo, Manila. They would
then divide the proceeds among themselves, with the private respondents getting the lion's share.
A criminal charge for qualified theft was thereafter filed against the private respondents.
On March 27, 1989, an amended information was filed to include private respondents as co-
accused in the qualified theft case filed against Abe Fuentes. Later, Abe Fuentes turned state
witness.
LA and NLRC ruled in favor of the respondents.
Issue: WON the dismissal is valid
Held: No. There is no evidence on record to support or show any connection of the private
respondents to the charge of qualified theft. As found by the trial court, Abe Fuentes implicated
the private respondents only after a series of conferences with petitioner's representatives, and
after petitioner facilitated his release from jail through the former's answering for his bail bond.
For loss of trust and confidence to be a valid ground for the dismissal of employees, it must be
substantial and not arbitrary, whimsical, capricious or concocted.
Irregularities or malpractice should not be allowed to escape the scrunity of this Court. Solicitude
for the protection of the rights of the working class are of prime importance. Although this is not
license to disregard the rights of management, still the Court must be wary of the ploys of
management to get rid of employees it considers as undesirable.

16.Farrol v. CA. G.R. No. 133259, February 10, 2000

Facts: Petitioner Wenifredo Farrol was employed as station cashier at respondent RCPI's
Cotabato City station. On June 18, 1993, respondent RCPI's district manager in Cotabato City
informed their main office that "Peragram funds" from said branch were used for the payment of
retirement benefits of five employees. On October 1, 1993, petitioner verified as correct RCPI's

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 Labor Relations Digest

Field Auditor's report that there was a shortage of P50,985.37 in their branch's Peragram, Petty
and General Cash Funds. The next day, petitioner paid to RCPI P25,000.00 of the cash shortage.
On October 10, 1993, RCPI required petitioner to explain why he should not be dismissed from
employment. Two days thereafter, petitioner wrote a letter to the Field Auditor stating that the
missing funds were used for the payment of the retirement benefits earlier referred to by the
branch manager and that he had already paid P25,000.00 to RCPI. After making two more
payments of the cash shortage to RCPI, petitioner was informed by the district manager that he is
being placed under preventive suspension. Thereafter, he again paid two more sum's on different
dates to RCPI leaving a balance of P6,995.37 of the shortage.
Respondent RCPI claims that it sent a letter to petitioner on November 22, 1993 informing him
of the termination of his services as of November 20, 1993. Unaware of the termination letter,
petitioner requested that he be reinstated considering that the period of his preventive suspension
had expired.
Sometime in September 1995, petitioner manifested to RCPI his willingness to settle his case
provided he is given his retirement benefits. However, RCPI informed petitioner that his
employment had already been terminated earlier as contained in the letter dated November 22,
1993. The conflict was submitted to the grievance committee. Despite the lapse of more than two
years, the case remained unresolved before the grievance committee, hence, it was submitted for
voluntary arbitration.
After hearing, the Voluntary Arbitrator ruled that petitioner was illegally dismissed from
employment and ordered RCPI to pay him backwages, separation pay, 13th month pay and sick
leave benefits.6 Aggrieved, RCPI filed a petition for certiorari before the Court of Appeals (CA),
which reversed the ruling of the arbitrator and dismissed the complaint for illegal dismissal.
Upon denial of petitioner's motion for reconsideration by the CA, he filed the instant petition for
review on certiorari on the grounds that his dismissal was illegal because he was not afforded
due process and that he "cannot be held liable for the loss of trust and confidence reposed in
him" by RCPI.
Issue: WON there is illegal dismissal
Held: Yes. In cases involving the illegal termination of employment, it is fundamental that the
employer must observe the mandate of the Labor Code, i.e., the employer has the burden of
proving that the dismissal is for a cause provided by the law10 and that it afforded the employee
an opportunity to be heard and to defend himself.

The employer must comply with the twin requirements of two notices and hearing. The first
notice is that which apprises the employee of the particular acts or omissions for which his
dismissal is sought, and after affording the employee an opportunity to be heard, a subsequent
notice informing the latter of the employer's decision to dismiss him from work.

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 Labor Relations Digest

As regards the first notice, RCPI simply required petitioner to "explain in writing why he failed
to account" for the shortage and demanded that he restitute the same. On the assumption that the
foregoing statement satisfies the first notice, the second notice not "clearly" cite the reasons for
the dismissal, contrary to the requirements set by the above-quoted Section 6 of Book V, Rule
XIV of the Omnibus Rules.
A perusal of RCPI's dismissal notice reveals that it merely stated a conclusion to the effect that
the withholding was deliberately done to hide alleged malversation or misappropriation without,
however, stating the circumstances in support thereof. It further mentioned that the position of
cashier requires utmost trust and confidence but failed to allege the breach of trust on the part of
petitioner and how the alleged breach was committed. On the assumption that there was indeed a
breach, there is no evidence that petitioner was a managerial employee of respondent RCPI. It
should be facts noted that the term 'trust and managerial employees.15 It may not even be
presumed that when there is a shortage, there is also a corresponding breach of trust. Cash
shortages in a cashier's work may happen, and when there is no proof that the same was
deliberately done for a fraudulent or wrongful purpose, it cannot constitute breach of trust so as
to render the dismissal from work invalid.

17.PAL v. PALEA, 57 SCRA 489

18.ALU-TUCP V. NLRC, 302 SCRA 708
Facts: Petitioners, as employees of private respondent National Steel Corporation (NSC), filed
separate complaints for unfair labor practice, regularization and monetary benefits with the
NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The complaints were consolidated and
after hearing, the Labor Arbiter declared petitioners “regular project employees who shall
continue their employment as such for as long as such [project] activity exists,” but entitled to
the salary of a regular employee pursuant to the provisions in the collective bargaining
agreement. It also ordered payment of salary differentials.

The NLRC in its questioned resolutions modified the Labor Arbiter’s decision. It affirmed the
Labor Arbiter’s holding that petitioners were project employees since they were hired to perform
work in a specific undertaking — the Five Years Expansion Program, the completion of which
had been determined at the time of their engagement and which operation was not directly
related to the business of steel manufacturing. The NLRC, however, set aside the award to
petitioners of the same benefits enjoyed by regular employees for lack of legal and factual basis.

The law on the matter is Article 280 of the Labor Code, where the petitioners argue that they are
“regular” employees of NSC because: (i) their jobs are “necessary, desirable and work-related to
private respondent’s main business, steel-making”; and (ii) they have rendered service for six (6)
or more years to private respondent NSC.

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 Labor Relations Digest

Issue: Whether or not petitioners are considered “permanent employees” as opposed to being
only “project empoyees” of NSC.

Held: NO. Petition for Certiorari dismissed for lack of merit. NLRC Resolutions affirmed.
Function of the proviso. Petitioners are not considered “permanent employees”. However,
contrary to petitioners’ apprehensions, the designation of named employees as “project
employees” and their assignment to a specific project are effected and implemented in good
faith, and not merely as a means of evading otherwise applicable requirements of labor laws.

