John Mark F.

Sunga, 2012-0351

LABOR LAW CASE DOCTRINES (2012-2013)

Certiorari; effect of receipt of award. The prevailing party’s receipt of the

full amount of the judgment award pursuant to a writ of execution issued
by the labor arbiter does not close or terminate the case if such receipt is
qualified as without prejudice to the outcome of the petition
for certiorari pending with the Court of Appeals. Timoteo H. Sarona vs.
National Labor Relations Commission, Royale Security Agency, et
al., G.R. No. 185280, January 18, 2011.
Constructive dismissal; change in position. Constructive dismissal exists
where there is cessation of work because “continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay” and other benefits. Aptly called a
dismissal in disguise of an act amounting to dismissal but made to appear
as if it were not,constructive dismissal may, likewise, exist if an act of clear
discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could foreclose any choice
by him except to forego his continued employment.In cases of a transfer of
an employee, the rule is settled that the employer is charged with the
burden of proving that its conduct and action are for valid and legitimate
grounds such as genuine business necessity and that the transfer is not
unreasonable, inconvenient or prejudicial to the employee. If the employer
cannot overcome this burden of proof, the employee’s transfer shall be
tantamount to unlawful constructive dismissal.Jonathan V. Morales vs.
Harbour Centre Port Terminal, Inc., G.R. No. 174208, January 25, 2011. 
Contract; novation. Novation is the extinguishment of an obligation by the
substitution or change of the obligation by a subsequent one which
extinguishes or modifies the first, either by changing the object or principal
 John Mark F. Sunga, 2012-0351

conditions, or, by substituting another in place of the debtor, or by

subrogating a third person in the rights of the creditor. In order for novation
to take place, the concurrence of the following requisites is indispensable:
(1) There must be a previous valid obligation; (2) There must be an
agreement of the parties concerned to a new contract; (3) There must be
the extinguishment of the old contract; and (4) There must be the validity
of the new contract. The parties impliedly extinguished the first contract by
agreeing to enter into the second contract.  The records also reveal that
the 2nd contract extinguished the first contract by changing its object or
principal. These contracts were for overseas employment aboard different
vessels. The first contract was for employment aboard the MV “Stolt
Aspiration” while the second contract involved working in another vessel,
the MV “Stolt Pride.” Petitioners and Madequillo, Jr. accepted the terms
and conditions of the second contract. Undoubtedly, he was still employed
under the first contract when he negotiated with petitioners on the second
contract. Since Madequillo was still employed under the first contract when
he negotiated with petitioners on the second contract, novation became an
unavoidable conclusion. Stolt-Nielsen Transportation Group, Inc., et al. vs.
Sulpecio Modequillo, G.R. No. 177498, January 18, 2011.
Employee; money claims. On the issue of how the seafarer will be
compensated by reason of the unreasonable non-deployment, the
Supreme Court decreed the application of Section 10 of Republic Act No.
8042 (Migrant Workers Act) which provides for money claims by reason of
a contract involving Filipino workers for overseas deployment. The law
provides:
Sec. 10. Money Claims. – Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and
 John Mark F. Sunga, 2012-0351

decide, within ninety (90) calendar days after the filing of the complaint,
the claims arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of
damages. x x x (Underscoring supplied)
Following the law, the claim is still cognizable by the labor arbiters of the
NLRC under the second phrase of the provision. Applying the rules on
actual damages, Article 2199 of the New Civil Code provides that one is
entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Stolt-Nielsen Transportation
Group, Inc., et al. vs. Sulpecio Modequillo, G.R. No. 177498, January 18,
2011.
Employee; preventive suspension; penalty of suspension. Preventive
suspension is a disciplinary measure resorted to by the employer pending
investigation of an alleged malfeasance or misfeasance committed by an
employee. The employer temporarily bars the employee from working if
his continued employment poses a serious and imminent threat to the life
or property of the employer or of his co-workers. On the other hand, the
penalty of suspension refers to the disciplinary action imposed on the
employee after an official investigation or administrative hearing is
conducted. The employer exercises its right to discipline erring employees
pursuant to company rules and regulations. In the present case, Henry
Delada filed a grievance against Manila Pavilion Hotel (MPH). Failing to
reach a settlement, Delada lodged a Complaint before the National
Conciliation and Mediation Board, which was eventually referred to a
panel of voluntary arbitrators (PVA). Meanwhile, citing security and safety
reasons, MPH placed Delada on a 30-day preventive suspension and
proceeded with the administrative case against him. MPH eventually found
 John Mark F. Sunga, 2012-0351

Delada liable for insubordination and willful disobedience of the transfer

order and imposed upon him a penalty of 90-day suspension. The PVA
ruled that there was no legal and factual basis to support MPH’s
imposition of preventive suspension on Delada, and that the penalty of 90-
day suspension imposed by MPH against Delada went beyond the 30-day
period of preventive suspension prescribed by the Implementing Rules of
the Labor Code. PVA also ruled that MPH lost its authority to continue with
the administrative proceedings for insubordination and willful disobedience
of the transfer order and to impose the penalty of 90-day suspension on
Delada. According to the panel, it acquired exclusive jurisdiction over the
issue when the parties submitted the aforementioned issues before it. The
Supreme Court  held that MPH did not lose its authority to discipline, and
that MPH had the authority to continue with the administrative proceedings
for insubordination and willful disobedience against Delada and to impose
on him the penalty of suspension. Manila Pavilion Hotel, etc. vs. Henry
Delada, G.R. No. 189947, January 25, 2011.
Employee; release and quitclaim. While the law looks with disfavor upon
releases and quitclaims by employees who are inveigled or pressured into
signing them by unscrupulous employers seeking to evade their legal
responsibilities, a legitimate waiver representing a voluntary settlement of
a laborer’s claims should be respected by the courts as the law between
the parties. Considering the petitioner’s claim of fraud and bad faith
against Philcomsat to be unsubstantiated, the Supreme Court found the
quitclaim in dispute to be a legitimate waiver. The Court of Appeals and
the National Labor Relations Commission were unanimous in holding that
the petitioner voluntarily executed the subject quitclaim. The Supreme
Court is not a trier of facts, and this doctrine applies with greater force in
labor cases. Factual questions are for the labor tribunals to resolve and
 John Mark F. Sunga, 2012-0351

whether the petitioner voluntarily executed the subject quitclaim is a

question of fact. In this case, the factual issues have already been
determined by the National Labor Relations Commission and its findings
were affirmed by the Court of Appeals. Judicial review by the Supreme
Court does not extend to a reevaluation of the sufficiency of the evidence
upon which the proper labor tribunal has based its determination. Hypte R.
Aujero vs. Philippine Communications Satellite Corporation, G.R. No.
193484, January 18, 2011.
Employee benefit; holiday pay, service incentive leave pay and
proportionate 13th month pay.Under the Labor Code, the employee is
entitled to his regular rate on holidays even if he does not work. Likewise,
express provision of the law entitles him to service incentive leave benefit
if he has rendered service for more than a year already.  Furthermore,
under Presidential Decree No. 851, the employee should be paid his
13th month pay.  The employer has the burden of proving that it has paid
these benefits to its employees. AbdulJuahid R. Pigcaulan vs. Security
and Credit Investigation, Inc. and/or Rene Amby Reyes, G.R. No. 173648,
January 16, 2011.
 Employee benefit; overtime pay. In the absence of any concrete proof
that additional service beyond the normal working hours and days had
been rendered, overtime pay cannot be granted. Handwritten itemized
computations are self-serving, unreliable and unsubstantiated evidence to
sustain the grant of salary differentials, particularly overtime pay. 
Unsigned and unauthenticated as they are, there is no way of verifying the
truth of the handwritten entries stated therein.AbdulJuahid R. Pigcaulan
vs. Security and Credit Investigation, Inc. and/or Rene Amby Reyes, G.R.
No. 173648, January 16, 2011.
 John Mark F. Sunga, 2012-0351

 Employee benefit; permanent disability.   The Supreme Court

reiterated Remigio v. National Labor Relations Commission, G.R. No.
159887, April 12, 2006, which stated that: “Thus, the Court has applied the
Labor Code concept of permanent total disability to the case of seafarers.
In Philippine Transmarine Carriers v. NLRC,  G.R. No. 123891, February
28, 2001, seaman Carlos Nietes was found to be suffering from
congestive heart failure and cardiomyopathy and was declared as unfit to
work by the company-accredited physician. The Court affirmed the award
of disability benefits to the seaman, citing ECC v. Sanico, G.R. No.
134028, December 17, 1999, GSIS v. CA, G.R. No. 117572, January 29,
1998, GSIS v. CA, G.R. No. 116015, July 31, 1996 and Bejerano v.
ECC, G. R. No. 84777, January 30, 1992,  that “disability should not be
understood more on its medical significance but on the loss of earning
capacity. Permanent total disability means disablement of an employee to
earn wages in the same kind of work, or work of similar nature that [he]
was trained for or accustomed to perform, or any kind of work which a
person of [his] mentality and attainment could do. It does not mean
absolute helplessness.” It likewise cited Bejerano to reiterate that in a
disability compensation, it is not the injury which is compensated, but
rather it is the incapacity to work resulting in the impairment of one’s
earning capacity. The Court also cited the more recent case ofCrystal
Shipping, Inc. v. Natividad, G.R. No. 154798, October 20, 2005, applying
the same principles, andGSIS v. Cadiz, G.R. No. 145093, July 8, 2003,
and Ijares v. CA, G.R. No. 105854, August 26, 1999, which declared that
“permanent disability is the inability of a worker to perform his job for more
than 120 days, regardless of whether or not he loses the use of any part of
his body.” Magsaysay Maritime Corporation, et al. vs. Oberto S.
Lobusta, G.R. No. 177578, January 25, 2011.
 John Mark F. Sunga, 2012-0351

Employee dismissal; due process. Notice and hearing constitute the

essential elements of due process in the dismissal of employees. The
employer must furnish the employee with two written notices before
termination of employment can be legally effected. The first apprises the
employee of the particular acts or omissions for which dismissal is sought.
The second informs the employee of the employer’s decision to dismiss
him. With regard to the requirement of a hearing, the essence of due
process lies simply in an opportunity to be heard, and not that an actual
hearing should always and indispensably be held. These requirements
were satisfied in this case. The first required notice was dated November
3, 2003, sufficiently notifying Yabut of the particular acts being imputed
against him, as well as the applicable law and the company rules
considered to have been violated. On November 17, 2003, Meralco
conducted a hearing on the charges against the petitioner where he was
accorded the right to air his side and present his defenses on the charges
against him. Significantly, a high-ranking officer of the supervisory union of
Meralco assisted him during the said investigation. His sworn statement
that forms part of the case records even listed the matters that were raised
during the investigation. Finally, Meralco served a notice of dismissal
dated February 4, 2004 upon Yabut. Such notice notified the latter of the
company’s decision to dismiss him from employment on the grounds
clearly discussed therein.Norman Yabut vs. Manila Electric Company and
Manuel M. Lopez, G.R. No. 190436, January 16, 2011.
Employee dismissal; due process. Even if there is a just or valid cause for
terminating an employee, it is necessary to comply with the requirements
of due process prior to the termination. Lolita S. Concepcion vs. Minex
Import Corporation/Minerama Corporation, et al., G.R. No. 153569,
January 24, 2011.
 John Mark F. Sunga, 2012-0351

Employee dismissal; gross negligence; habitual neglect. Gross

negligence has been defined as the “want of care in the performance of
one’s duties” and habitual neglect has been defined as “repeated failure to
perform one’s duties for a period of time, depending upon the
circumstances.” These are not overly technical terms, which, in the first
place, are expressly sanctioned by the Labor Code of the Philippines, to
wit: ART. 282. Termination by employer. – An employer may terminate an
employment for any of the following causes: [xxx](b) Gross and habitual
neglect by the employee of his duties; [xxx] Diosdado Bitara was
dismissed from service due to habitual tardiness and absenteeism, and for
having continued disregarding attendance policies despite his undertaking
to report on time. His weekly time record for the first quarter of the year
2000 revealed that he came late 19 times out of the 47 times he reported
for work. He also incurred 19 absences out of the 66 working days during
the quarter. His absences without prior notice and approval from March
11-16, 2000 were considered to be the most serious infraction of all
because of its adverse effect on business operations. The Supreme Court
held that even in the absence of a written company rule defining gross and
habitual neglect of duties, Bitara’s omissions qualify as such warranting
his dismissal from the service. Mansion Printing Center and Clement
Cheng vs. Diosdado Bitara, Jr., G.R. No. 168120, January 25, 2011.
Employee dismissal; just cause; loss of confidence. To dismiss an
employee, the law requires the existence of a just and valid cause.  Article
282 of the Labor Code enumerates the just causes for termination by the
employer:  (a) serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or the latter’s representative in
connection with the employee’s work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the employee of the
 John Mark F. Sunga, 2012-0351

trust reposed in him by his employer or his duly authorized representative;

(d) commission of a crime or offense by the employee against the person
of his employer or any immediate member of his family or his duly
authorized representative; and (e) other causes analogous to the
foregoing.
It is unfair to require an employer to first be morally certain of the guilt of
the employee by awaiting a conviction before terminating him when there
is already sufficient showing of the wrongdoing. Requiring that certainty
may prove too late for the employer, whose loss may potentially be
beyond repair. In the present case, no less than the DOJ Secretary found
probable cause for qualified theft against Concepcion. That finding was
enough to justify her termination for loss of confidence. Lolita S.
Concepcion vs. Minex Import Corporation/Minerama Corporation, et
al., G.R. No. 153569, January 24, 2011.
Employee dismissal; loss of trust and confidence. For loss of trust and
confidence to be a valid ground for dismissal, it must be based on a willful
breach of trust and founded on clearly established facts.  A breach is
willful if it is done intentionally, knowingly and purposely, without justifiable
excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.  In addition, loss of trust and confidence must
rest on substantial grounds and not on the employer’s arbitrariness,
whims, caprices or suspicion. Manila Electric Company (Meralco) vs. Ma.
Luisa Beltran, G.R. No. 173774, January 30, 2011.
Employee dismissal; misconduct. Article 282(a) provides that an employer
may terminate an employment because of an employee’s serious
misconduct, a cause that was present in this case in view of the
petitioner’s violation of his employer’s code of conduct. Misconduct is
defined as the “transgression of some established and definite rule of
 John Mark F. Sunga, 2012-0351

action, a forbidden act, a dereliction of duty, willful in character, and

implies wrongful intent and not mere error in judgment.” For serious
misconduct to justify dismissal, the following requisites must be present:
(a) it must be serious; (b) it must relate to the performance of the
employee’s duties; and (c) it must show that the employee has become
unfit to continue working for the employer. Installation of shunting wires is
without doubt a serious wrong as it demonstrates an act that is willful or
deliberate, pursued solely to wrongfully obtain electric power through
unlawful means. The act clearly relates to the petitioner’s performance of
his duties given his position as branch field representative who is
equipped with knowledge on meter operations, and who has the duty to
test electric meters and handle customers’ violations of contract. Instead
of protecting the company’s interest, the petitioner himself used his
knowledge to illegally obtain electric power from Meralco. His involvement
in this incident deems him no longer fit to continue performing his
functions for respondent-company.Norman Yabut vs. Manila Electric
Company and Manuel M. Lopez, G.R. No. 190436, January 16, 2011.
Employer-employee relationship; commencement. The POEA Standard
Employment Contract provides that employment shall commence “upon
the actual departure of the seafarer from the airport or seaport in the port
of hire.”  Distinction must be made between the perfection of the
employment contract and the commencement of the employer-employee
relationship. The perfection of the contract, which in this case coincided
with the date of execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well as the rest of the
terms and conditions therein. The commencement of the employer-
employee relationship would have taken place had petitioner been actually
 John Mark F. Sunga, 2012-0351

deployed from the point of hire. Stolt-Nielsen Transportation Group, Inc.,

et al. vs. Sulpecio Modequillo, G.R. No. 177498, January 18, 2011.
Judgment; finality. The petition was brought only on behalf of Pigcaulan.
The CA Decision has already become final and executory as to Canoy
since he did not appeal from it. Canoy cannot now simply incorporate in
his affidavit a verification of the contents and allegations of the petition as
he is not one of the petitioners therein. AbdulJuahid R. Pigcaulan vs.
Security and Credit Investigation, Inc. and/or Rene Amby Reyes, G.R. No.
173648, January 16, 2011.
Judgment; res judicata. The doctrine of res judicata lays down two main
rules which may be stated as follows: (1) The judgment or decree of a
court of competent jurisdiction on the merits concludes the parties and
their privies to the litigation and constitutes a bar to a new action or suit
involving the same cause of action either before the same or any other
tribunal; and (2) Any right, fact, or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent
court in which a judgment or decree is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated
between the parties and their privies whether the claim or demand,
purpose, or subject matter of the two suits is the same or not. These two
main rules mark the distinction between the principles governing the two
typical cases in which a judgment may operate as evidence. In speaking
of these cases, the first general rule, and which corresponds to paragraph
(b) of Section 47 of Rule 39 of the Rules of Court is referred to as “bar by
former judgment” while the second general rule, which is embodied in
paragraph (c) of the same section, is known as “conclusiveness of
judgment.”  The present labor case is closely related to the civil case that
was decided with finality. The acts and omissions alleged by the Bank in
 John Mark F. Sunga, 2012-0351