On the claim that petitioners’ service to NSC of more than six (6) years should qualify them as
“regular employees”, the Supreme Court believed this claim is without legal basis. The simple
fact that the employment of petitioners as project employees had gone beyond one (1) year, does
not detract from, or legally dissolve, their status as “project employees”. The second paragraph
of Article 280 of the Labor Code, quoted above, providing that an employee who has served for
at least one (1) year, shall be considered a regular employee, relates to casual employees, not to
project employees.
19.JAM Transport v. Flores, 220 SCRA 114
20.Philippine Japan Active Carbon Corporation v. NLRC, 171 SCRA164
Facts: The private respondent, who had been employed in petitioner corporation since January
19, 1982, as Assistant Secretary/Export Coordinator, was promoted on May 20, 1983 to the
position of Executive Secretary to the Executive Vice President and General Manager. On May
31, 1986, for no apparent reason at all and without prior notice to her, she was transferred to the
Production Department as Production Secretary, swapping positions with Ester Tamayo.
Although the transfer did not amount to a demotion because her salary and workload remained
the same, she believed otherwise so she rejected the assignment and filed a complaint for illegal
dismissal. The Labor Arbiter found, on the basis of the evidence of both parties, that the transfer
would amount to constructive dismissal, hence, her refusal to obey the transfer order was
justified.
Issue: WON there is illegal dismissal
Held: No. A constructive discharge is defined as: "A quitting because continued employment is
rendered impossible, unreasonable or unlikely; as, an offer involving a demotion in rank and a
diminution in pay."
In this case, the private respondent's assignment as Production Secretary of the Production
Department was not unreasonable as it did not involve a demotion in rank (her rank was still that
of a department secretary) nor a change in her place of work (the office is in the same building),
nor a diminution in pay, benefits, and privileges. It did not constitute a constructive dismissal.

pg. 20 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

It is the employer's prerogative, based on its assessment and perception of its employees'
qualifications, aptitudes, and competence, to move them around in the various areas of its
business operations in order to ascertain where they will function with maximum benefit to the
company. An employee's right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or transfer
him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor
prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries,
benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.

21.Singa Ship Management Phils. v. NLRC, 288 SCRA 692

Facts: Petitioner is the local manning agent of Singa Ship Management Pte., Ltd., a company
based in Singapore. Private respondent was employed by petitioner as radio officer on board the
vessel M/V Singa Wilstream from November 28, 1988 to September 1989 with a monthly salary
of U.S.$850.00.
On December 20, 1989, petitioner filed a complaint against private respondent before the
Philippine Overseas Employment Agency (POEA) Adjudication Office for desertion,
insubordination, and grave abuse of authority. Petitioner alleged that on July 27, 1989, when the
M/V Singa Wilstream was anchored in Los Angeles, California, private respondent and some
members of the crew, went on shore leave. By the end of the day, the group missed the last boat
and hired a service boat to take them to the ship. They arrived on the ship at 8:30 in the evening.
The ship captain and master, Bryan Pereira, together with some officers were at the bridge. The
captain reprimanded them for returning lateand admonished private respondent in particular,
being the highest-ranking member in the group. Private respondent who was drunk shouted:
"Fuck your ass, captain! I don't want to sail with you!" Bosun Rodolfo Sarmiento, who was
nearby, was ordered to take private respondent to his cabin. Private respondent, however, cried
out: "Fuck you two, two of you!" and hurled invectives at the captain and the bosun.
Eventually, the other crew members pacified private respondent and brought him down to his
cabin.
The POEA rendered a decision on October 24, 1991 finding that private respondent voluntarily
resigned from his employment and was awarded U.S.$2,463.58 for unpaid leave, allotment and
shipboard pay. At the same time, the POEA awarded petitioner U.S.$3,232.00 as reimbursement
for replacement costs.
Private respondent appealed to the National Labor Relations Commission. On March 9, 1995, the
Commission modified the decision of the POEA Administrator after finding that private
respondent did not voluntarily resign but was dismissed by the ship captain. It deleted the award
of U.S.$3,232.00 in favor of petitioner and affirmed the award of U.S.$2,463.58 in favor of
private respondent.

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 Labor Relations Digest

Issue: WON there is valid dismissal

Held: Yes.
"Desertion," in maritime law, is defined as:
"The act by which a seaman deserts and abandons a ship or vessel, in which he had engaged to
perform a voyage, before the expiration of his time, and without leave. By desertion, in maritime
law, is meant, not a mere unauthorized absence from the ship, without leave, but an unauthorized
absence from the ship with an intention not to return to her service; or as it is often expressed,
animo non revertendi, that is, with an intention to desert."
In the case at bar, private respondent's act of leaving the vessel was precipitated by a heated
argument between him and the ship captain. Respondent arrived late from shore leave. The
master reprimanded him and refused to pay for their service boat. So he shouted at the master
"Fuck your ass captain! I don't want to sail with you!" Later, he appeared at the crew mess hall
and overheard the bosun talking about him.This made him angry and he struck the bosun with
his pistol. A while later, private respondent was seen with baggage in hand leaving the ship and
uttering the words: "Sorry, but I don't want to sail with the captain!".
His dismissal was, however, with a valid cause. The master was acting in the performance of his
duty when he particularly demanded from the private respondent an explanation for his group's
tardiness. Private respondent was the highest ranking employee in the group. But instead of
giving an explanation, private respondent shouted at the master and cursed him. This was an act
of gross disrespect and insubordination against his superior and the highest official of the vessel.
Worse was private respondent's unprovoked assault on the bosun. This was made in the presence
of several people who executed separate statements narrating the incident. Private respondent did
not deny nor refute the statements, much less did he explain his aggressive behavior.
A seaman's assault with a pistol handle upon a member of the ship's crew without sufficient
provocation is tantamount to serious misconduct in connection with his work and a just cause for
termination of employment. We have ruled that such misconduct strips him of his right to his
salary for the unexpired portion of the employment contract.

22.Leonardo v. NLRC, G.R. Nos. 125303 & 126937, June 16. 2000
Facts: Petitioner was a mechanic employed by Reynaldo’s Marketing Corporation. He was
transferred to another plant of the company, and his supervisor’s allowance correspondingly
withdrawn, allegedly due to his failure to meet his sales quota. He then filed a complaint for
illegal dismissal, alleging constructive dismissal. Reynaldo’s denied the charge; it was simply
carrying out a policy designed to encourage work efficiency and competitiveness by giving out
extra allowances and choice assignments to employees who meet the required quota. Failure to
maintain such quota simply means loss of the assignment and extra allowances.
ISSUE: Whether or not petitioner was constructively dismissed.

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 Labor Relations Digest

HELD: No. Constructive dismissal is an involuntary resignation resorted to by an employee

when his continued employment becomes impossible, unreasonable, or unlikely or when there is
demotion in rank or diminution in pay, or when a clear determination, insensibility or disdain by
the employer becomes unbearable.
In the case at bar, there was a demotion and corresponding decrease in pay, but it was for cause
(failure to meet the required quota). The right to demote falls within the employer’s prerogative,
since an employer may set employment standards and appropriate sanctions for failure to meet
the latter.

23.Zafra v. CA. G.R. No. 139013, September 17. 2002

24.Manila Doctors Hospital v. NLRC, 135 SCRA 262
25.PAL v. NLRC, 292 SCRA 40
Facts: On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code
of Discipline. The Code was circulated among the employees and was immediately implemented
without notice and prior discussion with the Philippine Airlines Employees Association
(PALEA) by the Management. Some employees were subjected to the disciplinary measures
embodied therein.

On August 20, 1985, PALEA filed a complaint before the National Labor Relations Commission
(NLRC) for unfair labor practice.
Issue: Whether or not the formulation of a Code of Discipline among employees is a shared
responsibility of the employer and the employees.
Ruling: To achieve industrial peace, the employees must be granted their just participation in the
discussion of matters affecting their rights. It is the policy of the State to promote the
enlightenment of workers concerning their rights and obligations as employees. The New Code
of Discipline containing disciplinary measures cannot be implemented in the absence of full
cooperation of the employees as it affects their rights, duties and welfare. Management cannot
exclude labor in the deliberation and adoption of rules and regulations that will affect them.
Workers have the right to participate in decision and policy making process affecting their rights,
duties and welfare.
A line must be drawn between management prerogatives regarding business operations per se
and those which affect the rights of the employees. In treating the latter, management should see
to it that its employees are at least properly informed of its decisions or modes of action. Indeed,
industrial peace cannot be achieved if the employees are denied their just participation in the
discussion of matters affecting their rights.

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 Labor Relations Digest

26.Philippine Sheet Metal Workers Union v. CIR, 46 OG 5462

Facts: This is a petition for certiorari to review an order of the Court of Industrial Relations on
the ground that the same was rendered in excess of jurisdiction and with grave abuse of
discretion.

On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor
Relations (BLR) on ground of unfair labor practice consisting of alleged refusal to bargain,
dismissal of union officers/members; and coercing employees to retract their membership with
the union and restraining non-union members from joining the union.

The said order was issued of said court involving an industrial dispute between the respondent
company (a corporation engaged in the manufacture of tin plates, aluminum sheets, etc.) and its
laborers some of whom belong to the Philippine Sheet Metal Workers' Union (CLO) and some to
the Liberal Labor Union.

The dispute was over certain demands made upon the company by the laborers, one of the
demands, being for the recall of eleven workers who had been laid off. Temporarily taken back
on certain conditions pending final determination of the controversy, these eleven workers were
in the end ordered retained in the decision handed down by the court on February 19, 1947. The
petitioner tried to prove that the 11 laborers were laid off by the respondent company due to their
union activities.

On February 10, 1947, that is, nine days before the decision came down, filed a motion in the
case, asking for authority to lay off at least 15 workers in its can department on the ground that
the installation and operation of nine new labor-saving machines in said department had rendered
the services of the said workers unnecessary.

Issue: W/N the firing of the laborers due to their union activities is valid?

Held: Yes. The right to reduce personnel should, of course, not be abused. It should not be made
a pretext for easing out laborers on account of their union activities. But neither should it be
denied when it is shows that they are not discharging their duties in a manner consistent with
good discipline and the efficient operation of an industrial enterprise.

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 Labor Relations Digest

The petitioner contends that the order complained of was made with grave abuse of discretion
and in excess of jurisdiction in that it is contrary to the pronouncement made by the lower court
in its decision in the main case where it disapproved of the dismissal of eleven workers "with
whom the management is displeased due to their union activities." It appears, however, that the
pronouncement was made upon a distinct set of facts, which are different from those found by
the court in connection with the present incident, and that very decision, in ordering the
reinstatement of the eleven laborers, qualifies the order by saying that those laborers are to be
retained only "until the occurrence of facts that may give rise to a just cause of their laying off or
dismissal, or there is evidence of sufficient weight to convince the Court that their conduct is not
satisfactory."

27.Wiltshire File Co. v. NLRC, 193 SCRA 665

Facts: Ong was dismissed because of serious business losses. In the termination letter, the ground
alleged was redundancy of the position. Ong countered that there could be no redundancy
because nobody except him in the company was then performing the same duties.
HELD: Dismissal was valid. The losses were proven by the company and most importantly,
company finally closed its doors and terminated all its operations. SC considered that finally
shutting down business operations constitutes strong confirmatory evidence of financial distress.
REDUNDANCY exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. That no other person was holding the
same position that employee held does not show that his position had not become redundant.
The characterization of employee's services as no longer necessary or sustainable and therefore,
properly terminable, was a valid exercise of BUSINESS JUDGMENT on the part of the
employer.
The determination of the continuing necessity of a particular officer or position in a business
corporation is MANAGEMENT PREROGATIVE, and the courts will not interfere with the
exercise of such so long as no abuse of discretion or merely arbitrary or malicious action on the
part of the management is shown.
28.Caltex v. NLRC, G.R. No. 159641, October 15, 2007
29.Asiaworld Publishing House v. Ople, 152 SCRA 219
30.Almoite v. Pacific Architects, 142 SCRA 623
31.Lopez Sugar Corp. v. FFW, 189 SCRA 179
Facts: Petitioner, allegedly to prevent losses due to major economic problems, and exercising its
privilege under Article XI, Section 2 of its 1975-1977 Collective Bargaining Agreement
(“CBA”) entered into between petitioner and private respondent Philippine Labor Union
Association (“PLUA-NACUSIP”), caused the retrenchment and retirement of a number of its
employees.

pg. 25 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the then Ministry of
Labor and Employment (“MOLE”) a combined report on retirement and application for
clearance to retrench, affecting eighty six (86) of its employees. This was docketed as NLRC
Case Ne. A-217-80. Of these eighty-six (86) employees, fifty-nine (59) were retired effective 1
January 1980 and twenty-eight (27) were to be retrenched effective 16 January 1980 “in order to
prevent losses.”

private respondent Federation of Free Workers (“FFW”), as the certified bargaining agent of the
rank-and-file employees of petitioner, filed with the Bacolod District Office of the MOLE a
complaint dated 27 December 1979 for unfair labor practices and recovery of union dues. In said
complainant, FFW claimed that the terminations undertaken by petitioner were violative of the
security of tenure of its members and were intended to “bust” the union and hence constituted an
unfair labor practice. FFW claimed that after the termination of the services of its members,
petitioner advised 110 casuals to report to its personnel office. FFW further argued that to justify
retrenchment, serious business reverses must be “actual, real and amply supported by sufficient
and convincing evidence.”

Thereafter, another report on retirement affecting an additional twenty-five (25) employees

effective 1 February 1980 was filed by petitioner. Petitioner filed its Position Paper in NLRC
Case No. A-217-80 contending that certain economic factors jeopardizing its very existence
rendered the dismissals necessary.

LA: denied petitioner’s application for clearance to retrench its employees on the ground that for
retrenchment to be valid, the employer’s losses must be serious, actual and real and must be
amply supported by sufficient and convincing evidence. The application to retire was also denied
on the ground that petitioner’s prerogative to so retire its employees was granted by the 1975-77
collective bargaining agreement which agreement had long ago expired. Petitioner was,
therefore, ordered to reinstate twenty-seven retired or retrenched employees.

petitioner and respondent FFW appealed the case to public respondent NLRC. On appeal, the
NLRC, finding no justifiable reason for disturbing the decision.

Petitioner alleged: that under the law, it has the right to reduce its workforce if made necessary
by economic factors which would endanger its existence, and that for retrenchment to be valid, it
is not necessary that losses be actually sustained. The existence of valid grounds to anticipate or

pg. 26 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

expect losses would be sufficient justification to enable the employer to take the necessary
actions to prevent any threat to its survival.
ISSUE: WON petitioner’s application for clearance to retrench its employees should be granted.
HELD: NO.
Article 283 of the Labor Code provides In its ordinary connotation, he phrase “to revent losses”
means hat retrenchment or termination of the services of some employees is authorized to be
undertaken by the employer sometime before the losses anticipated are actually sustained or
realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay
his hand and keep all his employees until sometime after losses shall have in fact materialized ; if
such an intent were expressly written into the law, that law may well be vulnerable to
constitutional attack as taking property from one man to give to another. This is simple enough.
At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss
is sufficient legal warrant for reduction of personnel. Thus, the difficult question is determination
of when, or under what circumstances, the employer becomes legally privileged to retrench and
reduce the number of his employees.
Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bona fide nature of the retrenchment would appear to be
seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can
be perceived objectively and in good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid-off.
Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary
and likely to effectively prevent the expected losses. The employer should have taken other
measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs.
Lastly, but certainly not the least important, alleged if already realized, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.
The reason for requiring this quantum of proof is readily apparent: any less exacting standard of
proof would render too easy the abuse of this ground for termination of services of employees.
The submissions made by petitioner in this respect are basically that from the crop year 1975-
1976 to the crop year 1980-981, the amount of cane deliveries made to petitioner Central was
declining and that the degree of utilization of the mill’s capacity and the sugar recovery from the
cane actually processed, were similarly declining. Petitioner also argued that the competition
among the existing sugar mills for the limited supply of sugar cane was lively and that such
competition resulted in petitioner having to close approximately — thirty-eight (38) of its
railroad lines by the end of 1979. According to the petitioner, the cost of producing one (1) picul
of sugar during the same period