the civil case as basis of its counterclaim against Mauricio are the very
same acts and omissions which were used as grounds to terminate his
employment. Considering that it has already been conclusively determined
with finality in the civil case that the questioned acts of Mauricio were well
within his discretion as branch manager and approving officer of the Bank,
and the same were sanctioned by the Head Office, the Supreme Court
found that the Court of Appeals did not err in holding that there was no
valid or just cause for the Bank to terminate Mauricio’s
employment.Prudential Bank (now Bank of the Philippine Islands) vs.
Antonio S.A. Mauricio, substituted by his legal heirs Maria Fe, Voltaire,
Antonio, Jr., Antonio, Earl John, and Francisco Roberto all surnamed
Mauricio,G.R. No. 183350, January 18, 2011.
Jurisdiction; voluntary arbitrators. In Sime Darby Pilipinas, Inc. v. Deputy
Administrator Magsalin, G.R. No. 90426, December 15, 1989, the
Supreme Court ruled that the voluntary arbitrator had plenary jurisdiction
and authority to interpret the agreement to arbitrate and to determine the
scope of his own authority – subject only, in a proper case, to the certiorari
jurisdiction of this Court. It was also held in that case that the failure of the
parties to specifically limit the issues to that which was stated allowed the
arbitrator to assume jurisdiction over the related issue. In Ludo & Luym
Corporation v. Saornido, G.R. No. 140960, January 20, 2003, the
Supreme Court recognized that voluntary arbitrators are generally
expected to decide only those questions expressly delineated by the
submission agreement; that, nevertheless, they can assume that they
have the necessary power to make a final settlement on the related
issues, since arbitration is the final resort for the adjudication of disputes.
Thus, the Supreme Court ruled that even if the specific issue brought
before the arbitrators merely mentioned the question of “whether an
 John Mark F. Sunga, 2012-0351

employee was discharged for just cause,” they could reasonably assume
that their powers extended beyond the determination thereof to include the
power to reinstate the employee or to grant back wages. In the same vein,
if the specific issue brought before the arbitrators referred to the date of
regularization of the employee, law and jurisprudence gave them enough
leeway as well as adequate prerogative to determine the entitlement of the
employees to higher benefits in accordance with the finding of
regularization. Indeed, to require the parties to file another action for
payment of those benefits would certainly undermine labor proceedings
and contravene the constitutional mandate providing full protection to labor
and speedy labor justice. Manila Pavilion Hotel, etc. vs. Henry
Delada, G.R. No. 189947, January 25, 2011.
Procedural rules; liberal application; when waived. Procedural rules may
be waived or dispensed with in absolutely meritorious cases. The
Supreme Court, in past cases, has adhered to the strict implementation of
the rules and considered them inviolable when it is shown that the patent
lack of merit of the appeals render liberal interpretation pointless and
naught. The contrary obtains in this case as Philcomsat’s case is not
entirely unmeritorious. Specifically, Philcomsat alleged that the petitioner’s
execution of the subject quitclaim was voluntary despite his claim that he
did not do so. Philcomsat likewise argued that the petitioner’s educational
attainment and the position he occupied in Philcomsat’s hierarchy militate
against his claim that he was pressured or coerced into signing the
quitclaim. The emerging trend in our jurisprudence is to afford every party-
litigant the amplest opportunity for the proper and just determination of his
cause free from the constraints of technicalities. Far from having gravely
abused its discretion, the NLRC correctly prioritized substantial justice
over the rigid and stringent application of procedural rules. In the present
 John Mark F. Sunga, 2012-0351

case, the Supreme Court held that the CA was correct in not finding grave
abuse of discretion in the NLRC’s decision to give due course to
Philcomsat’s appeal despite its being belatedly filed. Hypte R. Aujero vs.
Philippine Communications Satellite Corporation, G.R. No. 193484,
January 18, 2011.
Public officers; reassignment; constructive dismissal.   While a temporary
transfer or assignment of personnel is permissible even without the
employee’s prior consent, it cannot be done when the transfer is a
preliminary step toward his removal, or a scheme to lure him away from
his permanent position, or when it is designed to indirectly terminate his
service, or force his resignation. Such a transfer would in effect circumvent
the provision which safeguards the tenure of office of those who are in the
Civil Service. Significantly, Section 6, Rule III of CSC Memorandum
Circular No. 40, series of 1998, defines constructive dismissal as a
situation when an employee quits his work because of the agency head’s
unreasonable, humiliating, or demeaning actuations which render
continued work impossible. Hence, the employee is deemed to have been
illegally dismissed. This may occur although there is no diminution or
reduction of salary of the employee. It may be a transfer from one position
of dignity to a more servile or menial job. Republic of the Phil.,
represented by the Civil Service Commission vs. Minerva M.P.
Pacheco, G.R. No. 178021, January 31, 2011.
Reinstatement; not possible; backwages. In case separation pay is
awarded and reinstatement is no longer feasible, backwages shall be
computed from the time of illegal dismissal up to the finality of the decision
should separation pay not be paid in the meantime. It is the employee’s
actual receipt of the full amount of his separation pay that will effectively
terminate the employment of an illegally dismissed employee. Otherwise,
 John Mark F. Sunga, 2012-0351

the employer-employee relationship subsists and the illegally dismissed

employee is entitled to backwages, taking into account the increases and
other benefits, including the 13th month pay, that were received by his co-
employees who are not dismissed. It is the obligation of the employer to
pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general
increases, to which he would have been normally entitled had he not been
dismissed and had not stopped working. Timoteo H. Sarona vs. National
Labor Relations Commission, Royale Security Agency, et al., G.R. No.
185280, January 18, 2011.
Reorganization; management prerogative.   Admittedly, the right of
employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to
change their assignments or to transfer them. By management prerogative
is meant the right of an employer to regulate all aspects of employment,
such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of
workers. Although jurisprudence recognizes said management
prerogative, it has been ruled that the exercise thereof, while ordinarily not
interfered with, is not absolute and is subject to limitations imposed by law,
collective bargaining agreement, and general principles of fair play and
justice.  Thus, an employer may transfer or assign employees from one
office or area of operation to another, provided there is no demotion in
rank or diminution of salary, benefits, and other privileges, and the action
is not motivated by discrimination, made in bad faith, or effected as a form
of punishment or demotion without sufficient cause.  Indeed, having the
right should not be confused with the manner in which that right is
 John Mark F. Sunga, 2012-0351

exercised. Jonathan V. Morales was hired by Harbour Centre Port

Terminal, Inc. (HCPTI) as an Accountant and Acting Finance Officer, with
a monthly salary of P18,000.00. Regularized on November 17, 2000,
Morales was promoted to Division Manager of the Accounting Department,
for which he was compensated a monthly salary ofP33,700.00, plus
allowances starting July 1, 2002. Subsequent to HCPTI’s transfer to its
new offices at Vitas, Tondo, Manila on January 2, 2003, Morales received
an inter-office memorandum dated March 27, 2003, reassigning him to
Operations Cost Accounting, tasked with the duty of “monitoring and
evaluating all consumables requests, gears and equipment” related to the
corporation’s operations and of interacting with its sub-contractor, Bulk
Fleet Marine Corporation. The memorandum was issued by HCPTI’s new
Administration Manager, duly noted by its new Vice President for
Administration and Finance, and approved by its President and Chief
Executive Officer.  Morales protested that his reassignment was a clear
demotion since the position to which he was transferred was not even
included in HCPTI’s plantilla. In response to Morales’ grievance that he
had been effectively placed on floating status, an inter-office memorandum
was issued on April 4, 2003 to the effect that “transfer of employees is a
management prerogative” and that HCPTI had “the right and responsibility
to find the perfect balance between the skills and abilities of employees to
the needs of the business.” However, the Supreme Court found that
HCPTI did not even bother to show that it had implemented a corporate
reorganization and/or approved a new plantilla of positions which included
the one to which Morales was being transferred. Thus, the Court
reinstated the NLRC’s July 29, 2005 Decision which found Morales’
reassignment to be a clear demotion despite lack of showing of diminution
 John Mark F. Sunga, 2012-0351

of salaries and benefits. Jonathan V. Morales vs. Harbour Centre Port

Terminal, Inc., G.R. No. 174208, January 25, 2011.
Rule 45; question of law. As a general rule, the Supreme Court is not a
trier of facts and a petition for review on certiorari under Rule 45 of the
Rules of Court must exclusively raise questions of law. Moreover, if factual
findings of the National Labor Relations Commission and the Labor Arbiter
have been affirmed by the Court of Appeals, the Supreme Court accords
them the respect and finality they deserve. It is well-settled and oft-
repeated that findings of fact of administrative agencies and quasi-judicial
bodies, which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only respect, but
finality when affirmed by the Court of Appeals.Nevertheless, the Supreme
Court will not hesitate to deviate from what are clearly procedural
guidelines and disturb and strike down the findings of the Court of Appeals
and those of the labor tribunals if there is a showing that they are
unsupported by the evidence on record or there was a patent
misappreciation of facts. Indeed, that the impugned decision of the Court
of Appeals is consistent with the findings of the labor tribunals does
not per se conclusively demonstrate the correctness thereof. By way of
exception to the general rule, the Supreme Court will scrutinize the facts if
only to rectify the prejudice and injustice resulting from an incorrect
assessment of the evidence presented. Timoteo H. Sarona vs. National
Labor Relations Commission, Royale Security Agency, et al., G.R. No.
185280, January 18, 2011.
Appeal; factual finding of NLRC. Findings of fact of administrative
agencies and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally
accorded not only respect but finality when affirmed by the Court of
 John Mark F. Sunga, 2012-0351

Appeals. Factual findings of quasi-judicial bodies like the NLRC, if

supported by substantial evidence, are accorded respect and even finality
by the Supreme Court, more so when they coincide with those of the
Labor Arbiter. Such factual findings are given more weight when the same
are affirmed by the Court of Appeals. In the present case, the Supreme
Court found no reason to depart from these principles since the Labor
Arbiter found that there was substantial evidence to conclude that Oasay
had breached the trust and confidence of Palacio Del Gobernador
Condominium Corporation, which finding the NLRC had likewise
upheld. Sebastian F. Oasay, Jr. vs. Palacio del Gobernador Condominium
Corporation and Omar T. Cruz, G.R. No. 194306, February 6, 2012.
Civil Service; Clark Development Corporation. Clark Development
Corporation (CDC) owes its existence to Executive Order No. 80 issued by
then President Fidel V. Ramos. It was meant to be the implementing and
operating arm of the Bases Conversion and Development Authority tasked
to manage the Clark Special Economic Zone. Expressly, CDC was formed
in accordance with Philippine corporation laws and existing rules and
regulations promulgated by the Securities and Exchange Commission
pursuant to Section 16 of Republic Act 7227. CDC, a government owned
or controlled corporation without an original charter, was incorporated
under the Corporation Code. Pursuant to Article IX-B, Sec. 2(1) of the
Constitution, the civil service embraces only those government owned or
controlled corporations with original charter. As such, CDC and its
employees are covered by the Labor Code and not by the Civil Service
Law. Antonio B. Salenga, et al. vs. Court of Appeals, et al., G.R. No.
174941, February 1, 2012.
Dismissal; resignation vs. illegal dismissal; telex is not equivalent to tender
of resignation. Article 285 of the Labor Code recognizes termination by the
 John Mark F. Sunga, 2012-0351

employee of the employment contract by “serving written notice on the

employer at least one (1) month in advance.” Given that provision, the law
contemplates the requirement of a written notice of resignation. In the
absence of a written resignation, it is safe to presume that the employer
terminated the seafarers. In this case,  the Supreme Court found the
dismissal of De Gracia, et al. to be illegal since Cosmoship merely sent a
telex to Skippers, the local manning agency, claiming that De Gracia, et al.
were repatriated because the latter voluntarily pre-terminated their
contracts. Skippers United Pacific, Inc. and Skippers Maritime Services,
Inc. Ltd. vs. Nathaniel Doza, et al., G.R. No. 175558. February 8, 2012.
Dismissal; substantive and procedural due process. For a worker’s
dismissal to be considered valid, it must comply with both procedural and
substantive due process. The legality of the manner of dismissal
constitutes procedural due process, while the legality of the act of
dismissal constitutes substantive due process. Procedural due process in
dismissal cases consists of the twin requirements of notice and hearing.
The employer must furnish the employee with two written notices before
the termination of employment can be effected: (1) the first notice apprises
the employee of the particular acts or omissions for which his dismissal is
sought; and (2) the second notice informs the employee of the employer’s
decision to dismiss him. Before the issuance of the second notice, the
requirement of a hearing must be complied with by giving the worker an
opportunity to be heard. It is not necessary that an actual hearing be
conducted. Substantive due process, on the other hand, requires that
dismissal by the employer be made based on a just or authorized cause
under Articles 282 to 284 of the Labor Code. In this case, there was no
written notice furnished to De Gracia, et al. regarding the cause of their
dismissal. Cosmoship furnished a telex to Skippers, the local manning
 John Mark F. Sunga, 2012-0351

agency, claiming that De Gracia, et al. were repatriated because they

voluntarily pre-terminated their contracts. This telex was given credibility
and weight by the Labor Arbiter and NLRC in deciding that there was pre-
termination of the employment contract “akin to resignation” and no illegal
dismissal. However, as correctly ruled by the CA, the telex message is “a
biased and self-serving document that does not satisfy the requirement of
substantial evidence.” If, indeed, De Gracia, et al. voluntarily pre-
terminated their contracts, then De Gracia, et al. should have submitted
their written resignations. Skippers United Pacific, Inc. and Skippers
Maritime Services, Inc. Ltd. vs. Nathaniel Doza, et al., G.R. No.
175558. February 8, 2012.
Employee benefits; right to bonus; diminution. From a legal point of view, a
bonus is a gratuity or act of liberality of the giver which the recipient cannot
demand as a matter of right. The grant of a bonus is basically a
management prerogative which cannot be forced upon the employer who
may not be obliged to assume the onerous burden of granting bonuses.
However, a bonus becomes a demandable or enforceable obligation if the
additional compensation is granted without any conditions imposed for its
payment. In such case, the bonus is treated as part of the wage, salary or
compensation of the employee.  Particularly instructive is the ruling of the
Court in Metro Transit Organization, Inc. v. National Labor Relations
Commission (G.R. No. 116008, July 11, 1995) where the Court said:
Whether or not a bonus forms part of wages depends upon the
circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or
greater production or output, then it is part of the wage. But if it is paid only
if profits are realized or if a certain level of productivity is achieved, it
 John Mark F. Sunga, 2012-0351

cannot be considered part of the wage. Where it is not payable to all but
only to some employees and only when their labor becomes more efficient
or more productive, it is only an inducement for efficiency, a prize
therefore, not a part of the wage.
In this case, there is no dispute that Eastern Telecommunications Phils.,
Inc. and Eastern Telecoms Employees Union agreed on the inclusion of a
provision for the grant of 14th, 15th and 16th month bonuses in the 1998-
2001 CBA Side Agreement, as well as in their 2001-2004 CBA Side
Agreement, which contained no qualification for its payment. There were
no conditions specified in the CBA Side Agreements for the grant of the
bonus. There was nothing in the relevant provisions of the CBA which
made the grant of the bonus dependent on the company’s financial
standing or contingent upon the realization of profits. There was also no
statement that if the company derives no profits, no bonus will be given to
the employees. In fine, the payment of these bonuses was not related to
the profitability of business operations.  Consequently, the giving of the
subject bonuses cannot be peremptorily withdrawn by Eastern
Telecommunications Phils., Inc. without violating Article 100 of the Labor
Code, which prohibits the unilateral elimination or diminution of benefits by
the employer. The rule is settled that any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is
founded on the constitutional mandate to protect the rights of workers and
to promote their welfare and to afford labor full protection. Eastern
Telecommunications Philippines, Inc. vs. Eastern Telecoms Employees
Union, G.R. No. 185665, February 8, 2012.
Employee dismissal; constructive dismissal.  In constructive dismissal
cases, the employer has the burden of proving that the transfer of an
 John Mark F. Sunga, 2012-0351

employee is for just or valid ground, such as genuine business necessity. 

The employer must demonstrate that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee and that the transfer does not
involve a demotion in rank or a diminution in salary and other benefits.  “If
the employer fails to overcome this burden of proof, the employee’s
transfer is tantamount to unlawful constructive dismissal.” [Merck Sharp
and Dohme (Philippines) v. Robles, G.R. No. 176506, November 25,
2009] Petitioners failed to satisfy the burden of proving that the transfer
was based on just or valid ground. Petitioners’ bare assertions of imminent
threat from the respondents are mere accusations which are not
substantiated by any proof. The Supreme Court agreed with the Court of
Appeals in ruling that the transfer of respondents amounted to a
demotion. Julie’s Bakeshop and/or Edgar Reyes vs. Henry Arnaiz, et
al., G.R. No. 173882, February 15, 2012.
Employee dismissal; disease; dereliction of duties. With regard to disease
as a ground for termination, Article 284 of the Labor Code provides that an
employer may terminate the services of an employee who has been found
to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health, as well as to the health of
his co-employees. In order to validly terminate employment on this ground,
Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor
Code requires that: (i) the employee be suffering from a disease and his
continued employment is prohibited by law or prejudicial to his health or to
the health of his co-employees, and (ii) a certification by a competent
public health authority that the disease is of such nature or at such a stage
that it cannot be cured within a period of six (6) months even with proper
medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee
 John Mark F. Sunga, 2012-0351

to take a leave. The employer shall reinstate such employee to his former
position immediately upon the restoration of his normal health. In Triple
Eight Integrated Services, Inc. v. NLRC (G.R. No. 129584, December 3,
1998),the Court held that the requirement for a medical certificate under
Article 284 of the Labor Code cannot be dispensed with; otherwise, it
would sanction the unilateral and arbitrary determination by the employer
of the gravity or extent of the employee’s illness and, thus, defeat the
public policy on the protection of labor.
In this case, Ynson should have reported back to work or attended the
investigations conducted by Wuerth Philippines, Inc. immediately upon
being permitted to work by his doctors, knowing that his position remained
vacant for a considerable length of time. However, he did not even show
any sincere effort to return to work. Clearly, since there is no more
hindrance for him to return to work and attend the investigations set by
Wuerth Philippines, Inc., Ynson’s failure to do so was without any valid or
justifiable reason.  His conduct shows his indifference and utter disregard
of his work and his employer’s interest, and displays his clear, deliberate,
and gross dereliction of duties. The power to dismiss an employee is a
recognized prerogative inherent in the employer’s right to freely manage
and regulate his business.  The law, in protecting the rights of the laborers,
authorizes neither oppression nor self-destruction of the employer. The
worker’s right to security of tenure is not an absolute right, for the law
provides that he may be dismissed for cause. As a general rule,
employers are allowed wide latitude of discretion in terminating the
employment of managerial personnel.  The mere existence of a basis for
believing that such employee has breached the trust and confidence of his
employer would suffice for his dismissal. Needless to say, an irresponsible
employee like Ynson does not deserve a position in the workplace, and it
 John Mark F. Sunga, 2012-0351

is Wuerth Philippines, Inc.’s management prerogative to terminate his

employment. To be sure, an employer cannot be compelled to continue
with the employment of workers when continued employment will prove
inimical to the employer’s interest. Wuerth Philippines, Inc. vs. Rodante
Ynson, G.R. No. 175932, February 15, 2012.
Employee dismissal; due process. With respect to due process
requirement, the employer is bound to furnish the employee concerned
with two (2) written notices before termination of employment can be
legally effected. One is the notice apprising the employee of the particular
acts or omissions for which his dismissal is sought    and this may loosely
be considered as the proper charge.  The other is the notice informing the
employee of the management’s decision to sever his employment.  This
decision, however, must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer
the charge, thereby giving him ample opportunity to be heard and defend
himself with the assistance of his representative should he so desire.  The
requirement of notice, it has been stressed, is not a mere technicality but a
requirement of due process to which every employee is entitled. Here,
Palacio Del Gobernador Condominium Corporation complied with the
“two-notice rule” stated above. Sebastian F. Oasay, Jr. vs. Palacio del
Gobernador Condominium Corporation and Omar T. Cruz, G.R. No.
194306, February 6, 2012.
Employee dismissal; due process.  Cityland did not afford Galang the
required notice before he was dismissed. As the Court of Appeals noted,
the investigation conference Tupas called to look into the janitors’
complaints against Galang did not constitute the written notice required by
law as he had no clear idea what the charges against him were. Romeo A.
 John Mark F. Sunga, 2012-0351