pg. 27 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

The principal difficulty with petitioner’s case as above presented was that no proof of actual
declining gross and net revenues was submitted. No audited financial statements showing the
financial condition of petitioner corporation during the above mentioned crop years were
submitted. Since financial statements audited by independent external auditors constitute the
normal method of proof of the profit and loss performance of a company, it is not easy to
understand why petitioner should have failed to submit such financial statements.
Upon the other hand, it appears from the record that petitioner, after reducing its work force,
advised 110 casual workers to register with the company personnel officer as extra workers.
Petitioner, as earlier noted, argued that it did not actually hire casual workers but that it merely
organize(d] a pool of “extra workers” from which workers could be drawn whenever vacancies
occurred by reason of regular workers going on leave of absence. Both the Labor Arbiter and the
NLRC did not accord much credit to petitioner’s explanation but petitioner has not shown that
the Labor Arbiter and the NLRC were merely being arbitrary and capricious in their evaluation.
32.Anino v. NLRC, 290 SCRA 489
33.International Hardware Inc. v. NLRC, 176 SCRA 256
34.Agro Commercial Services Agency v. NLRC, 175 SCRA 790
Facts: Private respondents, numbering forty-six (46) in all, worked as security guards and/or
janitors under individual contracts with petitioner. They were assigned to firms and offices
where petitioner had contracts providing security and janitorial services.
In the early part of 1986, petitioner's service contracts with various corporations and government
agencies to which private respondents were previously assigned had been terminated generally
due to the sequestration of the said offices by the Presidential Commission on Good
Government. Accordingly, many of the private respondents were placed on "floating status" on
September 16, 1986. A number of them had been put on that status even earlier. "Floating
status" means an indefinite period of time when private respondents do not receive any salary or
financial benefit provided by law. A number of them later obtained employment in other
security agencies.

On account of the uncertainty of their employment with the petitioner, on July 25, 1986, private
respondents filed a complaint for illegal dismissal in the Arbitration Branch of the Department of
Labor and Employment against petitioner. They sought the payment of their respective
separation pay, 13th month pay for 1986 and service incentive leave pay. After due proceedings
where the parties were required to submit their position papers and stipulation of facts, the
respondent labor arbiter ruled in favor of the private respondents whose decision as above-
related was affirmed by the NLRC.

Hence, the herein petition alleging that the petitioner was denied due process of law by the
NLRC and it committed a grave abuse of discretion in considering private respondents as

pg. 28 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

employees of petitioner, in ruling that the "floating status" of private respondents amounted to an
illegal dismissal, and in causing the execution of the judgment pending a complete and full
adjudication of the issues.

Forthwith, the allegation of denial of due process is without basis. Petitioner was afforded the
opportunity to file its position paper. It even entered into a stipulation of facts with private
respondent.

Issue: WON there is illegal dismissal

Held: NO. Obviously, the filing of the complaint was premature. Apparently, this issue was not
raised at all and so it is deemed waived. Thus, when the labor arbiter rendered his decision, he
considered those who have been out of work or "floating status" for a period exceeding six (6)
months to have been terminated from the service without just cause thus entitling them to the
corresponding benefits for such separation.
Under Article 286 of the Labor Code it is provided as follows:
"ART. 286. When employment not deemed terminated. - The bonafide suspension of the
operation of a business or undertaking for a period not exceeding six months, or the fulfillment
by the employee of a military or civic duty shall not terminate employment. In all such cases,
the employer shall reinstate the employee to his former position without loss of seniority rights if
he indicates his desire to resume his work not later than one month from the resumption of
operations of his employer or from his relief from the military or civic duty."
From the foregoing it is clear that when the bonafide suspension of the operation of a business or
undertaking exceeds six (6) months then the employment of the employee shall be deemed
terminated. By the same token and applying the said rule by analogy to security guards, if they
remained without work or assignment, that is in "floating status" for a period exceeding six (6)
months, then they are in effect constructively dismissed.
In this case, it appears that twenty-seven (27) of the private respondents violated this rule by
accepting employment in other security agencies without previously resigning from employment
with petitioner. No doubt, this is a just cause for termination of their services and as such they
are not entitled to any separation pay.[5]
The "floating status" of such an employee should last only for a reasonable time. In this case,
respondent labor arbiter correctly held that when the "floating status" of said employees lasts for
more than six (6) months, they may be considered to have been illegally dismissed from the
service. Thus, they are entitled to the corresponding benefits for their separation.

35.Edge Apparel v. NLRC, 286 SCRA 302

pg. 29 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Facts: Pursuing its retrenchment program, petitioner Edge Apparel, Inc., dismissed private
respondents Josephine Antipuesto, Norina Ando, Juliet Baguio, Apolinaria Velonta, Corazon
Pino and Josephine Caete from employment effective 03 September 1992. Feeling aggrieved,
Antipuesto, et al., consulted with the Regional Director of the Department of Labor and
Employment who opined that it would be best for them to receive the separation pay being
offered by the corporation. His advice was heeded. The subsequent receipt of their separation
pay benefits, nevertheless, did not deter Antipuesto, et al., from later going through with their
complaint for illegal dismissal against the corporation. The charge averred that the retrenchment
program was a mere subterfuge used by Edge Apparel to give a semblance of regularity and
validity to the dismissal of the complainants.
Edge Apparel countered that its financial obligations, amounting to about P8 Million, had begun
to eat up most of its capital outlay and resulted in unabated losses constraining the company to
adopt and implement a retrenchment program.
Satisfied with the legality of the retrenchment program, Labor Arbiter Nicasio C. Anion, on 20
June 1994, dismissed the complaint of Antipuesto, et al., against Edge Apparel.
Antipuesto, et al., appealed the decision of the Labor Arbiter to the National Labor Relations
Commission ("NLRC"). In their appeal, Antipuesto, et al., claimed that the documents submitted
by Edge Apparel to demonstrate its alleged losses had been "bloated" so as to reflect financial
losses.
Issue: WON the dismissal was valid
Held: Yes. The institution of “new methods or more efficient machinery, or of automation” is
technically a ground for termination of employment by reason of installation of labor-saving
devices but where the introduction of these methods is resorted to not merely to effect greater
efficiency in the operations of the business but principally because of serious business reverses
and to avert further losses, the device could then verily be considered one of retrenchment.

36.Somerville Stainless Steel Corp. v. NLRC, 287 SCRA 420

Facts: Somerville Stainless Steel Corporation, the company for brevity, is engaged in the
business of manufacturing stainless steel kitchen equipments [sic]. On different dates, the
complainants were employed by the respondent company.

The present controversy was triggered by the inability of the respondent company to pay its
workers certain benefits stipulated in their collective bargaining agreement starting 16 March
1993. The CBA benefits that were withheld by management are rice subsidy, incentive leave
pay, hospitalization, t-shirts and safety shoes and incentive bonus.

pg. 30 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Complainants allege that on 09 April 1993 their union, represented by their president and vice-
president, communicated with respondents for a renegotiation of their CBA but the same was
rejected by the latter. They aver that on 19 April 1993 their union filed a notice of strike with the
Department of Labor and Employment for unfair labor practice. Complainants claim that on the
pay day of 31 May 1994 Jerry Macandog, Antonio de Castro, Jr., Ma. Rosita Paradero, Reynaldo
Nevado, Roberto Tagala, Johnny Miranda, Domingo Sumigaya, Nonalito Nicolas, Mario Clet,
Johnny Mosquera, Renato Yape, among others, were surprised to receive a notice of
retrenchment which was inserted in their pay envelopes. Complainants contend that most of the
retrenched employees were union officers. They explain that only the union secretary was not
terminated. Complainants stress that their dismissal was without just cause and in utter disregard
of their right to due process. They assert that the true intention of management was to bust their
union which was very insistent on the renegotiation and renewal of their CBA with the
respondent company. Complainants explain further that while the notice of their retrenchment
specifically states that its effectivity is 30 June 1993, the retrenched employees were no longer
allowed to enter the company premises starting 16 June 1993, thus forcing the retrenched
employees to stage a picket in front of the company premises.