Galang vs. Citiland Shaw Tower, Inc. and Virgilio Baldemor, G.R. No.
173291, February 8, 2012.
Employee dismissal; grounds. The validity of an employee’s dismissal
from service hinges on the satisfaction of the two substantive
requirements for a lawful termination.  These are, first, whether the
employee was accorded due process the basic components of which are
the opportunity to be heard and to defend himself.  This is the procedural
aspect.  And second, whether the dismissal is for any of the causes
provided in the Labor Code of the Philippines.  This constitutes the
substantive aspect. On the substantive aspect, the Supreme Court found
that Palacio Del Gobernador Condominium Corporation’s termination of
the Oasay’s employment was for a cause provided under the Labor Code.
In terminating Oasay’s employment, Palacio Del Gobernador
Condominium Corporation invoked loss of trust and confidence. The first
requisite for dismissal on the ground of loss of trust and confidence is that
the employee concerned must be holding a position of trust and
confidence.  Here, it is indubitable that Oasay holds a position of trust and
confidence. The position of Building Administrator, being managerial in
nature, necessarily enjoys the trust and confidence of the employer. The
second requisite is that there must be an act that would justify the loss of
trust and confidence. Loss of trust and confidence, to be a valid cause for
dismissal, must be based on a willful breach of trust and founded on
clearly established facts. Palacio Del Gobernador Condominium
Corporation had established, by clear and convincing evidence, Oasay’s
acts which justified its loss of trust and confidence on the
former. Sebastian F. Oasay, Jr. vs. Palacio del Gobernador Condominium
Corporation and Omar T. Cruz, G.R. No. 194306, February 6, 2012.
 John Mark F. Sunga, 2012-0351

Employee dismissal; just cause.  The Supreme Court found that Galang
had become unfit to continue his employment. The evidence supports the
view that he continued to exhibit undesirable traits as an employee and as
a person, in relation to both his co-workers and his superiors, particularly
Tupas, her immediate supervisor. Quoting the Court of Appeals’ decision
with approval, the Supreme Court held: “Without offering any possible ill
motive that might have impelled [the respondents] to summarily dismiss
[Galang], who admitted having been absorbed by the former as janitor
upon the termination of his contract with his agency, this Court is more
inclined to give credence to the evidence pointing to the conclusion that
[Galang’s] employment was actually severed for a just cause.” Romeo A.
Galang vs. Citiland Shaw Tower, Inc. and Virgilio Baldemor, G.R. No.
173291, February 8, 2012.
 Employer; right to discipline employee. In Sagales v. Rustan’s
Commercial Corporation (G.R. No. 166554, November 27, 2008), the
Supreme Court ruled:
Truly, while the employer has the inherent right to discipline, including that
of dismissing its employees, this prerogative is subject to the regulation by
the State in the exercise of its police power.
In this regard, it is a hornbook doctrine that infractions committed by an
employee should merit only the corresponding penalty demanded by
the circumstance. The penalty must be commensurate with the act,
conduct or omission imputed to the employee and must be imposed
in connection with the disciplinary authority of the
employer. (Emphasis in the original.)
In the case at bar, the penalty handed out by the petitioners was the
ultimate penalty of dismissal.  There was no warning or admonition for
respondent’s violation of team rules, only outright termination of his
 John Mark F. Sunga, 2012-0351

services for an act which could have been punished appropriately with a
severe reprimand or suspension. Negros Slashers, Inc., Rodolfo C.
Alvarez and Vicente Tan vs. Alvin L. Teng, G.R. No. 187122, February
22, 2012.
Employer-employee relationship; onus probandi. The onus probandi falls
on petitioner to establish or substantiate such claim by the requisite
quantum of evidence. The issue of Javier’s alleged illegal dismissal is
anchored on the existence of an employer-employee relationship between
him and Fly Ace. As the records bear out, the Labor Arbiter and the Court
of Appeals found Javier’s claim of employment with Fly Ace as wanting
and deficient. Although Section 10, Rule VII of the New Rules of
Procedure of the NLRC allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean a complete
dispensation of proof.  Labor officials are enjoined to use reasonable
means to ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they provided a
license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, “when confronted
with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their decision must
be supported by substantial evidence.” [Salvador Lacorte v. Hon. Amado
G. Inciong, 248 Phil. 232 (1988)]  Accordingly, Javier needs to show by
substantial evidence that he was indeed an employee of the company
against which he claims illegal dismissal. Bitoy Javier (Danilo P. Javier)
vs. Fly Ace Corporation/Flordelyn Castillo, G.R. No. 192558, February 15,
2012.
 John Mark F. Sunga, 2012-0351

Employer-employee relationship; test. To determine the existence of an

employer-employee relationship, the following are considered: (1) the
selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power to control the employee’s
conduct.  Of these elements, the most important criterion is whether the
employer controls or has reserved the right to control the employee not
only as to the result of the work but also as to the means and methods by
which the result is to be accomplished. In this case, Javier was not able to
persuade the Court that the above elements exist in his case.  He could
not submit competent proof that Fly Ace engaged his services as a regular
employee; that Fly Ace paid his wages as an employee, or that Fly Ace
could dictate what his conduct should be while at work. In other words,
Javier’s allegations did not establish that his relationship with Fly Ace had
the attributes of an employer-employee relationship on the basis of the
above-mentioned four-fold test. Worse, Javier was not able to refute Fly
Ace’s assertion that it had an agreement with a hauling company to
undertake the delivery of its goods.  It was also baffling to realize that
Javier did not dispute Fly Ace’s denial of his services’ exclusivity to the
company. In short, all that Javier laid down were bare allegations without
corroborative proof. Bitoy Javier (Danilo P. Javier) vs. Fly Ace
Corporation/Flordelyn Castillo, G.R. No. 192558, February 15, 2012.
Employment contract; stages. Contracts undergo three distinct stages, to
wit: negotiation; perfection or birth; and consummation. Negotiation begins
from the time the prospective contracting parties manifest their interest in
the contract and ends at the moment of agreement of the parties.
Perfection or birth of the contract takes place when the parties agree upon
the essential elements of the contract. Consummation occurs when the
parties fulfill or perform the terms agreed upon in the contract, culminating
 John Mark F. Sunga, 2012-0351

in the extinguishment thereof. Under Article 1315 of the Civil Code, a

contract is perfected by mere consent and from that moment the parties
are bound not only to the fulfillment of what has been expressly stipulated
but also to all the consequences which, according to their nature, may be
in keeping with good faith, usage and law. An employment contract, like
any other contract, is perfected at the moment (1) the parties come to
agree upon its terms; and (2) concur in the essential elements thereof: (a)
consent of the contracting parties, (b) object certain which is the subject
matter of the contract and (c) cause of the obligation. In the present case,
C.F. Sharp, on behalf of its principal, International Shipping Management,
Inc., hired Agustin and Minimo as Sandblaster/Painter for a 3-month
contract, with a basic monthly salary of US$450.00.  Thus, the object of
the contract is the service to be rendered by Agustin and Minimo on board
the vessel while the cause of the contract is the monthly compensation
they expect to receive.  These terms were embodied in the Contract of
Employment which was executed by the parties. The agreement upon the
terms of the contract was manifested by the consent freely given by both
parties through their signatures in the contract.  Neither parties disavow
the consent they both voluntarily gave.  Thus, there is a perfected contract
of employment. C.F. Sharp & Co. Inc. and John J. Rocha vs. Pioneer
Insurance and Surety Corporation, et al.,G.R. No. 179469, February 15,
2012.
Employment relationship; commencement.  The commencement of an
employer-employee relationship must be treated separately from the
perfection of an employment contract.  Santiago v. CF Sharp Crew
Management, Inc., (G.R. No. 162419, 10 July 2007) is an instructive
precedent on this point.  In that case, the Supreme Court made a
 John Mark F. Sunga, 2012-0351

distinction between the perfection of the employment contract and the

commencement of the employer-employee relationship, thus:
The perfection of the contract, which in this case coincided with the date
of execution thereof, occurred when petitioner and respondent agreed on
the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as
earlier discussed, would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the start of any
employer-employee relationship, contemporaneous with the perfection of
the employment contract was the birth of certain rights and obligations,
the breach of which may give rise to a cause of action against the erring
party.
Despite the fact that the employer-employee relationship has not
commenced due to the failure to deploy Agustin and Minimo in this case,
Agustin and Minimo are entitled to rights arising from the perfected
Contract of Employment, such as the right to demand performance by C.F.
Sharp of its obligation under the contract. C.F. Sharp & Co. Inc. and John
J. Rocha vs. Pioneer Insurance and Surety Corporation, et al., G.R. No.
179469, February 15, 2012.
Forum shopping; elements; res judicata. For forum shopping to exist, it is
necessary that (a) there be identity of parties or at least such parties that
represent the same interests in both actions; (b) there be identity of rights
asserted and relief prayed for, the relief being founded on the same facts;
and (c) the identity of the two preceding particulars is such that any
judgment rendered in one action will, regardless of which party is
successful, amount to res judicata in the other action. Petitioners are
correct as to the first two requisites of forum shopping. First, there is
identity of parties involved: Negros Slashers Inc. and respondent Teng. 
 John Mark F. Sunga, 2012-0351

Second, there is identity of rights asserted i.e., the right of management to

terminate employment and the right of an employee against illegal
termination.  However, the third requisite of forum shopping is missing in
this case.  Any judgment or ruling of the Office of the Commissioner of the
Metropolitan Basketball Association will not amount to res judicata. Res
judicata is defined in jurisprudence as to have four basic elements: (1) the
judgment sought to bar the new action must be final; (2) the decision must
have been rendered by a court having jurisdiction over the subject matter
and the parties; (3) the disposition of the case must be a judgment on the
merits; and (4) there must be as between the first and second action,
identity of parties, subject matter, and causes of action. Here, although
contractually authorized to settle disputes, the Office of the Commissioner
of the Metropolitan Basketball Association is not a court of competent
jurisdiction as contemplated by law with respect to the application of the
doctrine of res judicata.  At best, the Office of the Commissioner of the
Metropolitan Basketball Association is a private mediator or go-between
as agreed upon by team management and a player in the Metropolitan
Basketball Association Player’s Contract of Employment. Any judgment
that the Office of the Commissioner of the Metropolitan Basketball
Association may render will not result in a bar for seeking redress in other
legal venues.  Hence, respondent’s action of filing the same complaint in
the Regional Arbitration Branch of the NLRC does not constitute forum
shopping. Negros Slashers, Inc., Rodolfo C. Alvarez and Vicente Tan vs.
Alvin L. Teng, G.R. No. 187122, February 22, 2012.
Jurisdiction; NLRC. It is clear from the NLRC Rules of Procedure that
appeals must be verified and certified against forum-shopping by the
parties-in-interest themselves. The purpose of verification is to secure an
assurance that the allegations in the pleading are true and correct and
 John Mark F. Sunga, 2012-0351

have been filed in good faith. In the case at bar, the parties-in-interest are
petitioner Salenga, as the employee, and respondent Clark Development
Corporation as the employer. A corporation can only exercise its powers
and transact its business through its board of directors and through its
officers and agents when authorized by a board resolution or its bylaws.
The power of a corporation to sue and be sued is exercised by the board
of directors. The physical acts of the corporation, like the signing of
documents, can be performed only by natural persons duly authorized for
the purpose by corporate bylaws or by a specific act of the board. Absent
the requisite board resolution, neither Timbol-Roman nor Atty. Mallari, who
signed the Memorandum of Appeal and Joint Affidavit of Declaration
allegedly on behalf of respondent corporation, may be considered as the
“appellant” and “employer” referred to by the NLRC Rules of Procedure.
As such, the NLRC had no jurisdiction to entertain the appeal. Antonio B.
Salenga, et al. vs. Court of Appeals, et al., G.R. No. 174941, February 1,
2012.
Labor; effect if procedural due process not followed but with a valid cause
for termination. It is required that the employer furnish the employee with
two written notices:  (1) a written notice served on the employee specifying
the ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side; and (2) a written
notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to
justify his termination. The twin requirements of notice and hearing
constitute the elements of due process in cases of employee’s dismissal. 
The requirement of notice is intended to inform the employee concerned of
the employer’s intent to dismiss and the reason for the proposed
dismissal. Upon the other hand, the requirement of hearing affords the
 John Mark F. Sunga, 2012-0351

employee an opportunity to answer his employer’s charges against him

and accordingly, to defend himself therefrom before dismissal is effected. 
Obviously, the second written notice, as indispensable as the first, is
intended to ensure the observance of due process. In this case, there was
only one written notice which required respondents to explain within five
(5) days why they should not be dismissed from the service.   Alcovendas
was the only one who signed the receipt of the notice.  The others, as
claimed by Lynvil, refused to sign.  The other employees argue that no
notice was given to them.   Despite the inconsistencies, what is clear is
that no final written notice or notices of termination were sent to the
employees. Due to the failure of Lynvil to follow the procedural
requirement of two-notice rule, nominal damages in the amount
of P50,000 were granted to Ariola, et al. despite their dismissal for just
cause. Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R.
No. 181974, February 1, 2012.
Labor; liability of officers if termination is attended with bad faith. In labor
cases, the corporate directors and officers are solidarily liable with the
corporation for the termination of employment of employees done with
malice or in bad faith. Indeed, moral damages are recoverable when the
dismissal of an employee is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good morals,
good customs or public policy. The term “bad faith” contemplates a “state
of mind affirmatively operating with furtive design or with some motive of
self-interest or will or for ulterior purpose.” The Supreme Court agreed with
the ruling of both the NLRC and the Court of Appeals when they
pronounced that there was no evidence on record that indicates
commission of bad faith on the part of De Borja, the general manager of
Lynvil, who was tasked with the supervision of the employees and the
 John Mark F. Sunga, 2012-0351

operation of the business.  There is no proof that he imposed on Ariola, et

al. the “por viaje” provision for purpose of effecting their summary
dismissal. Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R.
No. 181974, February 1, 2012.
Labor; nature of employment; security of tenure. In the context of these
facts — (1) Ariola, et al. were doing tasks necessary to Lynvil’s fishing
business with positions ranging from captain of the vessel to bodegero; (2)
after the end of a trip, they will again be hired for another trip with new
contracts; and (3) this arrangement continued for more than ten years –
the Court believed that Lynvil intended to go around the security of tenure
of Ariola, et al. as regular employees.  The Court held that by the express
provisions of the second paragraph of Article 280 which cover casual
employment, Ariola, et al. had become regular employees of Lynvil. Lynvil
Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No.
181974, February 1, 2012.
Labor; procedural and substantive due process; grounds for valid
termination; breach of trust. Just cause is required for a valid dismissal. 
The Labor Code provides that an employer may terminate an employment
based on fraud or willful breach of the trust reposed on the employee. 
Such breach is considered willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. It must also be
based on substantial evidence and not on the employer’s whims or
caprices or suspicions otherwise, the employee would eternally remain at
the mercy of the employer. 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. And, in order to constitute a just
cause for dismissal, the act complained of must be work-related and
 John Mark F. Sunga, 2012-0351

shows that the employee concerned is unfit to continue working for the
employer. In addition, 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, trust and confidence or that the employee
concerned is entrusted with confidence in delicate matters, such as the
handling or care and protection of the property and assets of the
employer. The betrayal of this trust is the essence of the offense for which
an employee is penalized. The Supreme Court found that breach of trust is
present in this case, when Ariola (the captain), Alcovendas (Chief Mate),
Calinao (Chief Engineer), Nubla (cook), Bañez (oiler), and Sebullen
(bodegero) conspired with one another and stole “pampano” and
“tangigue” fish and delivered them to another vessel, to the prejudice of
Lynvil. Lynvil Fishing Enterprises, Inc. vs. Andres G. Ariola, et al.,G.R. No.
181974, February 1, 2012.
Labor; public prosecutor’s decision not binding on the labor tribunal. The
Supreme Court has held in Nicolas v. National Labor Relations
Commission [327 Phil. 883, 886-887 (1996)] that a criminal conviction is
not necessary to find just cause for employment termination. Otherwise
stated, an employee’s acquittal in a criminal case, especially one that is
grounded on the existence of reasonable doubt, will not preclude a
determination in a labor case that he is guilty of acts inimical to the
employer’s interests. In the reverse, the finding of probable cause is not
followed by automatic adoption of such finding by the labor tribunals. In
other words, whichever way the public prosecutor disposes of a complaint,
the finding does not bind the labor tribunal. Lynvil contends that the filing
of a criminal case before the Office of the Prosecutor is sufficient basis for
a valid termination of employment based on serious misconduct and/or
loss of trust and confidence. The Supreme Court held that Lynvil cannot
 John Mark F. Sunga, 2012-0351