Stressing further their charges of unfair labor practice, complainants state that the respondents,
led by Messrs. Prigg and Dante Reyes, caused the removal of company equipments [sic], files
and other movable properties and transferred them to another site.

Complainants likewise claim that management never discussed with their union their
retrenchment and that there was no retrenchment program presented to them. Moreover, they
allege that they were never advised of the basis or criteria as to who were to be retrenched.

Respondents reiterated their contention in their motion to dismiss in that individual respondents
Leigh Anthony Prigg and Dante Reyes are not parties in interest and therefore the complaint
should be dismissed insofar as they are concerned.

The foregoing contention is partly correct. There is no clear showing that respondent Prigg is the
president of respondent company. It does not also appear that he had a hand in the termination or
retrenchment of complainants. With regard to respondent Dante Reyes, it is admitted that he was
designated officer-in-charge of the respondent company. Among the powers given him is the
power to administer the affairs of the respondent company. Contrary to the pretensions of
respondents, the power of respondent Dante Reyes is not limited but very broad. In any case, the
complaint against him can not likewise be given to do [sic] with the retrenchment of
complainants. It was former general of the company William Doland, Jr. who retrenched the
complainants.[8]

pg. 31 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Adopting the labor arbiters factual findings, the NLRC adds:

Contravening the allegations of the complainants, the respondent company avers that it was
experiencing serious business losses due to the effects of the economic and power crisis which
the nation was then experiencing. The company alleges that Mr. William Donald Somerville met
with the companys employees and informed them of the difficulties it was undergoing and that
the withdrawal of employee benefits was to be only temporary until the company recovers from
its financial debacle. The respondent explains that the union sought to be more adversarial rather
than conciliatory which only added to the further deterioration of the companys financial
condition. This, the respondent claims, served as the impetus for its undertaking the disputed
retrenchment program. The respondent recounts that the union declared a strike and conducted a
picket at midnight of 15 June 1993.
As earlier stated, the NLRC substantially affirmed the labor arbiters decision. Undaunted,
petitioner lodged this petition with this Court.[10]
Issue: WON retrenchment valid
Held: No. Retrenchment is one of the authorized causes for the dismissal of employees. Resorted
to by an employer to avoid or minimize business losses, it is recognized under Art. 283 of the
Labor Code: To justify retrenchment, the loss referred to in Art. 283 cannot be just any kind or
amount of loss; otherwise, a company could easily feign excuses to suit its whims and prejudices
or to rid itself of unwanted employees.
In a nutshell, the law recognizes a companys right to retrench employees when made necessary
or compelled by economic factors that would otherwise endanger its stability or existence.[14]
Unarguably, retrenchment is only a measure of last resort when other less drastic means have
been tried and found to be inadequate.
In the case at bar, the Court notes that both the labor arbiter and the NLRC, which possess
administrative expertise in the specific matter of labor law, found the retrenchment effected by
the SSSC unnecessary, for petitioner has not incurred any substantial loss(es) or exhausted all
other less drastic economic measures to avert business losses
The retrenchment is likewise unjustified because petitioner failed to show its reasonable
necessity. Significantly, petitioner admits that it could have continued its operation despite the
losses it suffered.[35] It stated, however, that the notice of strike filed by private respondents
indicated that they were unwilling to help save the business.

37.Phil. Tuberculosis Society v. NLU & NLRC, 294 SCRA 567

38.Asian Alcohol v. NLRC, 305 SCRA 416

pg. 32 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

39.UFW v. NLRC, 207 SCRA 435

40.Carmelcraft Corp. v. NLRC, 186 SCRA 393
Facts: the Camelcraft Employees Union sought but did not get recognition from the petitioners.
Consequently, it filed a petition for certification election in June 1987. On July 13, 1987,
Camelcraft Corporation, through its president and general manager, Carmen Yulo, announced in
a meeting with the employees that it would cease operations on August 13, 1987, due to serious
financial losses. Operations did cease as announced. On August 17, 1987, the union filed a
complaint with the Department of Labor against the petitioners for illegal lockout, unfair labor
practice and damages, followed the next day with another complaint for payment of unpaid
wages, emergency cost of living allowances, holiday pay, and other benefits.
On November 29, 1988, the Labor Arbiter declared the shutdown illegal and violative of the
employees' right to self-organization. The claim for unpaid benefits was also granted.
Issue: WON dismissal was valid
Held: No.The reason invoked by the petitioner company to justify the cessation of its operations
is hardly credible; in fact, it is preposterous when viewed in the light of the other relevent
circumstances. Its justification is that it sustained losses in the amount of P 1,603.88 as of
December 31, 1986. There is no report, however, of its operations during the period after that
date, that is, during the succeeding seven and a half months before it decided to close its
business. Significantly, the company is capitalized at P 3 million. Considering such a substantial
investment, we hardly think that a loss of the paltry sum of less than P 2,000.00 could be
considered serious enough to call for the closure of the company.
We agree with the public respondent that the real reason for the decision of the petitioners to
cease operations was the establishment of respondent Carmelcraft Employees Union. It was
apparently unwelcome to the corporation, which would rather shut down than deal with the
union. There is the allegation from the private respondent that the company had suggested that it
might decide not to close the business if the employees were to affiliate with another union
which the management preferred. 5 This allegation has not been satisfactorily disproved. At any
rate, the finding of the NLRC is more believable than the ground invoked by the petitioners.
Notably, this justification was made only eight months after the alleged year-end loss and shortly
after the respondent union filed a petition for certification election.
The act of the petitioners was an unfair labor practice prohibited by Article 248 of the Labor
Code.
More importantly, it was a defiance of the constitutional provision guaranteeing to workers the
right to self-organization and to enter into collective bargaining with management through the
labor union of their own choice and confidence.
The determination to cease operations is a prerogative of management that is usually not
interfered with by the State as no business can be required to continue operating at a loss simply
to maintain the workers in employment. That would be a taking of property without due process

pg. 33 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

of law which the employer has a right to resist. But where it is manifest that the closure is
motivated not by a desire to avoid further losses but to discourage the workers from organizing
themselves into a union for more effective negotiations with the management, the State is bound
to intervene.

41.Del Mar Domestic Enterprises v. NLRC, 282 SCRA 602

42.Sundowner Development Corp. v. Drilon, 180 SCRA 14
Facts: Private respondent Hotel Mabuhay, Inc. (Mabuhay for short) leased the premises
belonging to Santiago Syjuco, Inc. (Syjuco for short) located at 1430 A. Mabini St., Ermita,
Manila.
However, due to non-payment of rentals, a case for ejectment was filed by Syjuco against
Mabuhay in the Metropolitan Trial Court of Manila. Mabuhay offered to... amicably settle the
case by surrendering the premises to Syjuco and to sell its assets and personal property to any
interested party.

Syjuco offered the said premises for lease to petitioner.