argue that since the Office of the Prosecutor found probable cause for
theft, the Labor Arbiter must follow the finding as a valid reason for the
termination of respondents’ employment.  The proof required for purposes
that differ from one and the other are likewise different. Lynvil Fishing
Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No. 181974, February
1, 2012.
Labor; regular employee; fixed-contract agreement, requisites for validity. 
Prior Supreme Court decisions have laid two conditions for the validity of a
fixed-contract agreement between the employer and employee: First, the
fixed period of employment was knowingly and voluntarily agreed upon by
the parties without any force, duress, or improper pressure being brought
to bear upon the employee and absent any other circumstances vitiating
his consent; or Second, it satisfactorily appears that the employer and the
employee dealt with each other on more or less equal terms with no moral
dominance exercised by the former or the latter. Lynvil contends that
Ariola, et al. were employed under a fixed-term contract which expired at
the end of the voyage. Contrarily, Ariola, et al. contend that they became
regular employees by reason of their continuous hiring and performance of
tasks necessary and desirable in the usual trade and business of Lynvil.
Textually, the provision in the contract between Lynvil and Ariola, et al.
that: “NA ako ay sumasang-ayon na maglingkod at gumawa ng mga
gawain sang-ayon sa patakarang “por viaje” na magmumula sa pagalis sa
Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa
Navotas, Metro Manila” is for a fixed period of employment. In the context,
however, of the facts that:  (1) Ariola, et al. were doing tasks necessarily to
Lynvil’s fishing business with positions ranging from captain of the vessel
to bodegero; (2) after the end of a trip, they will again be hired for another
trip with new contracts; and (3) this arrangement continued for more than
 John Mark F. Sunga, 2012-0351

ten years, the clear intention is to go around the security of tenure of

Ariola, et al. as regular employees.  As such, the Supreme Court found
that Ariola, et al. are regular employees. Lynvil Fishing Enterprises, Inc.
vs. Andres G. Ariola, et al., G.R. No. 181974, February 1, 2012.
Labor Code; maximum award of attorney’s fees in cases of recovery of
wages. Article 111 of the Labor Code provides for a maximum award of
attorney’s fees in cases of recovery of wages:
a.  In cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages
recovered.
b.  It shall be unlawful for any person to demand or accept, in any judicial
or administrative proceedings for the recovery of wages, attorney’s fees
which exceed ten percent of the amount of wages recovered.
Since De Gracia, et al. had to secure the services of the lawyer to recover
their unpaid salaries and protect their interest, attorney’s fees in the
amount of ten percent (10%) of the total claims was imposed. Skippers
United Pacific, Inc. and Skippers Maritime Services, Inc. Ltd. vs. Nathaniel
Doza, et al.,G.R. No. 175558. February 8, 2012.
Labor contracting; elements. There is labor-only contracting where: (a) the
person supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises,
among others; and (b) the workers recruited and placed by such person
are performing activities which are directly related to the principal business
of the employer. In the present case, the Supreme Court found that both
the capitalization requirement and the power of control on the part of
Requiño are wanting. Generally, the presumption is that the contractor is a
labor-only contractor unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools and the like. In
 John Mark F. Sunga, 2012-0351

the present case, though Garden of Memories is not the contractor, it has
the burden of proving that Requiño has sufficient capital or investment
since it is claiming the supposed status of Requiño as independent
contractor. Garden of Memories, however, failed to adduce evidence
purporting to show that Requiño had sufficient capitalization. Neither did it
show that she invested in the form of tools, equipment, machineries, work
premises and other materials which are necessary in the completion of the
service contract.Garden of Memories Park and Life Plan, Inc., et al. vs.
NLRC, 2nd Div., et al., G.R. No. 160278, February 8, 2012.
Migrant Workers; RA No. 8042; money claims in cases of unjust
termination. Section 10 of Republic Act No. 8042 (Migrant Workers Act)
provides for money claims in cases of unjust termination of employment
contracts:
In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be
entitled to the full reimbursement of his placement fee with interest of
twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less.
The Migrant Workers Act provides that salaries for the unexpired portion of
the employment contract or three (3) months for every year of the
unexpired term, whichever is less, shall be awarded to the overseas
Filipino worker, in cases of illegal dismissal. However, in 24 March
2009,Serrano v. Gallant Maritime Services and Marlow Navigation Co.
Inc. (G.R. No. 167614), the Court, in an En Banc Decision, declared
unconstitutional the clause “or for three months for every year of the
unexpired term, whichever is less” and awarded the entire unexpired
portion of the employment contract to the overseas Filipino worker. On 8
 John Mark F. Sunga, 2012-0351

March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022)
amended Section 10 of the Migrant Workers Act, and once again
reiterated the provision of awarding the unexpired portion of the employent
contract or three (3) months for every year of the unexpired term,
whichever is less. Nevertheless, since the termination occurred on
January 1999 before the passage of the amendatory RA 10022, the
Supreme Court applied RA 8042, without touching on the constitutionality
of Section 7 of RA 10022. The declaration in March 2009 of the
unconstitutionality of the clause “or for three months for every year of the
unexpired term, whichever is less” in RA 8042 shall be given retroactive
effect to the termination that occurred in January 1999 because an
unconstitutional clause in the law confers no rights, imposes no duties and
affords no protection. The unconstitutional provision is inoperative, as if it
was not passed into law at all. Skippers United Pacific, Inc. and Skippers
Maritime Services, Inc. Ltd. vs. Nathaniel Doza, et al.,G.R. No.
175558. February 8, 2012.
NLRC; contempt powers.  Under Article 218 the Labor Code, the NLRC
(and the labor arbiters) may hold any offending party in contempt, directly
or indirectly, and impose appropriate penalties in accordance with law.
The penalty for direct contempt consists of either imprisonment or fine, the
degree or amount depends on whether the contempt is against the
Commission or the labor arbiter. The Labor Code, however, requires the
labor arbiter or the Commission to deal with indirect contempt in the
manner prescribed under Rule 71 of the Rules of Court. Rule 71 of the
Rules of Court does not require the labor arbiter or the NLRC to initiate
indirect contempt proceedings before the trial court.  This mode is to be
observed only when there is no law granting them contempt powers.  As is
clear under Article 218(d) of the Labor Code, the labor arbiter or the
 John Mark F. Sunga, 2012-0351

Commission is empowered or has jurisdiction to hold the offending party

or parties in direct or indirect contempt. Robosa, et al., therefore, have not
improperly brought the indirect contempt charges against the respondents
before the NLRC. Federico S. Robosa, et al. vs. National Labor Relations
Commission (First Division), et al., G.R. No. 176085, February 8, 2012.
NLRC; factual findings.  It is a well-entrenched rule that findings of facts of
the NLRC, affirming those of the Labor Arbiter, are accorded respect and
due consideration when supported by substantial evidence. The Supreme
Court, however, found that the doctrine of great respect and finality has no
application to the case at bar.  The Labor Arbiter dismissed Arnaiz, et al.’s
complaints on mere technicality.  The NLRC, upon appeal, then came up
with three divergent rulings.  At first, it remanded the case to the Labor
Arbiter.  However, in a subsequent resolution, it decided to resolve the
case on the merits by ruling that Arnaiz, et al. were constructively
dismissed.  But later on, it again reversed itself in its third and final
resolution of the case and ruled in favor of Julie’s bakeshop. Therefore,
contrary to Reyes’s claim, the NLRC did not, on any occasion, affirm any
factual findings of the Labor Arbiter. The Court of Appeals is thus correct
in reviewing the entire records of the case to determine which findings of
the NLRC is sound and in accordance with law.  Besides, the Court of
Appeals may still resolve factual issues by express mandate of the law
despite the respect given to administrative findings of fact. Julie’s
Bakeshop and/or Edgar Reyes vs. Henry Arnaiz, et al., G.R. No. 173882,
February 15, 2012.
Probationary employee; valid cause for dismissal but without procedural
due process; employee entitled to nominal damages. Section 2, Rule I,
Book VI of the Labor Code’s Implementing Rules and Regulations
provides: “If the termination is brought about by the completion of a
 John Mark F. Sunga, 2012-0351

contract or phase thereof, or by failure of an employee to meet the

standards of the employer in the case of probationary employment, it shall
be sufficient that a written notice is served the employee within a
reasonable time from the effective date of termination.” Dalangin was hired
by Canadian Opportunities as Immigration and Legal Manager, subject to
a probationary period of six months. One month after hiring Dalangin, the
company terminated his employment, declaring him “unfit” and
“unqualified” to continue as Immigration and Legal Manager, for reasons
which included obstinacy and utter disregard of company policies.
Propensity to take prolonged and extended lunch breaks, shows no
interest in familiarizing oneself with the policies and objectives, lack of
concern for the company’s interest despite having just been employed in
the company (Declined to attend company sponsored activities, seminars
intended to familiarize company employees with Management objectives
and enhancement of company interest and objectives), lack of enthusiasm
toward work, and lack of interest in fostering relationship with his co-
employees. The company contends that it complied with the rule on
procedural due process when it asked Dalangin, through a Memorandum,
to explain why he could not attend the seminar. When he failed to submit
his explanation, the company served him a notice the following day
terminating his employment. According to the Supreme Court, the notice
to Dalangin was not served within a reasonable time from the effective
date of his termination as required by the rules since he was dismissed on
the very day the notice was given to him. However, because of the
existence of a valid cause for termination, the Supreme Court did not
invalidate his dismissal but penalized the company for its non-compliance
with the notice requirement, and ordered the company to pay an
indemnity, in the form of nominal damages amounting
 John Mark F. Sunga, 2012-0351

to P10,000. Canadian Opportunities Unlimited, Inc. vs. Bart Q. Dalangin,

Jr., G.R. No. 172223, February 6, 2012.
Probationary employee; valid dismissal even before 6 months. The
essence of a probationary period of employment fundamentally lies in the
purpose or objective of both the employer and the employee during the
period. While the employer observes the fitness, propriety and efficiency of
a probationer to ascertain whether he is qualified for permanent
employment, the latter seeks to prove to the former that he has the
qualifications to meet the reasonable standards for permanent
employment. The “trial period” or the length of time the probationary
employee remains on probation depends on the parties’ agreement, but it
shall not exceed six (6) months under Article 281 of the Labor Code. The
Supreme Court found substantial evidence indicating that the company
was justified in terminating Dalangin’s probationary employment. Dalangin
admitted in compulsory arbitration that the proximate cause for his
dismissal was his refusal to attend the company’s “Values Formation
Seminar” scheduled for October 27, 2001, a Saturday. He refused to
attend the seminar after he learned that it had no relation to his duties, as
he claimed, and that he had to leave at 2:00 p.m. because he wanted to
be with his family in the province.  When the Chief Operations Officer,
insisted that he attend the seminar to encourage his co-employees to
attend, he stood pat on not attending, arguing that marked differences
exist between their positions and duties, and insinuating that he did not
want to join the other employees. He also questioned the scheduled 2:00
p.m. seminars on Saturdays as they were not supposed to be doing a
company activity beyond 2:00 p.m. He considers 2:00 p.m. as the close of
working hours on Saturdays; thus, holding them beyond 2:00 p.m. would
be in violation of the law. This incident reveals Dalangin’s lack of interest
 John Mark F. Sunga, 2012-0351

in establishing a good working relationship with his co-employees,

especially the rank and file; he did not want to join them because of his
view that the seminar was not relevant to his position and duties. It also
betrays his arrogant and condescending attitude towards his co-
employees, and a lack of support for the company objective. Dalangin also
exhibited negative working habits, particularly with respect to the one hour
lunch break policy of the company and the observance of the company’s
working hours. Dalangin would take prolonged lunch breaks or would go
out of the office – without leave of the company – and call the personnel
manager later only to say that he would be unable to return to the office
because of some personal matters he needs to attend to. Canadian
Opportunities Unlimited, Inc. vs. Bart Q. Dalangin, Jr., G.R. No.
172223, February 6, 2012.
Procedural rules; liberal application. Ordinarily, rules of procedure are
strictly enforced by courts in order to impart stability in the legal system. 
However, in not a few instances, the Supreme Court has relaxed the rigid
application of the rules of procedure to afford the parties the opportunity to
fully ventilate their cases on the merits.   This is in line with the time
honored principle that cases should be decided only after giving all the
parties the chance to argue their causes and defenses.  In that way, the
ends of justice would be better served.   For indeed, the general objective
of procedure is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedure is not to hinder
but to promote the administration of justice. In Ong Lim Sing, Jr. v. FEB
Leasing and Finance Corporation (G.R. No. 168115, June 8, 2007), the
Supreme Court ruled:
Courts have the prerogative to relax procedural rules of even the most
mandatory character, mindful of the duty to reconcile both the need to
 John Mark F. Sunga, 2012-0351

speedily put an end to litigation and the parties’ right to due process. In
numerous cases, this Court has allowed liberal construction of the rules
when to do so would serve the demands of substantial justice and equity.
xxx
Indeed the prevailing trend is to accord party litigants the amplest
opportunity for the proper and just determination of their causes, free from
the constraints of needless technicalities.  In this case, besides the fact
that a denial of the recourse to the Court of Appeals would serve more to
perpetuate an injustice and violation of Teng’s rights under our labor laws,
the Supreme Court found that as correctly held by the Court of Appeals,
no intent to delay the administration of justice could be attributed to Teng. 
The Court of Appeals therefore did not commit reversible error in excusing
Teng’s one-day delay in filing his motion for reconsideration and in giving
due course to his petition for certiorari. Negros Slashers, Inc., Rodolfo C.
Alvarez and Vicente Tan vs. Alvin L. Teng, G.R. No. 187122, February
22, 2012.
Reinstatement; backwages. Employees who are illegally dismissed are
entitled to full backwages, inclusive of allowances and other benefits or
their monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their actual
reinstatement. But if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the finality
of the decision. Thus, when there is an order of reinstatement, the
computation of backwages shall be reckoned from the time of illegal
dismissal up to the time that the employee is actually reinstated to his
former position. Pursuant to the order of reinstatement rendered by the
Labor Arbiter, the Bank of Lubao sent Manabat a letter requiring him to
report back to work on May 4, 2007. Notwithstanding the said letter,
 John Mark F. Sunga, 2012-0351

Manabat opted not to report for work. Thus, it is but fair that the
backwages to be awarded to Manabat should be computed from the time
that he was illegally dismissed until the time when he was required to
report for work, i.e. from September 1, 2005 until May 4, 2007. Bank of
Lubao, Inc. vs. Rommel J. Manabat, et al., G.R. No. 188722, February 1,
2012.
Reinstatement; doctrine of strained relations; when applicable. Under the
law and prevailing jurisprudence, an illegally dismissed employee is
entitled to reinstatement as a matter of right. However, if reinstatement
would only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and the employee
has been unduly strained by reason of their irreconcilable
differences, particularly where the illegally dismissed employee held a
managerial or key position in the company, it would be more prudent to
order payment of separation pay instead of reinstatement.  Under
the doctrine of strained relations, the payment of separation pay is
considered an acceptable alternative to reinstatement when the latter
option is no longer desirable or viable. On one hand, such payment
liberates the employee from what could be a highly oppressive work
environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no
longer trust. In such cases, it should be proved that the employee
concerned occupies a position where he enjoys the trust and confidence
of his employer; and that it is likely that if reinstated, an atmosphere of
antipathy and antagonism may be generated as to adversely affect the
efficiency and productivity of the employee concerned. In the present
case, the Supreme Court found that the relations between the parties had
been already strained thereby justifying the grant of separation pay in lieu
 John Mark F. Sunga, 2012-0351

of reinstatement in favor of Manabat. Manabat’s reinstatement to his

former position would only serve to intensify the atmosphere of antipathy
and antagonism between the parties. Undoubtedly, Bank of Lubao’s filing
of various criminal complaints against Manabat for qualified theft and the
subsequent filing by the latter of the complaint for illegal dismissal against
the former, taken together with the pendency of the instant case for more
than six years, had caused strained relations between the parties.
Considering that Manabat’s former position as bank encoder involves the
handling of accounts of the depositors of the Bank of Lubao, it would not
be equitable on the part of the Bank of Lubao to be ordered to maintain
the former in its employ since it may only inspire vindictiveness on the part
of Manabat. Also, the refusal of Manabat to return to work is in itself an
indication of the existence of strained relations between him and the
petitioner.Bank of Lubao, Inc. vs. Rommel J. Manabat, et al., G.R. No.
188722, February 1, 2012.
Seafarers; employment contract; perfection stage vs. commencement
stage. An employment contract, like any other contract, is perfected at the
moment (1) the parties come to agree upon its terms; and (2) concur in the
essential elements thereof: (a) consent of the contracting parties, (b)
object certain which is the subject matter of the contract, and (c) cause of
the obligation. The object of the contract was the rendition of service by
Fantonial on board the vessel for which service he would be paid the
salary agreed upon. In this case, the employment contract was perfected
on January 15, 2000 when it was signed by the parties who entered into
the contract in behalf of their principal. However, the employment
relationship never commenced since Fantonial was not allowed to leave
on January 17, 2000 and go on board the vessel M/V AUK in Germany on
the ground that he was not yet declared fit to work on the day of his
 John Mark F. Sunga, 2012-0351

scheduled departure. But, even if no employer-employee relationship

commenced, there was, contemporaneous with the perfection of the
employment contract, the birth of certain rights and obligations, the breach
of which may give rise to a cause of action against the erring party. Bright
Maritime Corporation (BMC) / Desiree P. Tenorio vs. Ricardo B.
Fantonial, G.R. No. 165935, February 8, 2012.
Dismissal; constructive dismissal. Constructive dismissal exists where
there is cessation of work because continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion in
rank and a diminution in pay. Constructive dismissal is a dismissal in
disguise or an act amounting to dismissal but made to appear as if it were
not. In constructive dismissal cases, the employer is, concededly, charged
with the burden of proving that its conduct and action or the transfer of an
employee are for valid and legitimate grounds such as genuine business
necessity. In the instant case, the overt act relied upon by petitioner is not
only a doubtful occurrence but is, if it did transpire, even consistent with
the dismissal from employment posited by the respondent. The factual
appraisal of the Court of Appeals is correct. Petitioner was displeased
after incurring expenses for respondent’s medical check-up and, it is
credible that, thereafter, respondent was prevented entry into the work
premises. This is tantamount to constructive dismissal. The Supreme
Court agreed with the Court of Appeals that the incredibility of petitioner’s
submission about abandonment of work renders credible the position of
respondent that she was prevented from entering the property. This was
even corroborated by the affidavits of Siarot and Mendoza which were
made part of the records of this case. Ma. Melissa A. Galang vs. Julia
Malasuqui, G.R. No. 174173. March 7, 2012.
 John Mark F. Sunga, 2012-0351