Mabuhay offered to sell its assets and personal properties in the premises to petitioner to which
petitioner agreed. On same date Syjuco formally turned over the possession of the leased
premises to petitioner who actually took possession and occupied the same on May 1, 1987.
On May 4, 1987, respondent National Union of Workers in Hotel, Restaurant and Allied
Services (NUWHRAIN for short) picketed the leased premises, barricaded the entrance to the
leased premises and denied petitioner's officers, employees and... guests free access to and egress
from said premises. Thus, petitioner wrote a letter-complaint to Syjuco.
A complaint for damages with preliminary injunction and/or temporary restraining order was
filed by petitioner on May 7, 1987.
On the same day, the Executive Judge of said court issued a restraining order against respondent
NUWHRAIN and its officers and members
Nevertheless, NUWHRAIN maintained their strike on the subject premises but filed an answer to
the... complaint. On May 14, 1987, an order was issued by public respondent Secretary of Labor
assuming jurisdiction over the labor dispute... requiring all... striking employees to return to
work and for respondent Mabuhay to accept all returning employees pending final determination
of the issue of the absorption of the former employees of Mabuhay.

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 Labor Relations Digest

On May 25, 1987, Mabuhay submitted its position paper alleging among others that it had sold
all its assets and personal properties to petitioner... there was no sale or transfer of its shares
whatsoever
Mabuhay completely ceased... operation effective April 28, 1987 and surrendered the premises to
petitioner... there exists a legal and physical impossibility on its part to comply with the return to
work order specifically on absorption.
Respondent NUWHRAIN on July 13, 1987 filed its position paper alleging connivance between
Mabuhay and petitioner in selling the assets and closing the hotel to escape its obligations to the
employees of Mabuhay... it prays that petitioner accept... the workforce of Mabuhay and pay
backwages from April 15, 1986 to April 28, 1987, the day Mabuhay stopped operation.
On January 20, 1988, the public respondent issued an order requiring petitioner to absorb the
members of the union and to pay backwages from the time it... started operations up to the date
of the order.
Issue: Whether or not the purchaser of the assets of an employer corporation can be considered a
successor employer of the latter's employees and Petitioner present seven issues for resolution
which all... revolve about the singular issue of whether or not under the circumstances of this
case the petitioner may be compelled to absorb the employees of respondent Mabuhay.

Ruling: Yes. The rule is that unless expressly assumed, labor contracts such as employment
contracts and collective bargaining agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only between the... parties.[5] A labor
contract merely creates an action in personam and does not create any real right which should be
respected by third parties. This conclusion draws its force from the right of an employer to select
his employees and to decide when to engage them as protected under our Constitution, and the
same can only be restricted by law through the exercise of the police... power. As a general rule,
there is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in its
employ the employees of the latter.
However, although the purchaser of the assets or enterprise is not legally bound to absorb in its
employ the employees of the seller of such assets or enterprise, the parties are liable to the
employees if the transaction between the parties is... colored or clothed with bad faith. In the case
at bar, contrary to the claim of the public respondent that the transaction between petitioner and
Mabuhay was attended with bad faith, the court finds no cogent basis for such contention. Thus,
the absorption of the employees of

Mabuhay may not be imposed on petitioner. It is undisputed that when Mabuhay surrendered the
leased premises to Syjuco and asked Syjuco to offer same to other lessees it was Syjuco who
found petitioner and persuaded petitioner to lease said... premises. Mabuhay had nothing to do
with the negotiation and consummation of the lease contract between petitioner and Syjuco.

pg. 35 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

It was only when Mabuhay offered to sell its assets and personal properties in the premises to
petitioner that they came to deal with each others. It appears that... petitioner agreed to purchase
said assets of respondent Mabuhay to enable Mabuhay to pay its obligations to its striking
employees and to Syjuco.

it is clear that petitioner has no liability whatsoever to the employees of Mabuhay and its
responsibility if at all, is only to consider them for re-employment in the operation of the
business in the same premises. There... can be no implied acceptance of the employees of
Mabuhay by petitioner and acceptance of statutory wrong as it is expressly provided in the
agreement that petitioner has no commitment or duty to absorb them.

43.MDD Supervisors v. Presidential Assistant for Legal Affairs, 79 SCRA 40

44.Marina Port Services v. Iniego, 181 SCRA 304
Facts: On July 19, 1986, the Philippine Ports Authority canceled its arrastre management
contract with Metro Port Services, Inc. and directly assumed the cargo handling operations in the
South Harbor of Manila.
Two days later, it awarded a permit to Marina Port Services to undertake arrastre services in the
same port, subject inter alia to the following stipulation embodied in Paragraph 7 of the terms
and conditions of the said permit:
Labor and personnel of previous operator, except those positions of trust and confidence, shall be
absorbed by grantee. Labor or employees benefits provided for under existing CBA shall
likewise be honored. Marina retained the bulk of the 2,700-man personnel of Metro but refused
to continue the employment of 65 of the 123 persons constituting the security force. The guards
excluded were served with notices of separation effective on various dates during the period
from July 19 to August 24, 1986. Their reaction was to file a complaint for illegal dismissal and
damages with the Department of Labor and Employment on August 5, 1986.
After submission of position papers by the parties, Labor Arbiter Crescencio R. Iniego held in
favor of the complainants. In a decision dated December 22, 1986, he ordered their reinstatement
without loss of seniority rights and payment of back salaries, moral and exemplary damages and
attorney's fees.
On October 30, 1987, his decision was affirmed by the respondent National Labor Relations
Commission except for the award of moral and exemplary damages, which was deleted. The
motion for reconsideration was denied on November 23, 1987.
The petitioner then came to this Court alleging grave abuse of discretion on the part of the public
respondent. We issued a temporary restraining order on January 6, 1988, and required comments
from the respondents, to which a reply was submitted, followed by a rejoinder and then a sur-

pg. 36 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

rejoinder. On October 10, 1988, we gave due course to the petition and called for the submission
of simultaneous memoranda, which were both filed on February 13, 1989.

Issue: WON Dismissal is valid

Held: Turning now to the alleged illegal dismissal of the private respondents, we affirm first of
all that loss of confidence is a valid ground for dismissal under our labor laws. However, that
ground, like any other ground, must first be established in proper proceedings before an
employee can be lawfully dismissed.
The record shows that the above procedure was not followed by the petitioner when it dismissed
the private respondents. There was no hearing conducted as required by the rules, only an alleged
background investigation that supposedly linked them to pilferages in the pier. No charges were
formally preferred against the private respondents nor were they given a chance to defend
themselves. They were simply and arbitrarily separated and served notices of termination in
disregard of their rights to due process and security of tenure.
The argument that the petitioner could not re-hire the private respondents because it had no
license to operate a security agency must fall against the admitted fact that it retained 56 of the
security guards and later re-hired two others even without the said license. The solution, at any
rate, was to secure the license if it was really necessary, not to dismiss some of the security
guards while retaining the others.
It remains to say that if the petitioner distrusts the private respondents, it may still seek to
establish its lack of confidence and trust in them by proving that ground for their dismissal at an
investigation conducted in accordance with the prescribed procedure.
45.Filport v. NLRC, 200 SCRA 773
Facts: In view of the government policy which ordained that cargo handling operations should be
limited to only one cargo handling operator-contractor for every port (under Customs
Memorandum Order 28075, later on superseded by General Ports Regulations of the Philippine
Ports Authority) the different stevedoring and arrastre corporations operating in the Port of
Davao were integrated into a single dockhandlers corporation, known as the Davao
Dockhandlers, Inc., which was registered with the Securities and Exchange Commission on July
13, 1976.