Dismissal; loss of trust and confidence. The rule is long and well settled
that, in illegal dismissal cases like the one at bench, the burden of proof is
upon the employer to show that the employee’s termination from service is
for a just and valid cause. The employer’s case succeeds or fails on the
strength of its evidence and not on the weakness of that adduced by the
employee, in keeping with the principle that the scales of justice should be
tilted in favor of the latter in case of doubt in the evidence presented by
them. Often described as more than a mere scintilla, the quantum of proof
is substantial evidence which is understood as such relevant evidence as
a reasonable mind might accept as adequate to support a conclusion,
even if other equally reasonable minds might conceivably opine otherwise.
Failure of the employer to discharge the foregoing onus would mean that
the dismissal is not justified and therefore illegal.
In  the case at bar, the Supreme Court agreed with the petitioners that
mere substantial evidence and not proof beyond reasonable doubt is
required to justify the dismissal from service of an employee charged with
theft of company property. However, the Court found no error in the CA’s
findings that the petitioners had not adequately proven by substantial
evidence that Arlene and Joseph indeed participated or cooperated in the
commission of theft relative to the six missing intensifying screens so as to
justify the latter’s termination from employment on the ground of loss of
trust and confidence. Blue Sky Trading Company, Inc. et al. vs. Arlene P.
Blas and Joseph D. Silvano,G.R. No. 190559. March 7, 2012.
Dismissal; probationary employees. Gala insists that he cannot be
sanctioned for the theft of company property on May 25, 2006. He
maintains that he had no direct participation in the incident and that he
was not aware that an illegal activity was going on as he was at some
distance from the trucks when the alleged theft was being committed. He
 John Mark F. Sunga, 2012-0351

adds that he did not call the attention of the foremen because he was a
mere lineman and he was focused on what he was doing at the time. He
argues that in any event, his mere presence in the area was not enough to
make him a conspirator in the commission of the pilferage.
Gala misses the point. He forgets that as a probationary employee, his
overall job performance and his behavior were being monitored and
measured in accordance with the standards (i.e., the terms and
conditions) laid down in his probationary employment agreement. Under
paragraph 8 of the agreement, he was subject to strict compliance with,
and non-violation of the Company Code on Employee Discipline, Safety
Code, rules and regulations and existing policies. Par. 10 required him to
observe at all times the highest degree of transparency, selflessness and
integrity in the performance of his duties and responsibilities, free from any
form of conflict or contradicting with his own personal interest. Manila
Electric Company vs. Jan Carlo Gala, G.R. No. 191288. March 7, 2012.
Dismissal; relief of illegally dismissed employee. An illegally dismissed
employee is entitled to two reliefs: back wages and reinstatement. The two
reliefs provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained relations between
the employee and the employer, separation pay is granted. In effect, an
illegally dismissed employee is entitled to either reinstatement if such is
viable, or separation pay if reinstatement is no longer viable, and to back
wages. The normal consequences of respondent’s illegal dismissal, then,
are reinstatement without loss of seniority rights, and payment of back
wages computed from the time compensation was withheld from him up to
the date of actual reinstatement. Where reinstatement is no longer viable
as an option, separation pay equivalent to one month salary for every year
 John Mark F. Sunga, 2012-0351

of service should be awarded as an alternative. The payment of

separation pay is in addition to payment of back wages.
Petitioners question the CA Resolution dated October 24, 2008, arguing
that it modified its March 31, 2008 Decision which has already attained
finality insofar as respondent is concerned. Such contention is misplaced.
The CA merely clarified the period of payment of back wages and
separation pay up to the finality of its decision (March 31, 2008) modifying
the Labor Arbiter’s decision. In view of the modification of monetary
awards in the Labor Arbiter’s decision, the time frame for the payment of
back wages and separation pay is accordingly modified to the finality of
the CA decision. Norkis Distribution, Inc., et al. vs. Delfin S. Descallar,
G.R. No. 185255. March 14, 2012
Employees; project vs. regular employees. The principal test for
determining whether particular employees are properly characterized as
“project employees” as distinguished from “regular employees” is whether
or not the project employees were assigned to carry out a “specific project
or undertaking,” the duration and scope of which were specified at the time
the employees were engaged for that project.
In a number of cases, the Court has held that the length of service or the
re-hiring of construction workers on a project-to-project basis does not
confer upon them regular employment status, since their re-hiring is only a
natural consequence of the fact that experienced construction workers are
preferred. Employees who are hired for carrying out a separate job,
distinct from the other undertakings of the company, the scope and
duration of which has been determined and made known to the employees
at the time of the employment are properly treated as project employees
and their services may be lawfully terminated upon the completion of a
 John Mark F. Sunga, 2012-0351

project. Should the terms of their employment fail to comply with this
standard, they cannot be considered project employees.
Applying the above disquisition, the Court agreed with the findings of the
CA that petitioners were project employees.  It is not disputed that
petitioners were hired for the construction of the Cordova Reef Village
Resort in Cordova, Cebu.  By the nature of the contract alone, it is clear
that petitioners’ employment was to carry out a specific project. Wilfredo
Aro, Ronilo Tirol, et al.  vs. NLRC, Fourth Division, et al., G.R. No.
174792. March 7, 2012.
Jurisdiction; power of the DOLE to determine the existence of employer-
employee relationship. If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is properly with
the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that
the Labor Arbiter has original and exclusive jurisdiction over those cases
involving wages, rates of pay, hours of work, and other terms and
conditions of employment, if accompanied by a claim for reinstatement.
In the present case, the finding of the DOLE Regional Director that there
was an employer-employee relationship has been subjected to review by
the Supreme Court, with the finding being that there was no employer-
employee relationship between petitioner and private respondent, based
on the evidence presented. The DOLE had no jurisdiction over the case,
as there was no employer-employee relationship present. Thus, the
dismissal of the complaint against petitioner is proper. People’s
Broadcasting Service (Bombo Rado Phils., Inc.) vs. The Secretary of the
Dept. of Labor & Employment, et al. G.R. No. 179652. March 6, 2012.
Management prerogative; resignation of employees running for public
office. The Supreme Court has consistently held that so long as a
company’s management prerogatives are exercised in good faith for the
 John Mark F. Sunga, 2012-0351

advancement of the employer’s interest and not for the purpose of

defeating or circumventing the rights of the employees under special laws
or under valid agreements, the Court will uphold them. In the instant case,
ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It
is well within its rights to ensure that it maintains its objectivity and
credibility and freeing itself from any appearance of impartiality so that the
confidence of the viewing and listening public in it will not be in any way
eroded. Even as the law is solicitous of the welfare of the employees, it
must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its
own business affairs to achieve its purpose cannot be denied. Ernesto
Ymbong vs. ABS-CBN Broadcasting Corporation, Veranda Sy & Dante
Luzon, G.R. No. 184885. March 7, 2012.
Separation pay; payment to those who participated in illegal strikes.
Separation pay may be given as a form of financial assistance when a
worker is dismissed in cases such as the installation of labor-saving
devices, redundancy, retrenchment to prevent losses, closing or cessation
of operation of the establishment, or in case the employee was found to
have been suffering from a disease such that his continued employment is
prohibited by law. It is a statutory right defined as the amount that an
employee receives at the time of his severance from the service and is
designed to provide the employee with the wherewithal during the period
that he is looking for another employment. It is oriented towards the
immediate future, the transitional period the dismissed employee must
undergo before locating a replacement job. As a general rule, when just
causes for terminating the services of an employee exist, the employee is
not entitled to separation pay because lawbreakers should not benefit from
their illegal acts. The rule, however, is subject to exceptions.
 John Mark F. Sunga, 2012-0351

Here, not only did the Court declare the strike illegal, rather, it also found
the Union officers to have knowingly participated in the illegal strike.
Worse, the Union members committed prohibited acts during the strike.
Thus, as the Court has concluded in other cases it has previously decided,
such Union officers are not entitled to the award of separation pay in the
form of financial assistance. C. Alcantara & Sons, Inc. vs. Court of
Appeals, et al./Nagkahiusang Mamumuo sa Alsons-SPFL, et al. vs. C.
Alcantara & Sons, Inc., et al./Nagkahiusang Mamumuo sa Alsons-SPFL,
et al. vs. C. Alcantara & Sons, Inc., et al. G.R. No. 155109/G.R. No.
155135/G.R. No. 179220. March 14, 2012.
Dismissal; due process. When the Labor Code speaks of procedural due
process, the reference is usually to the two (2)-written notice rule
envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code. MGG Marine Services, Inc. v. NLRC tersely
described the mechanics of what may be considered a two-part due
process requirement which includes the two-notice rule, “x x x one, of the
intention to dismiss, indicating therein his acts or omissions complained
against, and two, notice of the decision to dismiss; and an opportunity to
answer and rebut the charges against him, in between such notices.”
Here, the first and second notice requirements have not been properly
observed. The adverted memo would have had constituted the “charge
sheet,” sufficient to answer for the first notice requirement, but for the fact
that there is no proof such letter had been sent to and received by him.
Neither was there compliance with the imperatives of a hearing or
conference. Suffice it to point out that the record is devoid of any showing
of a hearing or conference having been conducted. And the written notice
of termination itself did not indicate all the circumstances involving the
charge to justify severance of employment. For violating petitioner’s right
 John Mark F. Sunga, 2012-0351

to due process, the Supreme Court ordered the payment to petitioner of

the amount of P30,000 as nominal damages. Armando Ailing vs. Jose B.
Feliciano, Manuel F. San Mateo III, et al., G.R. No. 185829. April 25,
2012.
Dismissal; just cause. In fine, an employee’s failure to meet sales or work
quotas falls under the concept of gross inefficiency, which in turn is
analogous to gross neglect of duty that is a just cause for dismissal under
Article 282 of the Code. However, in order for the quota imposed to be
considered a valid productivity standard and thereby validate a dismissal,
management’s prerogative of fixing the quota must be exercised in good
faith for the advancement of its interest. The duty to prove good faith,
however, rests with WWWEC as part of its burden to show that the
dismissal was for a just cause. WWWEC must show that such quota was
imposed in good faith. This WWWEC failed to do, perceptibly because it
could not. The fact of the matter is that the alleged imposition of the quota
was a desperate attempt to lend a semblance of validity to Aliling’s illegal
dismissal. Armando Ailing vs. Jose B. Feliciano, Manuel F. San Mateo III,
et al., G.R. No. 185829. April 25, 2012.
Dismissal; retrenchment. Retrenchment is a valid exercise of management
prerogative subject to the strict requirements set by jurisprudence, to wit:
(1)  That the retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer;
(2)  That the employer served written notice both to the employees and to
the Department of Labor and Employment at least one month prior to the
intended date of retrenchment;
 John Mark F. Sunga, 2012-0351

(3)  That the employer pays the retrenched employees separation pay
equivalent to one month pay or at least ½ month pay for every year of
service, whichever is higher;
(4)  That the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and
(5)  That the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, x x x efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.
As aptly found by the NLRC and justly sustained by the CA, Petrocon
exercised its prerogative to retrench its employees in good faith and the
considerable reduction of work allotments of Petrocon by Saudi Aramco
was sufficient basis for Petrocon to reduce the number of its personnel. As
for the notice requirement, however, contrary to petitioner’s contention,
proper notice to the DOLE within 30 days prior to the intended date of
retrenchment is necessary and must be complied with despite the fact that
respondent is an overseas Filipino worker. In the present case, although
respondent was duly notified of his termination by Petrocon 30 days
before its effectivity, no allegation or proof was advanced by petitioner to
establish that Petrocon ever sent a notice to the DOLE 30 days before the
respondent was terminated. Thus, this requirement of the law was not
complied with. Despite the fact that respondent was employed by
Petrocon as an OFW in Saudi Arabia, still both he and his employer are
subject to the provisions of the Labor Code when applicable. The basic
policy in this jurisdiction is that all Filipino workers, whether employed
locally or overseas, enjoy the protective mantle of Philippine labor and
social legislations (citing Philippine National Bank v. Cabansag, G.R. No.
 John Mark F. Sunga, 2012-0351

157010, June 21, 2005, 460 SCRA 514, 518 and Royal Crown
Internationale v. NLRC, G.R. No. 78085, October 16, 1989, 178 SCRA
569.) International Management Services/Marilyn C. Pascual vs. Roel P.
Logarta, G.R. No. 163657, April 18, 2012.
Employee; probationary employee. The aforequoted Section 6 of the
Implementing Rules of Book VI, Rule VIII-A of the Code specifically
requires the employer to inform the probationary employee of such
reasonable standards at the time of his engagement, not at any time later;
else, the latter shall be considered a regular employee. Thus, pursuant to
the explicit provision of Article 281 of the Labor Code, Section 6(d) of the
Implementing Rules of Book VI, Rule VIII-A of the Labor Code and settled
jurisprudence, petitioner Aliling is deemed a regular employee as of June
11, 2004, the date of his employment contract.
The letter-offer to Aliling states that the regularization standards or the
performance norms to be used are still to be agreed upon by him and his
supervisor. Moreover, Aliling was assigned to GX trucking sales, an
activity entirely different to the Seafreight Sales for which he was originally
hired and trained for. In the present case, there was no proof that Aliling
was informed of the standards for his continued employment, such as the
sales quota, at the time of his engagement. Armando Ailing vs. Jose B.
Feliciano, Manuel F. San Mateo III, et al., G.R. No. 185829. April 25,
2012.
Employee; separation package. Article 283 of the Labor Code provides
only the required minimum amount of separation pay, which employees
dismissed for any of the authorized causes are entitled to receive.
Employers, therefore, have the right to create plans, providing for
separation pay in an amount over and above what is imposed by Article
283. There is nothing therein that prohibits employers and employees from
 John Mark F. Sunga, 2012-0351

contracting on the terms of employment, or from entering into agreements

on employee benefits, so long as they do not violate the Labor Code or
any other law, and are not contrary to morals, good customs, public order,
or public policy.
Consequently, petitioners are not allowed to receive separation pay from
both the Labor Code, on the one hand, and the New Gratuity Plan and the
SSP, on the other, they would receive double compensation for the same
cause (i.e., separation from the service due to redundancy). Ma. Corina C.
Jiao, et al. vs. Global Business Bank, Inc., et al., G.R. No. 182331, April
18, 2012.
Employer-employee relationship. In determining the presence or absence
of an employer-employee relationship, the Court has consistently looked
for the following incidents, to wit:  (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer’s power to control the employee on the means and methods
by which the work is accomplished. The last element, the so-called control
test, is the most important element.
It can be deduced from the March 1996 affidavit of petitioner that
respondents challenged his authority to deliver some 158 checks to SFC.
Considering that petitioner contested respondents’ challenge by pointing
to the existing arrangements between BCC and SFC, it should be clear
that respondents did not exercise the power of control over petitioner,
because he thereby acted for the benefit and in the interest of SFC more
than of BCC. Charlie Jao vs. BCC Products Sales, Inc. and Terrance
Ty, G.R. No. 163700, April 18, 2012.
Project employee; conversion into regular employee. In all the 38 projects
where DMCI engaged Jamin’s services, the tasks he performed as a
carpenter were indisputably necessary and desirable in DMCI’s
 John Mark F. Sunga, 2012-0351

construction business. He might not have been a member of a work pool

since DMCI insisted that it does not maintain a work pool, but his
continuous rehiring in 38 projects over a period of 31 years and the nature
of his work unmistakably made him a regular employee. In Maraguinot, Jr.
v. NLRC, 348 Phil. 580 (1998), the Court held that once a project or work
pool employee has been: (1) continuously, as opposed to intermittently,
rehired by the same employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a
regular employee.
Surely, length of time is not the controlling test for project employment but
it is vital in determining if the employee was hired for a specific
undertaking or if it is tasked to perform functions vital, necessary and
indispensable to the usual business or trade of the employer. Here,
[private] respondent had been a project employee several times over. The
nature of his employment ceased to be project-based when he was
repeatedly re-hired due to the demands of petitioner’s business.D.M.
Consunji, Inc. and/or David M. Consunji vs. Estelito, G.R. No. 192514,
April 18, 2012.
Dismissal; willful disobedience. For willful disobedience to be a valid cause
for dismissal, these two elements must concur: (1) the employee’s
assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must have been
reasonable, lawful, made known to the employee, and must pertain to the
duties which he had been engaged to discharge.
The petitioner’s arbitrary defiance to Graphics, Inc.’s order for him to
render overtime work constitutes willful disobedience. Because of his
refusal to render overtime work, the company failed to meet its printing
 John Mark F. Sunga, 2012-0351

deadlines, resulting in losses to the company. The Supreme Court took

into account the fact that petitioner was inclined to absent himself and to
report late for work despite being previously penalized, and affirmed the
CA’s ruling that the petitioner is indeed utterly defiant of the lawful orders
and the reasonable work standards prescribed by his employer. The Court
reiterated its previous rulings stating that an employer has the right to
require the performance of overtime service in any of the situations
contemplated under Article 89 of the Labor Code and an employee’s non-
compliance is willful disobedience. Realda v. New Age Graphics, Inc. et.
al. G.R. No. 192190, April 25, 2012.
Dismissal; inefficiency. The petitioner’s failure to observe Graphics, Inc.’s
work standards constitutes inefficiency that is a valid cause for dismissal.
Failure to observe prescribed standards of work, or to fulfill reasonable
work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work
goals or work quotas, either by failing to complete the same within the
alloted reasonable period, or by producing unsatisfactory results. As the
operator of Graphics, Inc.’s printer, he is mandated to check whether the
colors that would be printed are in accordance with the client’s
specifications and for him to do so, he must consult the General Manager
and the color guide used by Graphics, Inc. before making a full run. The
employee in this case failed to observe this simple procedure and
proceeded to print without making sure that the colors were at par with the
client’s demands. This resulted to delays in the delivery of output, client
dissatisfaction, and additional costs to Graphics, Inc.. Realda v. New Age
Graphics, Inc. et. al. G.R. No. 192190, April 25, 2012.
 John Mark F. Sunga, 2012-0351

Dismissal; due process. In King of Kings Transport, Inc. v. Mamac, this

Court laid down the manner by which the procedural due requirements of
due process can be satisfied:
(1)          The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them, and a
directive that the employees are given the opportunity to submit their
written explanation within a reasonable period.  “Reasonable opportunity”
under the Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to prepare
adequately for their defense.  This should be construed as a period of at
least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the
defenses they will raise against the complaint.  Moreover, in order to
enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the
employees.  A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged
against the employees.
(2)          After serving the first notice, the employers should schedule and
conduct a hearing orconference wherein the employees will be given the
opportunity to: (a) explain and clarify their defenses to the charge against
them; (b) present evidence in support of their defenses; and (c) rebut the
evidence presented against them by the management.  During the hearing
or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their
 John Mark F. Sunga, 2012-0351

choice.  Moreover, this conference or hearing could be used by the parties

as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the
employers shall serve the employees a written notice of
termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment.
Graphics, Inc. failed to afford the petitioner with a reasonable opportunity
to be heard and defend itself. An administrative hearing set on the same
day that the petitioner received the memorandum and the 24-hour period
given to him to submit a written explanation is far from reasonable.
Furthermore, there is no indication that Graphics, Inc. issued a second
notice, informing the petitioner of his dismissal. Graphics, Inc. admitted
that it decided to terminate the petitioner’s employment when he ceased to
report for work after being served with the memorandum requiring him to
explain and subsequent to his failure to submit a written explanation.
However, there is nothing on record showing that Graphics, Inc. placed its
decision to dismiss in writing and that a copy thereof was sent to the
petitioner. Notwithstanding the existence of a just cause to terminate
petitioner’s employment, respondent was ordered to pay P30,000 as
nominal damages for violation of the employee’s right to due
process. Realda v. New Age Graphics, Inc. et. al. G.R. No. 192190, April
25, 2012.
Dismissal; willful disobedience. Willful disobedience requires the
concurrence of two elements: (1) the employee’s assailed conduct must
have been willful, that is, characterized by a wrongful and perverse
attitude; and (2) the order violated must have been reasonable, lawful,
 John Mark F. Sunga, 2012-0351

made known to the employee, and must pertain to the duties which he had
been engaged to discharge. Both elements are present in this case.
First, at no point did the dismissed employees deny Kingspoint Express’
claim that they refused to comply with the directive for them to submit to a
drug test or, at the very least, explain their refusal. This gives rise to the
impression that their non-compliance is deliberate. The utter lack of
reason or justification for their insubordination indicates that it was
prompted by mere obstinacy, hence, willful thereby justifying their
dismissal. Second, that the company’s order to undergo a drug test is
necessary and relevant in the performance of petitioners’ functions as
drivers of Kingspoint Express is obvious. As the NLRC correctly pointed
out, drivers are indispensable to Kingspoint Express’ primary business of
rendering door-to-door delivery services. It is common knowledge that the
use of dangerous drugs has adverse effects on driving abilities that may
render employees incapable of performing their duties. Not only are they
acting against the interests of Kingspoint Express, they also pose a threat
to the public. Kakampi and its members, et al. v. Kingspoint Express and
Logistic and/or Mary Ann Co, G.R. No. 194813, April 25, 2012.
Dismissal; procedural due process requirements. While Kingspoint
Express had reason to sever petitioners’ employment, this Court finds its
supposed observance of the requirements of procedural due process
pretentious. While Kingspoint Express required the dismissed employees
to explain their refusal to submit to a drug test, the two (2) days afforded to
them to do so cannot qualify as “reasonable opportunity”, which the Court
construed in King of Kings Transport, Inc. v. Mamac as a period of at least
five (5) calendar days from receipt of the notice.
Thus, even if a just cause exists for the dismissal of petitioners, Kingspoint
Express is still liable to indemnify the dismissed employees, with the
 John Mark F. Sunga, 2012-0351

exception of Panuelos, Dizon and Dimabayao, who did not appeal the
dismissal of their complaints, with nominal damages in the amount of
P30,000.00.Kakampi and its members, et al. v. Kingspoint Express and
Logistic and/or Mary Ann Co, G.R. No. 194813, April 25, 2012.
Appeal; issue of employer-employee relationship raised for the first time
on appeal. It is a fundamental rule of procedure that higher courts are
precluded from entertaining matters neither alleged in the pleadings nor
raised during the proceedings below, but ventilated for the first time only in
a motion for reconsideration or on appeal. The alleged absence of
employer-employee relationship cannot be raised for the first time on
appeal. The resolution of this issue requires the admission and calibration
of evidence and the LA and the NLRC did not pass upon it in their
decisions. Petitioner is bound by its submissions that respondent is its
employee and it should not be permitted to change its theory. Such
change of theory cannot be tolerated on appeal, not on account of the
strict application of procedural rules, but as a matter of fairness. Duty Free
Philippines Services, Inc. vs. Manolito Q. Tria. G.R. No. 174809. June 27,
2012.
Dismissal; abandonment. Abandonment cannot be inferred from the
actuations of respondent. When he discovered that his time card was off
the rack, he immediately inquired from his supervisor.  He later sought the
assistance of his counsel, who wrote a letter addressed to Polyfoam
requesting that he be re-admitted to work.  When said request was not
acted upon, he filed the instant illegal dismissal case.  These
circumstances clearly negate the intention to abandon his
work. Polyfoam-RGC International, Corporation and Precilla A. Gramaje
vs. Edgardo Concepcion. G.R. No. 172349, June 13, 2012.
 John Mark F. Sunga, 2012-0351

Dismissal; due process. To meet the requirements of due process in the

dismissal of an employee, an employer must furnish the worker with two
written notices: (1) a written notice specifying the grounds for termination
and giving to said employee a reasonable opportunity to explain his side
and (2) another written notice indicating that, upon due consideration of all
circumstances, grounds have been established to justify the employer’s
decision to dismiss the employee. The law does not require that an
intention to terminate one’s employment should be included in the first
notice. It is enough that employees are properly apprised of the charges
brought against them so they can properly prepare their defenses. It is
only during the second notice that the intention to terminate one’s
employment should be explicitly stated.
The guiding principles in connection with the hearing requirement in
dismissal cases are the following:
1. “Ample opportunity to be heard” means any meaningful opportunity
(verbal or written) given to the employee to answer the charges
against him and submit evidence in support of his defense, whether
in a hearing, conference or some other fair, just and reasonable
way.
2. A formal hearing or conference becomes mandatory only when
requested by the employee in writing or substantial evidentiary
disputes exist or a company rule or practice requires it, or when
similar circumstances justify it.
3. The “ample opportunity to be heard” standard in the Labor Code
prevails over the “hearing or conference” requirement in the
implementing rules and regulations.
The existence of an actual, formal “trial-type” hearing, although preferred,
is not absolutely necessary to satisfy the employee’s right to be heard.
 John Mark F. Sunga, 2012-0351

Esguerra was able to present her defenses; and only upon proper
consideration of it did Valle Verde send the second memorandum
terminating her employment. Since Valle Verde complied with the two-
notice requirement, no procedural defect exists in Esguerra’s
termination. Dolores T. Esguerra vs. Valle Verde Country Club, Inc. and
Ernesto Villaluna. G.R. No. 173012, June 13, 2012.
Dismissal; loss of trust and confidence. There are two (2) classes of
positions of trust. The first class consists of managerial employees, or
those vested with the power to lay down management policies; and the
second class consists of cashiers, auditors, property custodians or those
who, in the normal and routine exercise of their functions, regularly handle
significant amounts of money or property. Esguerra held the position of
Cost Control Supervisor and had the duty to remit to the accounting
department the cash sales proceeds from every transaction she was
assigned to. This is not a routine task that a regular employee may
perform; it is related to the handling of business expenditures or finances.
For this reason, Esguerra occupies a position of trust and confidence – a
position enumerated in the second class of positions of trust. Any breach
of the trust imposed upon her can be a valid cause for dismissal.
Loss of confidence as a just cause for termination of employment can be
invoked when an employee holds a position of responsibility, trust and
confidence. In order to constitute a just cause for dismissal, the act
complained of must be related to the performance of the duties of the
dismissed employee and must show that he or she is unfit to continue
working for the employer for violation of the trust reposed in him or her. It
was Esguerra’s responsibility to account for the cash proceeds; in case of
problems, she should have promptly reported it, regardless of who was at
fault. Instead, she settled the unaccounted amount only after the
 John Mark F. Sunga, 2012-0351

accounting department informed her about the discrepancy, almost one

month following the incident. Esguerra’s failure to make the proper report
reflects her irresponsibility in the custody of cash for which she was
accountable. Dolores T. Esguerra vs. Valle Verde Country Club, Inc. and
Ernesto Villaluna. G.R. No. 173012, June 13, 2012.
Dismissal; serious misconduct and loss of trust and confidence. Dejan is
liable for violation of Section 7, paragraphs 4 and 11 of the Company
Code of Employee Discipline, constituting serious misconduct, fraud and
willful breach of trust of the employer, which are just causes for
termination of employment under the law. There is no dispute about the
release of the meter sockets. Also, the persons involved were clearly
identified – Dejan; Gozarin, a private electrician who received the meter
sockets; Reyes, the owner of the jeep where the meter sockets were
loaded by Gozarin; Duenas, a Meralco field representative; and Depante,
another private electrician who purportedly owned the meter sockets. The
release by Dejan of the meter sockets to Gozarin without the written
authority or SPA from the customer or customers who applied for electric
connection (as a matter of company policy) served as a key element in
proving the private contracting activity for electric service connection being
undertaken by Dejan and Duenas.
Moreover, it was bad enough that Dejan failed to ask for a written
authorization from the customers for the release of the meter sockets as
required by company policy, but the elaborate scheme pursued by Dejan
in concert with Duenas, were all undertaken to defraud Meralco. Hence,
Meralco had valid reasons for losing its trust and confidence in Dejan.  He
is no ordinary employee.  As branch representative, he was principally
charged with the function and responsibility to accept payment of fees
required for the installation of electric service and facilitate issuance of
 John Mark F. Sunga, 2012-0351

meter sockets. The duties of his position require him to always act with the
highest degree of honesty, integrity and sincerity, as the company puts it. 
In light of his fraudulent act, Meralco, an enterprise imbued with public
interest, cannot be compelled to continue Dejan’s employment, as it would
be inimical to its interest. Manila Electric Company (Meralco) vs.
Herminigildo H. Dejan. G.R. No. 194106, June 18, 2012.
Employee benefit; attorney’s fees. Lazaro must establish a legal basis –
either by law, contract or other sources of obligations – to merit the receipt
of the additional 10% attorney’s fees collected in the various foreclosure
procedures he settled as the bank’s legal officer. Lazaro has not produced
any contract or provision of law that would warrant the payment of the
additional attorney’s fees. He is only entitled to his salaries as the bank’s
legal officer, because the services he rendered in the foreclosure
proceedings were part of his official tasks. Banco Filipino Savings and
Mortgage Bank vs. Miguelito M. Lazaro/Miguelito M. Lazaro vs. Banco
Filipino Savings and Mortgage Bank, et al. G.R. No. 185346 & G.R. No.
185442. June 27, 2012.
Employee benefit; retirement pay. Banco Filipino maintains that the seven-
year period when it was under liquidation should not be credited in
computing Lazaro’s retirement pay because, during that period, the bank
was considered closed. The Supreme Court held that banks under
liquidation retain their legal personality. In fact, even if they are prohibited
from conducting regular banking business, it is necessary that debts owed
to them be collected. Lazaro performed the duty of foreclosing debts in
favor of Banco Filipino. It cannot rightfully disclaim Lazaro’s work that
benefitted it.
As found in the Implementing Rules of the Retirement Pay Law and in
jurisprudence, only in the absence of an applicable retirement agreement
 John Mark F. Sunga, 2012-0351

shall Article 287 of the Labor Code apply. There is aproviso however, that
an employee’s retirement benefits under any agreement shall not be less
than those provided in the said article. The Rules of the Banco Filipino
Retirement Fund do not provide for benefits lower than those in the Labor
Code. In fact, the bank offers a retirement pay equivalent to one andone-
half month salary for every year of service, a rate over and above the one-
half month salary threshold provided by the law. Although the Rules of the
Banco Filipino Retirement Fund do not grant a rounding off scheme, they
nonetheless provide that prorated credit shall be given for incomplete
years, regardless of the fraction of months in the retiree’s length of
service. Notwithstanding the lack of a rounding-up provision, still, the
higher retirement pay, together with the prorated crediting, cannot be
deemed to be less favorable than that provided for by the law. Ultimately,
the more important threshold to be considered in construing whether the
retirement agreement provides less benefits, compared to those provided
by the Retirement Pay Law, is that the retirement benefits in the said
agreement should at least amount to one-half of the employee’s monthly
salary. Banco Filipino Savings and Mortgage Bank vs. Miguelito M.
Lazaro/Miguelito M. Lazaro vs. Banco Filipino Savings and Mortgage
Bank, et al. G.R. No. 185346 & G.R. No. 185442. June 27, 2012
Employee dismissal. When the floating status of employees lasts for more
than six (6) months, they may be considered to have been illegally
dismissed from the service. “Floating status” means an indefinite period of
time when one does not receive any salary or financial benefit provided by
law. In this case, petitioners were actually reassigned to new posts, albeit
in a different location from where they resided. Thus, there can be no
floating status or indefinite period to speak of. Instead, petitioners were the
ones who refused to report for work in their new assignment.
 John Mark F. Sunga, 2012-0351

In cases involving security guards, a relief and transfer order in itself does
not sever the employment relationship between the security guards and
their agency. Employees have the right to security of tenure, but this does
not give them such a vested right to their positions as would deprive the
company of its prerogative to change their assignment or transfer them
where their services, as security guards, will be most beneficial to the
client. An employer has the right to transfer or assign its employees from
one office or area of operation to another in pursuit of its legitimate
business interest, provided there is no demotion in rank or diminution of
salary, benefits, and other privileges; and the transfer is not motivated by
discrimination or bad faith, or effected as a form of punishment or
demotion without sufficient cause. While petitioners may claim that their
transfer to Manila will cause added expenses and inconvenience, absent
any showing of bad faith or ill motive on the part of the employer, the
transfer remains valid. Salvador O. Mojar, et al. vs. Agro Commercial
Security Service Agency, et al. G.R. No. 187188, June 27, 2012.
Employee dismissal; burden of proof. Under the law, the burden of proving
that the termination of employment was for a valid or authorized cause
rests on the employer. Failure to discharge this burden would result in an
unjust or illegal dismissal. The company’s evidence on the respondents’
alleged infractions do not substantially show that they violated company
rules and regulations to warrant their dismissal. It is obvious that the
company overstepped the bounds of its management prerogative in the
dismissal of Mauricio and Camacho. It lost sight of the principle that
management prerogative must be exercised in good faith and with due
regard to the rights of the workers in the spirit of fairness and with justice
in mind. Philbag Industrial Manufacturing Corp. vs. Philbag Workers
 John Mark F. Sunga, 2012-0351

Union-Lakas at Gabay ng Manggagawang Nagkakaisa. G.R. No.