Due to the late receipt of its permit to operate at the Port of Davao from the Bureau of Customs,
Davao Dockhandlers, Inc., which was subsequently renamed Filport, actually started its
operation on February 16, 1977.
As a result of the merger, Section 118, Article X of the General Guidelines on The Integration of
Stevedoring/Arrastre Services (PPA Administrative Order No. 13-77) mandated Filport to draw
its personnel complements from the merging operators, as follows:

pg. 37 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

"Sec. 118. Absorption of labor - Subject to the provisions of the immediate preceding section,
and consistent with the actual operational requirements of the new management, all labor force
together with its necessary personnel complement, of the merging operators shall be absorbed by
the merged or integrated organization to constitute its labor force." (Emphasis supplied)
Thus, Filport's labor force was mostly taken from the integrating corporations, among them the
private respondents.
On February 4, 1987, private respondent Paterno Liboon and 18 others filed a complaint with the
Department of Labor and Employment Regional Office in Davao City, alleging that they were
employees of Filport since 1955 through 1958 up to December 31, 1986 when they retired; that
they were paid retirement benefits computed from February 16, 1977 up to December 31, 1986
only; and that taking into consideration their continuous length of service, they are entitled to be
paid retirement benefits differentials from the time they started working with the predecessors of
Filport up to the time they were absorbed by the latter in 1977.
Finding Filport a mere alter ego of the different integrating corporations, the Labor Arbiter held
Filport liable for retirement benefits due private respondents for services rendered prior to
February 16, 1977. Said decision was affirmed by the NLRC on appeal.

In so ruling, the First Division relied heavily on the case of Fernando v. Angat Labor Union (5
SCRA 248) where it was held that unless expressly assumed, labor contracts are not enforceable
against a transferee of an enterprise, labor contracts being in personam.
Issue: WON the new corporation in a merger is obliged to absorb employees of the defunct
corporation
Held: NO. The principle involved in the case cited by the First Division (Fernando v. Angat
Labor Union [supra]) applies only when the transferee is an entirely new corporation with a
distinct personality from the integrating firms and NOT where the transferee was found to be
merely an alter ego of the different merging firms, as in this case. Thus, Filport has the
obligation not only to absorb the workers of the dissolved companies but also to include the
length of service earned by the absorbed employees with their former employers as well. To rule
otherwise would be manifestly less than fair, certainly, less than just and equitable.
Finally, to deny the private respondents the fruits of their labor corresponding to the time they
worked with their previous employers would render at naught the constitutional provisions on
labor protection. In interpreting the protection to labor and social justice provisions of the
Constitution and the labor laws, and rules and regulations implementing the constitutional
mandate, the Supreme Court has always adopted the liberal approach which favors the exercise
of labor rights.

pg. 38 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

46.Philippine Tobacco Flue-Curing v. NLRC, 300 SCRA 37

Facts: There are two groups of employees, namely, the Lubat group and the Luris group. The
Lubat group is composed of petitioner’s seasonal employees who were not rehired for the 1994
tobacco season. At the start of that season, they were merely informed that their employment
had been terminated at the end of the 1993 season. They claimed that petitioner’s refusal to
allow them to report for work without mention of any just or authorized cause constituted illegal
dismissal. In their Complaint, they prayed for separation pay, back wages, attorney’s fees and
moral damages.

On the other hand, the Luris group is made up of seasonal employees who worked during the
1994 season. On August 3, 1994, they received a notice informing them that, due to serious
business losses, petitioner planned to close its Balintawak , Quezon City plant and transfer its
tobacco processing and redrying operations to Ilocos Sur. Although the closure was to be
effective September 15, 1994, they were no longer allowed to work starting August 4, 1994.
Instead, petitioner awarded them separation pay computed according to the following formula:

total no. of days actually worked

—————————————————– x daily rate x 15 days

total no. of working days in one year

The cases were consolidated.

pg. 39 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Issue: WON the dismissal is valid

Held: Article 283 of the Labor Code prescribes the requisites and the procedure for an
employee’s dismissal arising from the closure or cessation of operation of the establishment.

The present case involves the closure of merely a unit or division, not the whole business of an
otherwise viable enterprise. Although Article 283 uses the phrase “closure or cessation of
operation of an establishment or undertaking,” , the said statutory provision applies in cases of
both complete and partial cessation of the business operation.

The ‘loss’ referred to in Article 283 cannot be just any kind or amount of loss; otherwise, a
company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted
employees. To guard against this possibility of abuse, the Court laid down the following
standard which a company must meet to justify retrenchment:

the losses expected should be substantial and not merely de minimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bonafide nature of the retrenchment would appear to be
seriously in question.
the substantial loss apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid off.
it must be reasonably necessary and likely to effectively prevent the expected losses.
alleged losses if already realized, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence.
Petitioner did not actually close its entire business. It merely transferred or relocated its tobacco
processing and redrying operations. Moreover, it was also engaged in, among others, corn and
rental operations, which were unaffected by the closure of its Balintawak plant. Petitioner was
not able to prove serious financial losses arising from its tobacco operations.
Petitioner was not able to establish that the closure of its business operations in its Balintawak
plant was in fact due to serious financial losses. Therefore, under the last two sentences of
Article 283 of the Labor Code, the dismissed employees belonging to the Luris group are entitled
to separation pay “equivalent to one (1) month pay or at least one half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered one
(1) whole year.”

pg. 40 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Petitioner illegally dismissed the members of the Lubat group when it refused to allow them to
work during the 1994 season. The nature of the relationship of seasonal workers is such that
during off season they are temporarily laid off but during summer season they are re-employed,
or when their services may be needed. They are not strictly speaking separated from the service
but are merely considered as on leave of absence without pay until they are re-employed. The
Court considered a seasonal worker “in regular employment” in cases involving the
determination of an employer-employee relationship and security of tenure.

The employer-employee relationship between herein petitioner and members of the Lubat group
was not terminated at the end of the 1993 season. From the end of the 1993 season until the
beginning of the 1994 season, they were considered only on leave but nevertheless still in the
employ of petitioner.

Petitioner is liable for illegal dismissal and should be responsible for the reinstatement of the
Lubat group and the payment of their back wages. However, since reinstatement is no longer
possible as petitioner has already closed its Balintawak plant, respondent members of the said
group should instead be awarded normal separation pay (in lieu of reinstatement) equivalent to at
least one month pay, or one month pay for every year of service, whichever is higher. It must
be stressed that the separation pay being awarded to the Lubat group is due to illegal dismissal;
hence, it is different from the amount of separation pay provided for in Article 283 in case of
retrenchment to prevent losses or in case of closure or cessation of the employer’s business, in
either of which the separation pay is equivalent to at least 1 month or 1/2 month pay for every
year of service, whichever is higher.

Petitioner posits that the separation pay of a seasonal worker, who works for only a fraction of a
year, should not be equated with that of a regular worker. Positing that the total number of
working days in one year is 303 days, petitioner submits the following formula for the
computation of a seasonal worker’s separation pay:

Total No. of Days Actually Worked

————————————————— X Daily Rate X 15 days

pg. 41 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Total No. Of Working Days In One Year

Private respondents, on the other hand, claim that their separation pay should be based on the
actual number of years they have been in petitioner’s service.

The amount of separation pay is based on two factors: the amount of monthly salary and the
number of years of service. Although the Labor Code provides different definitions as to what
constitutes “one year of service,” Book Six does not specifically define “one year of service” for
purposes of computing separation pay. However, Articles 283 and 284 both state in connection
with separation pay that a fraction of at least 6 months shall be considered one whole year.
Applying this to the case at bar, we hold that the amount of separation pay which respondent
members of the Lubat and Luris groups should receive is 1/2 their respective average monthly
pay during the last season they worked multiplied by the number of years they actually rendered
service, provided that they worked for at least six months during a given year.

The formula that petitioner proposes, wherein a year of work is equivalent to actual work
rendered for 303 days, is both unfair and inapplicable, considering that Articles 283 and 284
provide that in connection with separation pay, a fraction of at least six months shall be
considered one whole year. Under these provisions, an employee who worked for only six
months in a given year — which is certainly less than 303 days — is considered to have worked
for one whole year.