182486, June 20, 2012.
Employee dismissal; due process. Retrenchment is subject to faithful
compliance with the substantive and procedural requirements laid down by
law and jurisprudence. For a valid retrenchment, the following elements
must be present:
1. That retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in
good faith by the employer;
2. That the employer served written notice both to the employees and
to the Department of Labor and Employment at least one month
prior to the intended date of retrenchment;
3. That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least ½ month pay for every
year of service, whichever is higher;
4. That the employer exercises its prerogative to retrench employees
in good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and
5. That the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness,
age, and financial hardship for certain workers.
All these elements were successfully proven by petitioner. First, the huge
losses suffered by the Club for the past two years had forced petitioner to
close it down to avert further losses which would eventually affect the
operations of petitioner. Second, all 45 employees working in the Club
 John Mark F. Sunga, 2012-0351

were served with notice of termination. The corresponding notice was

likewise served to the DOLE one month prior to retrenchment. Third, the
employees were offered separation pay, most of whom have accepted and
opted not to join in this complaint. Fourth, the cessation of or withdrawal
from business operations was bona fide in character and not impelled by a
motive to defeat or circumvent the tenurial rights of employees. Waterfront
Cebu City Hotel vs. Ma. Melanie P. Jimenez, et al. G.R. No. 174214, June
13, 2012.
Employee dismissal; due process. The following are the guiding principles
in connection with the hearing requirement in dismissal cases:
1. “Ample opportunity to be heard” means any meaningful opportunity
(verbal or written) given to the employee to answer the charges
against him and submit evidence in support of his defense, whether
in a hearing, conference or some other fair, just and reasonable
way.
2. A formal hearing or conference becomes mandatory only when
requested by the employee in writing or substantial evidentiary
disputes exist or a company rule or practice requires it, or when
similar circumstances justify it.
3. The “ample opportunity to be heard” standard in the Labor Code
prevails over the “hearing or conference” requirement in the
implementing rules and regulations.
Given that the petitioners expressly requested a conference or a
convening of a grievance committee, such formal hearing became
mandatory. After PGAI failed to affirmatively respond to such request, it
follows that the hearing requirement was not complied with and, therefore,
Vallota was denied his right to procedural due process. Prudential
Guarantee and Assurance Employee Labor Union and Sandy T. Vallota
 John Mark F. Sunga, 2012-0351

vs. NLRC, Prudential Guarantee and Assurance Inc., and/or Jocelyn

Retizos.G.R. No. 185335, June 13, 2012.
Employee dismissal; just cause. Article 282(e) of the Labor Code talks of
other analogous causes or those which are susceptible of comparison to
another in general or in specific detail as a cause for termination of
employment. A cause analogous to serious misconduct is a voluntary
and/or willful act or omission attesting to an employee’s moral depravity.
Theft committed by an employee against a person other than his
employer, if proven by substantial evidence, is a cause analogous to
serious misconduct. Previous infractions may be cited as justification for
dismissing an employee only if they are related to the subsequent offense.
However, it must be noted that such a discussion was unnecessary since
the theft, taken in isolation from Fermin’s other violations, was in itself a
valid cause for the termination of his employment. Cosmos Bottling Corp.
vs. Wilson Fermin/Wilson Fermin vs. Cosmos Bottling Corp. and Cecilia
Bautista. G.R. No. 193676 & G.R. No. 194303. June 20, 2012.
Employee dismissal; loss of trust and confidence. The Labor Code
recognizes that an employer, for just cause, may validly terminate the
services of an employee for serious misconduct or willful disobedience of
the lawful orders of the employer or representative in connection with the
employee’s work. Fraud or willful breach by the employee of the trust
reposed by the employer in the former, or simply loss of confidence, also
justifies an employee’s dismissal from employment. Willful breach of trust
or loss of confidence requires that the employee (1) occupied a position of
trust or (2) was routinely charged with the care of the employer’s property.
To warrant dismissal based on loss of confidence, there must be some
basis for the loss of trust or the employer must have reasonable grounds
to believe that the employee is responsible for the misconduct that renders
 John Mark F. Sunga, 2012-0351

the latter unworthy of the trust and confidence demanded by his or her
position. For more than a month, the petitioners did not even inform PLDT
of the whereabouts of the plant materials. Instead, he stocked these
materials at his residence even if they were needed in the daily operations
of the company. In keeping with the honesty and integrity demanded by
his position, he should have turned over these materials to the plant’s
warehouse. Thus, PLDT reasonably suspected petitioner of stealing the
company’s property. At that juncture, the employer may already dismiss
the employee since it had reasonable grounds to believe or to entertain
the moral conviction that the latter was responsible for the misconduct,
and the nature of his participation therein rendered him absolutely
unworthy of the trust and confidence demanded by his position.Romeo E.
Paulino vs. NLRC, Philippine Long Distance Co., Inc. G.R. No.
176184, June 13, 2012.
Employee dismissal; loss of trust and confidence. Loss of confidence as a
just cause for dismissal was never intended to provide employers with a
blank check for terminating their employees. It should ideally apply only to
cases involving employees occupying positions of trust and confidence or
to those situations where the employee is routinely charged with the care
and custody of the employer’s money or property. To the first class belong
managerial employees, i.e., those vested with the powers or prerogatives
to lay down management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees or effectively recommend
such managerial actions; and to the second class belong cashiers,
auditors, property custodians, etc., or those who, in the normal and routine
exercise of their functions, regularly handle significant amounts of money
or property.
 John Mark F. Sunga, 2012-0351

The first 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. The second requisite is that there must be an act
that would justify the loss of trust and confidence. Vallota’s position as
Junior Programmer is analogous to the second class of positions of trust
and confidence. Though he did not physically handle money or property,
he became privy to confidential data or information by the nature of his
functions. At a time when the most sensitive of information is found not
printed on paper but stored on hard drives and servers, an employee who
handles or has access to data in electronic form naturally becomes the
unwilling recipient of confidential information. There was no other evidence
presented to prove fraud in the manner of securing or obtaining the files
found in Vallota’s computer. The presence of the files would merely merit
the development of some suspicion on the part of the employer, but
should not amount to a loss of trust and confidence such as to justify the
termination of his employment. Such act is not of the same class, degree
or gravity as the acts that have been held to be of such
character. Prudential Guarantee and Assurance Employee Labor Union
and Sandy T. Vallota vs. NLRC, Prudential Guarantee and Assurance
Inc., and/or Jocelyn Retizos. G.R. No. 185335, June 13, 2012.
Employee dismissal; loss of trust and confidence. To validly dismiss an
employee on the ground of loss of trust and confidence under Article 282
(c) of the Labor Code of the Philippines, the following guidelines must be
observed: 1) loss of confidence should not be simulated; 2) it should not
be used as subterfuge for causes which are improper, illegal or unjustified;
3) it may not be arbitrarily asserted in the face of overwhelming evidence
to the contrary; and 4) it must be genuine, not a mere afterthought to
justify earlier action taken in bad faith. More importantly, it must be based
 John Mark F. Sunga, 2012-0351

on a willful breach of trust and founded on clearly established facts. The

testimony of Lobitaña constitutes substantial evidence to prove that
respondent, as the then Power Plant Manager, accepted commissions
and/or “kickbacks” from suppliers, which is a clear violation of Section 2.04
of petitioner’s Company Rules and Regulations. Jurisprudence
consistently holds that for managerial employees, the mere existence of a
basis for believing that such employee has breached the trust of his
employer would suffice for his dismissal. Respondent’s termination was for
a just and valid cause. Apo Cement Corporation Vs. Zaldy E.
Baptisma. G.R. No. 176671. June 20, 2012.
Employee dismissal; order of reinstatement. Article 223 of the Labor Code
provides that in case there is an order of reinstatement, the employer must
admit the dismissed employee under the same terms and conditions, or
merely reinstate the employee in the payroll. The order shall be
immediately executory. Thus, 3rd Alert cannot escape liability by simply
invoking that Navia did not report for work. The law states that the
employer must still reinstate the employee in the payroll. Where
reinstatement is no longer viable as an option, separation pay equivalent
to one (1) month salary for every year of service could be awarded as an
alternative. 3rd Alert Security and Detective Services, Inc. vs. Romualdo
Navia. G.R. No. 200653, June 13, 2012.
Employee dismissal; retrenchment. Retrenchment is the termination of
employment initiated by the employer through no fault of and without
prejudice to the employees. It is resorted to during periods of business
recession, industrial depression, or 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. It is an act of the employer of
 John Mark F. Sunga, 2012-0351

dismissing employees because of losses in the operation of a business,

lack of work, and considerable reduction on the volume of his business. In
this case, the closure of a department or division of a company constitutes
retrenchment by, and not closure of, the company itself. Petitioner has not
totally ceased its business operations.  It merely ceased operations of a
department. Waterfront Cebu City Hotel vs. Ma. Melanie P. Jimenez, et
al. G.R. No. 174214, June 13, 2012.
Employee dismissal; willful breach of trust. The loss of trust and
confidence must be based on willful breach of the trust reposed in the
employee by his employer.  Such breach is willful if it is done intentionally,
knowingly, and purposely, without justifiable excuse, as distinguished from
an act done carelessly, thoughtlessly, heedlessly or inadvertently. 
Moreover, it must be based on substantial evidence and not on the
employer’s whims or caprices or suspicions otherwise, the employee
would eternally remain at the mercy of the employer.  The Supreme Court
has laid down the guidelines for the application of the loss of trust and
confidence doctrine: (1) loss of confidence should not be simulated; (2) it
should not be used as a subterfuge for causes which are improper, illegal
or unjustified; (3) it may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; and (4) it must be genuine, not a
mere afterthought, to justify an earlier action taken in bad faith. Villanueva
worked for Meralco as a Branch Representative whose tasks included the
issuance of Contracts for Electric Service after receipt of the amount due
for service connection from customers.  Obviously, he was entrusted not
only with the responsibility of handling company funds but also to cater to
customers who intended to avail of Meralco’s services.  This is nothing but
an indication that trust and confidence were reposed in him by the
company, although his position was not strictly managerial by nature. 
 John Mark F. Sunga, 2012-0351

Meralco’s loss of trust and confidence arising out of Villanueva’s act of

misappropriation of company funds in the course of processing customer
applications has been proven by substantial evidence, thus, justified. 
Verily, the issuance of additional receipts for excessive payments exacted
from customers is a willful breach of the trust reposed in him by the
company. Vicente Villanueva, Jr. vs.. The National Labor Relations
Commission, Third Division, Manila Electric Company, Manuel Lopez,
Chairman and CEO, and Francisco Collantes, Manager. G.R. No.
176893, June 13, 2012.
Employee suit; damages. To obtain moral damages, the claimant must
prove the existence of bad faith by clear and convincing evidence, for the
law always presumes good faith. It is not even enough that one merely
suffered sleepless nights, mental anguish and serious anxiety as the result
of the actuations of the other party. In this case, Lazaro did not state any
moral anguish that he suffered. Neither did he substantiate his imputations
of malice to Banco Filipino. He only made a sweeping declaration, without
concrete proof, that the bank in refusing his claim maliciously damaged his
property rights and interest. Accordingly, neither moral damages nor
exemplary damage can be awarded to him.
With respect to attorney’s fees, an award is proper only if that person was
forced to litigate and incur expenses to protect one’s rights and interest by
reason of an unjustified act or omission of the party for whom it is sought.
Banco Filipino had a prima facie legitimate defense that, because it
underwent liquidation proceedings, it cannot be compelled to credit that
period in the computation of the employee’s the retirement pay and profit
shares. Considering that Banco Filipino’s refusal cannot be accurately
characterized as unjustified, Lazaro cannot claim an award of attorney’s
fees.Banco Filipino Savings and Mortgage Bank vs. Miguelito M.
 John Mark F. Sunga, 2012-0351

Lazaro/Miguelito M. Lazaro vs. Banco Filipino Savings and Mortgage

Bank, et al. G.R. No. 185346 & G.R. No. 185442. June 27, 2012.
Independent contractor; tests. Permissible job contracting or
subcontracting refers to an arrangement whereby a principal agrees to put
out or farm out to a contractor or subcontractor the performance or
completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or service is
to be performed or completed within or outside the premises of the
principal.  A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur:
(a)    The contractor or subcontractor carries on a distinct and independent
business and undertakes to perform the job, work or service on its own
account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all
matters connected with the performance of the work except as to the
results thereof;
(b)   The contractor or subcontractor has substantial capital or investment;
and
(c)    The agreement between the principal and contractor or subcontractor
assures the contractual employees entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social welfare benefits.
In contrast, labor-only contracting, a prohibited act, is an arrangement
where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal.  In labor-only
contracting, the following elements are present:
 John Mark F. Sunga, 2012-0351

(a)    The contractor or subcontractor does not have substantial capital or

investment to actually perform the job, work or service under its own
account and responsibility; and
(b)   The employees recruited, supplied or placed by such contractor or
subcontractor, are performing activities which are directly related to the
main business of the principal.
The test of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his own
methods and without being subject to the control of the employer, except
only as to the results of the work.
Gramaje is not an independent job contractor, but a “labor-only”
contractor. First, Gramaje has no substantial capital or investment.  The
presumption is that a contractor is a labor-only contractor unless he
overcomes the burden of proving that it has substantial capital,
investment, tools, and the like. Neither Gramaje nor Polyfoam presented
evidence showing Gramaje’s ownership of the equipment and machineries
used in the performance of the alleged contracted job.
Second, Gramaje did not carry on an independent business or undertake
the performance of its service contract according to its own manner and
method, free from the control and supervision of its principal, Polyfoam, its
apparent role having been merely to recruit persons to work for Polyfoam.
It is undisputed that respondent had performed his task of packing
Polyfoam’s foam products in Polyfoam’s premises. As to the recruitment of
respondent, petitioners were able to establish only that respondent’s
application was referred to Gramaje, but that is all.  Prior to his
termination, respondent had been performing the same job in Polyfoam’s
business for almost six (6) years.  He was even furnished a copy of
Polyfoam’s “Mga Alituntunin at Karampatang Parusa,”which embodied
 John Mark F. Sunga, 2012-0351

Polyfoam’s rules on attendance, the manner of performing the employee’s

duties, ethical standards, cleanliness, health, safety, peace and order. 
These rules carried with them the corresponding penalties in case of
violation. While it is true that petitioners submitted the Affidavit of
Polyfoam’s supervisor, claiming that the latter did not exercise supervision
over respondent because the latter was not Polyfoam’s but Gramaje’s
employee, said Affidavit is insufficient to prove such claim.  Petitioners
should have presented the person who they claim to have exercised
supervision over respondent and their alleged other employees assigned
to Polyfoam.  It was never established that Gramaje took entire charge,
control and supervision of the work and service agreed upon. Polyfoam-
RGC International, Corporation and Precilla A. Gramaje vs. Edgardo
Concepcion.G.R. No. 172349, June 13, 2012.
NLRC; jurisdiction over interpretation or implementation of the CBA. R.A.
8042 is a special law governing overseas Filipino workers. However, there
is no specific provision thereunder which provides for jurisdiction over
disputes or unresolved grievances regarding the interpretation or
implementation of a CBA.  Section 10 of R.A. 8042 simply speaks, in
general, of “claims arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and other forms
of damages.” On the other hand, Articles 217(c) and 261 of the Labor
Code are very specific in stating that voluntary arbitrators have jurisdiction
over cases arising from the interpretation or implementation of collective
bargaining agreements. In the present case, the basic issue raised by
Merridy Jane in her complaint filed with the NLRC is: which provision of
the subject CBA applies insofar as death benefits due to the heirs of
Nelson are concerned.  This issue clearly involves the interpretation or
 John Mark F. Sunga, 2012-0351

implementation of the said CBA. Thus, the specific or special provisions of

the Labor Code govern.
CBA is the law or contract between the parties. Article 13.1 of the CBA
entered into by and between respondent GCI and AMOSUP provides that
the Company and the Union agree that in case of dispute or conflict in the
interpretation or application of any of the provisions of this Agreement, or
enforcement of Company policies, the same shall be settled through
negotiation, conciliation or voluntary arbitration. The provisions of the CBA
are in consonance with Rule VII, Section 7 of the present Omnibus Rules
and Regulations Implementing the Migrant Workers and Overseas
Filipinos Act of 1995, as amended by Republic Act No. 10022, which
states that for OFWs with collective bargaining agreements, the case shall
be submitted for voluntary arbitration in accordance with Articles 261 and
262 of the Labor Code. With respect to disputes involving claims of Filipino
seafarers wherein the parties are covered by a collective bargaining
agreement, the dispute or claim should be submitted to the jurisdiction of a
voluntary arbitrator or panel of arbitrators. It is only in the absence of a
collective bargaining agreement that parties may opt to submit the dispute
to either the NLRC or to voluntary arbitration. Estate of Nelson R. Dulay,
represented by his wife Meddiry Jane P. Dulay vs. Aboitiz Jebsen
Maritime, Inc. and General Charterers, Inc. G.R. No. 172642, June 13,
2012.
Service; proof of service. Petitioners allege that no affidavit of service was
attached to the CA Petition. However, the Supreme Court noted that in the
CA Resolution, the appellate court stated that their records revealed that
Atty. Espinas, petitioners’ counsel of record at the time, was duly served a
copy of the following: CA Resolution granting respondent’s Motion for
Extension of Time to file the CA Petition; CA Resolution requiring
 John Mark F. Sunga, 2012-0351

petitioners to file their Comment on the CA Petition; and CA Resolution,

submitting the case for resolution, as no comment was filed. Such service
to Atty. Espinas was valid despite the fact he was already deceased at the
time. If a party to a case has appeared by counsel, service of pleadings
and judgments shall be made upon his counsel or one of them, unless
service upon the party is specifically ordered by the court. It is not the duty
of the courts to inquire, during the progress of a case, whether the law firm
or partnership representing one of the litigants continues to exist lawfully,
whether the partners are still alive, or whether its associates are still
connected with the firm. Salvador O. Mojar, et al. vs. Agro Commercial
Security Service Agency, et al. G.R. No. 187188, June 27, 2012.
Dismissal; due process.  Due process requirement is met when there is
simply an opportunity to be heard and to explain one’s side even if no
hearing is conducted. An employee may be afforded ample opportunity to
be heard by means of any method, verbal or written, whether in a hearing,
conference or some other fair, just and reasonable way. After receiving the
first notice apprising him of the charges against him, the employee may
submit a written explanation (which may be in the form of a letter,
memorandum, affidavit or position paper) and offer evidence in support
thereof, like relevant company records and the sworn statements of his
witnesses. For this purpose, he may prepare his explanation personally or
with the assistance of a representative or counsel. He may also ask the
employer to provide him copy of records material to his defense. His
written explanation may also include a request that a formal hearing or
conference be held. In such a case, the conduct of a formal hearing or
conference becomes mandatory, just as it is where there exist substantial
evidentiary disputes or where company rules or practice requires an actual
hearing as part of employment pre-termination procedure.
 John Mark F. Sunga, 2012-0351

Petitioner’s written response to the prerequisite notice provided her with

an avenue to explain and defend her side and thus served the purpose of
due process. That there was no hearing, investigation or right to appeal,
which petitioner opined to be a violation of company policies, is of no
moment since the record is bereft of any showing that there is an existing
company policy that requires these procedures with respect to the
termination of a CHR Director like petitioner or that company practice calls
for the same. There was also no request for a formal hearing on the part of
petitioner.  As she was served with a notice apprising her of the charges
against her and also a subsequent notice informing her of the
management’s decision to terminate her services after respondents found
her written response to the first notice unsatisfactory, petitioner was clearly
afforded her right to due process. Flordeliza Maria Reyes-Rayel vs.
Philippine Luen Thai Holdings Corporation, et al. G.R. No. 174893, July
11, 2012.
Dismissal; loss of trust and confidence. An employer has a distinct
prerogative and wider latitude of discretion in dismissing a managerial
personnel who performs functions which by their nature require the
employer’s full trust and confidence.As distinguished from a rank and file
personnel, mere existence of a basis for believing that a managerial
employee has breached the trust of the employer justifies dismissal. Loss
of confidence as a ground for dismissal does not require proof beyond
reasonable doubt as the law requires only that there be at least some
basis to justify it.
Petitioner was L&T’s CHR Director for Manufacturing, which is a
managerial position saddled with great responsibility. As such, she was
directly responsible for managing her own departmental staff. Because of
this, petitioner must enjoy the full trust and confidence of her superiors.
 John Mark F. Sunga, 2012-0351