47.Valdez v. NLRC, 286 SCRA 87

48.Sentinel Security Agency v. NLRC, 295 SCRA 123
Facts: Complainants were assigned to render guard duty at the premises of [Philippine American
Life Insurance Company] at Jones Avenue, Cebu City. On December 16, 1993 Philippine
American Life Insurance Company ['the Client,' for brevity], through Carlos De Pano, Jr., sent
notice to all concerned that the [Agency] was again awarded the contract of security services
together with a request to replace all the security guards in the company's offices at the cities of
Cebu, Bacolod, Cagayan de Oro, Dipolog and Ilagan.

pg. 42 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

In compliance therewith, the agency issued on January 12, 1994, a Relief and Transfer Order
replacing the complainants as guards [of the Client] and for then to be re-assigned to other clients
effective January 16, 1994. As ordered, the complainants reported but were never given new
assignments but instead they were told in the vernacular, 'gui-ilisa mo kay mga tigulang naman
mo' which when translated means, 'you were replaced because you are already old.'
Precisely, the complainants lost no time but filed the subject illegal dismissal cases on January
18, January 26 and February 4, 1994 and prayed for payment of separation pay and other labor
standard benefits.

Issue: WON there is illegal dismissal

Held: Yes.
The private respondents' transfer, according to Respondent Commission, was affected to
circumvent the mandate of Republic Act 7641 or the New Retirement Law, which by then had
already taken effect, in view of the fact that the complainants had worked for both the Client and
the Agency for 10 to 20 years and were nearing retirement age. With this premise, the NLRC
concluded that the guards were illegally dismissed. The complainants add that the findings of the
Commission match the remarks of the personnel manager of the Agency, Feliciano Marticion;
that is, that they were being replaced because they were already old. They insist that their service
records are unblemished; hence, they could not have been dismissed by reason of any just cause.
In the case at bar, the relief and transfer order per se did not sever the employment relationship
between the complainants and the Agency. Thus, despite the fact that complainants were no
longer assigned to the Client, Article 287 of the Labor Code, as amended by RA 7641, still binds
the Agency to provide them - upon their reaching the retirement age of sixty to sixty-five years -
retirement pay or whatever else was established in the collective bargaining agreement or in any
other applicable employment contract. On the other hand, the Client is not liable to the
complainants for their retirement pay because of the absence of an employer-employee
relationship between them.
A floating status requires the dire exigency of the employer's bona fide suspension of operation,
business or undertaking. In security services, this happens when the clients that do not renew
their contracts with a security agency are more than those that do and the new ones that the
agency gets. However, in the case at bar, the Agency was awarded a new contract by the Client.
There was no surplus of security guards over available assignments. If there were, it was because
the Agency hired new security guards. Thus, there was no suspension of operation, business or
undertaking, bona fide or not, that would have justified placing the complainants off-detail and
making them wait for a period of six months. If indeed they were merely transferred, there would
have been no need to make them wait for six months.
The only logical conclusion from the foregoing discussion is that the Agency illegally dismissed
the complainants. Hence, as a necessary consequence, the complainants are entitled to
reinstatement and back wages.[24] However, reinstatement is no longer feasible in this case. The

pg. 43 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Agency cannot reassign them to the Client, as the former has recruited new security guards; the
complainants, on the other hand, refuse to accept other assignments. Verily, complainants do not
pray for reinstatement; in fact, they refused to be reinstated. Such refusal is indicative of strained
relations.[25] Thus, separation pay is awarded in lieu of reinstatement.

49.Cheniver Deco v. NLRC, G.R. No. 122876, February 17, 2000

Facts: Petitioner is printing business in Sta. Cruz Makati. Petitioner informed its workers that it
was going to transfer its site in Makati to Batangas. It gave its employees time to inform the
management of their willingness to go with petitioner; otherwise, they would find replacements.
The union advised petitioner that its members were not willing to transfer to the new site. Private
respondents herein filed a complaint for ULP, illegal dismissal, underpayment of wages, non-
payment of holiday pay, 13th month pay. SIL and separation pay. The labor Arbiter directed
petitioner to pay separation pay and attorney’s fees. The NLRC affirmed the decision, but
deleted the award of attorney’s fees.
Issue: Whether or not private respondent are entitled to separation pay by virtue of their refusal
to transfer to the business in Batangas.
Held: Yes. Although there is no complete dissolution of petitioner’s undertaking, but a mere
relocation; the phrase, “closure or cessation of operation of an establishment not due to serious
business losses or reverses,” under Article 288 of the Labor Code includes the cessation of only
part of a company’s business. Petitioner did have legitimate reason to relocate its plant due to the
expiration of the lease contract in Makati; however petitioner is still required to pay its workers
separation pay. Cessation of operation not due to serious business losses is an authorized cause
for termination; but the Labor Code provides that the terminated employees are entitled to
separation pay of 1 month pay or less ½ for every year of service, whichever is higher.

50.NFL v. NLRC, G.R. No. 127718, March 2, 2000

Facts: FACTS: Petitioners are bona fide members of the National Federation of Labor (NFL), a
legitimate labor organization duly registered with the Department of Labor and Employment.
They were employed by private respondents Charlie Reith and Susie Galle Reith, general
manager and owner, respectively, of the 354-hectare Patalon Coconut Estate located at Patalon,
Zamboanga City. Patalon Coconut Estate was engaged in growing agricultural products and in
raising livestock.

In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), which mandated the compulsory acquisition of
all covered agricultural lands for distribution to qualified farmer beneficiaries under the so-called
Comprehensive Agrarian Reform Programme (CARP).

pg. 44 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the Patalon Estate
Agrarian Reform Association (PEARA), a cooperative accredited by the Department of Agrarian
Reform (DAR), of which petitioners are members and co-owners.

As a result of this acquisition, private respondents shut down the operation of the Patalon
Coconut Estate and the employment of the petitioners was severed on July 31, 1994. Petitioners
did not receive any separation pay.

Subsequently, the cooperative took over the estate. Being beneficiaries of the Patalon Coconut
Estate pursuant to the CARP, the petitioners became part-owners of the land.

Petitioners, thereafter, filed individual complaints before the Regional Arbitration Branch (RAB)
of the National Labor Relations Commission (NLRC) in Zamboanga City, praying for their
reinstatement with full backwages on the ground that they were illegally dismissed.

RAB dismissed the complaints for lack of merit. However, ordered respondents thru [sic] its
owner-manager or its duly authorized representative to pay complainants’ separation pay in view
of the latter’s cessation of operations or forced sale, and for 13th month differential pay.

NLRC on appeal, set aside the decision of RAB ordering respondents to pay separation pay and
13th month differentials stating that, the severance of employer-employee relationship between
the parties came about INVOLUNTARILY, as a result of an act of the State. MR Denied. Hence,
this petition.

Issue: whether or not an employer that was compelled to cease its operation because of the
compulsory acquisition by the government of its land for purposes of agrarian reform, is liable to
pay separation pay to its affected employees

Held: NO. Petitioners contend that they are entitled to separation pay citing Article 283 of the
Labor Code
It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and
reduction of personnel.1âwphi1 The peculiar circumstances in the case at bar, however, involves
neither the closure of an establishment nor a reduction of personnel as contemplated under the

pg. 45 Erven John Claros JD-3 CJC Law

 Labor Relations Digest

aforesaid article. When the Patalon Coconut Estate was closed because a large portion of the
estate was acquired by DAR pursuant to CARP, the ownership of that large portion of the estate
was precisely transferred to PEARA and ultimately to the petitioners as members thereof and as
agrarian lot beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the case at
bench.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure
of the business establishment is forced upon the employer and ultimately for the benefit of the
employees.
Capital and management sectors must also be protected under a regime of justice and the rule of
law.

pg. 46 Erven John Claros JD-3 CJC Law