However, petitioner delivered dismal performance and displayed poor

work attitude, which constitute sufficient reasons for an employer to
terminate an employee on the ground of loss of trust and confidence. First,
records show that petitioner indeed unreasonably failed to effectively
communicate with her immediate superior. Second, the affidavits of
petitioner’s co-workers revealed her negative attitude and unprofessional
behavior towards them and the company. Lastly, petitioner displayed
inefficiency and ineptitude in her job as a CHR Director. Taking all these
circumstances collectively, the Court is convinced that respondents have
sufficient and valid reasons for terminating the services of petitioner as her
continued employment would be patently inimical to respondents’
interest. Flordeliza Maria Reyes-Rayel vs. Philippine Luen Thai Holdings
Corporation, et al. G.R. No. 174893, July 11, 2012.
Employee dismissal; validity of termination. Retrenchment is one of the
authorized causes for the dismissal of employees recognized by the Labor
Code. It is a management prerogative resorted to by employers to avoid or
to minimize business losses. The Court has laid down the following
standards that an employer should meet to justify retrenchment and to foil
abuse, namely:
(a)    The expected losses should be substantial and not merely de
minimis in extent;
(b)   The substantial losses apprehended must be reasonably imminent;
(c)    The retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and
(d)   The alleged losses, if already incurred, and the expected imminent
losses sought to be forestalled must be proved by sufficient and
convincing evidence
 John Mark F. Sunga, 2012-0351

In termination cases, the burden of proving that the dismissal was for a
valid or authorized cause rests upon the employer. The petitioner did not
submit evidence of the losses to its business operations and the economic
havoc it would thereby imminently sustain. It only claimed that
respondent’s termination was due to its “present business/financial
condition”. This bare statement fell short of the norm to show a valid
retrenchment. Indeed, not every loss incurred or expected to be incurred
by an employer can justify retrenchment. The employer must prove,
among others, that the losses are substantial and that the retrenchment is
reasonably necessary to avert such losses. Thus, by its failure to present
sufficient and convincing evidence to prove that retrenchment was
necessary, respondent’s termination due to retrenchment is not
allowed. Legend Hotel [Manila], owned by Titatium Corporation, et al. vs.
Hernani S. Realuyo, also known as Joey Roa. G.R. No. 153511, July 18,
2012.
Employee training; reimbursement. The Supreme Court recognized the
right of PAL to recoup the costs of a pilot’s training in the form of service
for a period of at least three (3) years. By carrying over the same
stipulation setting the age of fifty-seven (57) years as the reckoning point
when a pilot becomes disqualified to bid for a higher position in the
present CBA, both PAL and ALPAP recognized that the company’s effort
in sending pilots for training abroad is an investment which necessarily
expects a reasonable return in the form of service for a period of at least
three (3) years. This stipulation had been repeatedly adopted by the
parties in the succeeding renewals of their CBA, thus validating the
impression that it is a reasonable and acceptable term to both PAL and
ALPAP. Consequently, the petitioner cannot conveniently disregard this
stipulation by simply raising the absence of a contract expressly requiring
 John Mark F. Sunga, 2012-0351

the pilot to remain within PAL’s employ within a period of 3 years after he
has been sent on training. The supposed absence of contract being raised
by the petitioner cannot stand as the CBA clearly covered the petitioner’s
obligation to render service to PAL within 3 years to enable it to recoup the
costs of its investment. Bibiano C. Elegir vs. Philippine Airlines, Inc. G.R.
No. 181995, July 16, 2012.
Employer-employee relationship; existence. The issue of whether or not
an employer-employee relationship existed is essentially a question of
fact. The factors that determine the issue include who has the power to
select the employee, who pays the employee’s wages, who has the power
to dismiss the employee, and who exercises control of the methods and
results by which the work of the employee is accomplished. Although no
particular form of evidence is required to prove the existence of the
relationship, and any competent and relevant evidence to prove the
relationship may be admitted, a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant
evidence that a reasonable mind might accept as adequate to justify a
conclusion.
A review of the circumstances reveals that respondent was, indeed,
petitioner’s employee. He was undeniably employed as a pianist in
petitioner’s Restaurant. First of all, petitioner actually wielded the power of
selection at the time it entered into the service contract with respondent.
The power of selection was firmly evidenced by, among others, the
express written recommendation by petitioner’s restaurant manager, for
the increase of his remuneration. Secondly, there is no denying that the
remuneration denominated as talent fees was fixed on the basis of his
talent and skill and the quality of the music he played during the hours of
performance each night, taking into account the prevailing rate for similar
 John Mark F. Sunga, 2012-0351

talents in the entertainment industry. Respondent’s remuneration, albeit

denominated as talent fees, was still considered as included in the term
wagein the sense and context of the Labor Code, regardless of how
petitioner chose to designate the remuneration. Thirdly, the petitioner has
the power to dismiss respondent. The memorandum informing respondent
of the discontinuance of his service because of the present business or
financial condition of petitioner showed that the latter had the power to
dismiss him from employment. Lastly, the power of the employer to control
the work of the employee is considered the most significant determinant of
the existence of an employer-employee relationship. This is the so-called
control test, and is premised on whether the person for whom the services
are performed reserves the right to control both the end achieved and the
manner and means used to achieve that end. Respondent performed his
work as a pianist under petitioner’s supervision and control. Petitioner’s
control of both the end achieved and the manner and means used to
achieve that end was demonstrated by the following, to wit: (1)He could
not choose the time of his performance, which petitioners had fixed from
7:00 pm to 10:00 pm, three to six times a week; (2)He could not choose
the place of his performance; (3) The restaurant’s manager required him
at certain times to perform only Tagalog songs or music, or to
wear barong Tagalog to conform to the Filipiniana motif; and (4)He was
subjected to the rules on employees’ representation check and chits, a
privilege granted to other employees. Legend Hotel [Manila], owned by
Titatium Corporation, et al. vs. Hernani S. Realuyo, also known as Joey
Roa. G.R. No. 153511, July 18, 2012.
Management prerogative; transfer of employees. An employer’s decision
to transfer an employee, if made in good faith, is a valid exercise of a
management prerogative, although it may result in personal inconvenience
 John Mark F. Sunga, 2012-0351

or hardship to the employee. Re-assignments made by management

pending investigation of irregularities allegedly committed by an employee
fall within the ambit of management prerogative. The purpose of
reassignments is no different from that of preventive suspension which
management could validly impose as a disciplinary measure for the
protection of the company’s property pending investigation of any alleged
malfeasance or misfeasance committed by the employee.
As the executive assistant of the president, petitioner undeniably occupied
a sensitive position that required her employer’s utmost trust and
confidence. Having lost his trust and confidence in petitioner, respondent
Delfin had the right to transfer her to ensure that she would no longer have
access to the companies’ confidential files. Although it is true that
petitioner has yet to be proven guilty, respondents had the authority to
reassign her, pending investigation. When petitioner was assigned to
Cavite, there was an ongoing investigation of the charges filed against her.
It is undisputed that she refused to fill up, for no justifiable reasons, the
questionnaire distributed by her employer to determine who among those
who had access to the confidential files was responsible for their taking.
Furthermore, a witness had executed an Affidavit claiming that she found
the missing files, and that her husband told her that it was petitioner who
handed those files to him. Lastly, the person who supposedly received
these documents from petitioner did not deny or rebuke the statements
made by his wife. Josephine Ruiz vs. Wendel Osaka Realty Corp., et
al.G.R. No. 189082, July 11, 2012.
Retirement Pay; collective bargaining agreement. Article 287 of the Labor
Code provides that it is applicable only to a situation where (1) there is no
CBA or other applicable employment contract providing for retirement
benefits for an employee, or (2) there is a CBA or other applicable
 John Mark F. Sunga, 2012-0351

employment contract providing for retirement benefits for an employee, but

it is below the requirement set by law. The rationale for the first situation is
to prevent the absurd situation where an employee, deserving to receive
retirement benefits, is denied to them through the nefarious scheme of
employers to deprive employees of the benefits due them under existing
labor laws. On the other hand, the second situation aims to prevent private
contracts from derogating from the public law. The determining factor in
choosing which retirement scheme to apply is still superiorityin terms of
benefits provided. Thus, even if there is an existing CBA but the same
does not provide for retirement benefits equal or superior to that which is
provided under Article 287 of the Labor Code, the latter will apply.
There are two retirement schemes at point in this case: (1) Article 287 of
the Labor Code, and; (2) the PAL-ALPAP Retirement Plan and the PAL
Pilots’ Retirement Benefit Plan. The two retirement schemes are
alternative in nature such that the retired pilot can only be entitled to that
which provides for superior benefits. Comparing the benefits under the two
(2) retirement schemes, it can readily be perceived that the 22.5 days
worth of salary for every year of service provided under Article 287 of the
Labor Code cannot match the 240% of salary or almost two and a half
worth of monthly salary per year of service provided under the PAL Pilots’
Retirement Benefit Plan, which will be further added to the ₱125,000.00 to
which the petitioner is entitled under the PAL-ALPAP Retirement Plan.
Clearly then, it is to the petitioner’s advantage that PAL’s retirement plans
were applied in the computation of his retirement benefits. Bibiano C.
Elegir vs. Philippine Airlines, Inc. G.R. No. 181995, July 16, 2012.
Unjust enrichment. There is unjust enrichment when a person unjustly
retains a benefit at the loss of another, or when a person retains the
money or property of another against the fundamental principles of justice,
 John Mark F. Sunga, 2012-0351

equity and good conscience. Two conditions must concur: (1) a person is
unjustly benefited; and (2) such benefit is derived at the expense of or with
damages to another. The enrichment may consist of a patrimonial,
physical, or moral advantage, so long as it is appreciable in money. It must
have a correlative prejudice, disadvantage or injury to the plaintiff which
may consist, not only of the loss of the property or the deprivation of its
enjoyment, but also of the non-payment of compensation for a prestation
or service rendered to the defendant without intent to donate on the part of
the plaintiff, or the failure to acquire something that the latter would have
obtained.
PAL invested a considerable amount of money in sending the petitioner
abroad to undergo training to prepare him for his new appointment as
B747-400 Captain. In the process, the petitioner acquired new knowledge
and skills which effectively enriched his technical know-how. As all other
investors, PAL expects a return on investment in the form of service by the
petitioner for a period of 3 years, which is the estimated length of time
within which the costs of the latter’s training can be fully recovered. The
petitioner is, thus, expected to work for PAL and utilize whatever
knowledge he had learned from the training for the benefit of the company.
However, after only one (1) year of service, the petitioner opted to retire
from service, leaving PAL stripped of a necessary manpower. Undeniably,
the petitioner was enriched at the expense of PAL. After undergoing the
training fully shouldered by PAL, he acquired a higher level of technical
competence which, in the professional realm, translates to a higher
compensation. Further, his training broadened his opportunities for a
better employment as in fact he was able to transfer to another airline
company immediately after he left PAL. To allow the petitioner to simply
leave the company without reimbursing it for the proportionate amount of
 John Mark F. Sunga, 2012-0351

the expenses it incurred for his training will only magnify the financial
disadvantage sustained by PAL. Reason and fairness dictate that he must
return to the company a proportionate amount of the costs of his
training. Bibiano C. Elegir vs. Philippine Airlines, Inc. G.R. No. 181995,
July 16, 2012.
Disability benefits; entitlement. Entitlement of seafarers to disability
benefits is governed not only by medical findings but also by contract and
by law. By contract, Department Order No. 4, series of 2000, of the
Department of Labor and Employment and the parties’ Collective
Bargaining Agreement bind the seafarer and the employer. By law, the
Labor Code provisions on disability apply with equal force to seafarers.
The seafarer, upon sign-off from his vessel, must report to the company-
designated physician within three (3) days from arrival for diagnosis and
treatment. For the duration of the treatment but in no case to exceed 120
days, the seaman is on temporary total disability as he is totally unable to
work. He receives his basic wage during this period until he is declared fit
to work or his temporary disability is acknowledged by the company to be
permanent, either partially or totally, as his condition is defined under the
POEA Standard Employment Contract and by applicable Philippine laws.
If the 120 days initial period is exceeded and no such declaration is made
because the seafarer requires further medical attention, then the
temporary total disability period may be extended up to a maximum of 240
days, subject to the right of the employer to declare within this period that
a permanent partial or total disability already exists. The seaman may of
course also be declared fit to work at any time such declaration is justified
by his medical condition.
From the time Tomacruz was repatriated on November 18, 2002, he
submitted himself to the care and treatment of the company-designated
 John Mark F. Sunga, 2012-0351

physician. When the company-designated physician made a declaration

on July 25, 2003 that Tomacruz was already fit to work, 249 days had
already lapsed from the time he was repatriated. As such, his temporary
total disability should be deemed total and permanent, pursuant to Article
192 (c)(1) of the Labor Code and its implementing rule.Philasia Shipping
Agency Corporation, et al. vs. Andres G. Tomacruz. G.R. No. 181180,
August 15, 2012.
Employee dismissal; due process requirements. The following standards
of due process shall be substantially observed for termination of
employment based on just causes as defined in Article 282 of the Labor
Code:
(i) A written notice served on the employee specifying the ground or
grounds for termination, and giving said employee reasonable opportunity
within which to explain his side.
(ii) A hearing or conference during which the employee concerned, with
the assistance of counsel if he so desires is given opportunity to respond
to the charge, present his evidence or rebut the evidence presented
against him.
(iii) A written notice of termination served on the employee, indicating that
upon due consideration of all the circumstances, grounds have been
established to justify his termination.
Petitioners’ evidence fails to prove their contention that they afforded
Atencio with due process. The June 21, 1999 letter, which allegedly
proves Atencio’s knowledge of the charges against him, and which
allegedly constitutes Atencio’s explanation, clearly discusses an entirely
different topic – which is the removal of his construction company from the
Caltex project. As for the May 24, 1999 letter, which allegedly constitutes
the notice of termination of Atencio’s employment as JARL’s chief
 John Mark F. Sunga, 2012-0351

operating manager, the said letter involves the termination of the

subcontracting agreement between JARL and Atencio’s company, and not
the termination of Atencio’s employment. For petitioners’ failure to observe
the two-notice rule under Article 277(b) of the Labor Code, respondent is
entitled to nominal damages. Jarl Construction and Armando K. Tejada
vs. Simeon A. Atencio. G.R. No. 175969, August 1, 2012.
Judgment; law of the case.The law of the case has been defined as the
opinion delivered on a former appeal. It means that whatever is once
irrevocably established as the controlling legal rule or decision between
the same parties in the same case continues to be the law of the case,
whether correct on general principles or not, so long as the facts on which
such decision was predicated continue to be the facts of the case before
the court.
Both G.R. No. 168477 and this petition are offshoots of petitioner’s
purported temporary measures to preserve its neutrality with regard to the
perceived void in the union leadership. While these two cases arose out of
different notices to strike, it is undeniable that the facts cited and the
arguments raised by petitioner are almost identical. Inevitably, G.R. No.
168477 and this petition seek only one relief, that is, to absolve petitioner
from respondent’s charge of committing an unfair labor practice. For this
reason, we are constrained to apply the law of the case doctrine in light of
the finality of our July 20, 2005 and September 21, 2005 resolutions in
G.R. No. 168477. In other words, our previous affirmance of the Court of
Appeals’ finding – that petitioner erred in suspending collective bargaining
negotiations with the union and in placing the union funds in escrow
considering the intra-union dispute between the Aliazas and Bañez
factions was not a justification therefor — is binding in the present
 John Mark F. Sunga, 2012-0351

case. De la Salle University vs. De la Salle University Employees

Association. G.R. No. 169254. August 23, 2012.
Lien; unpaid wages. Under Republic Act No. 10142, otherwise known as
the Financial Rehabilitation and Insolvency Act of 2010, the right of a
secured creditor to enforce his lien during liquidation proceedings is
retained. On the right of first preference as regards unpaid wages, a
distinction should be made between a preference of credit and a lien. A
preference applies only to claims which do not attach to specific
properties. A lien creates a charge on a particular property. The right of
first preference as regards unpaid wages recognized by Article 110 of the
Labor Code does not constitute a lien on the property of the insolvent
debtor in favor of workers. It is but a preference of credit in their favor, a
preference in application. It is a method adopted to determine and specify
the order in which credits should be paid in the final distribution of the
proceeds of the insolvent’s assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor. Consequently, the right of
first preference for unpaid wages may not be invoked in this case to nullify
the foreclosure sales conducted pursuant to PNB’s right as a secured
creditor to enforce its lien on specific properties of its debtor,
ARCAM. Manuel D. Yngson, Jr., (in his capacity as the Liquidator of
ARCAM & Co., Inc.)  vs. Philippine National Bank. G.R. No. 171132,
August 15, 2012.
NLRC; jurisdiction. Although Republic Act No. 8042, through its Section
10, transferred the original and exclusive jurisdiction to hear and decide
money claims involving overseas Filipino workers from the POEA to the
Labor Arbiters, the law did not remove from the POEA the original and
exclusive jurisdiction to hear and decide all disciplinary action cases and
other special cases administrative in character involving such workers.
 John Mark F. Sunga, 2012-0351

The obvious intent of Republic Act No. 8042 was to have the POEA focus
its efforts in resolving all administrative matters affecting and involving
such workers. The NLRC had no appellate jurisdiction to review the
decision of the POEA in disciplinary cases involving overseas contract
workers.
Although, as a rule, all laws are prospective in application unless the
contrary is expressly provided, or unless the law is procedural or curative
in nature, there is no serious question about the retroactive applicability of
Republic Act No. 8042 to the appeal of the POEA’s decision on petitioners’
disciplinary action against respondents. In a way, Republic Act No. 8042
was a procedural law due to its providing or omitting guidelines on appeal.
Republic Act No. 8042 applies to petitioners’ complaint by virtue of the
case being then still pending or undetermined at the time of the law’s
passage, there being no vested rights in rules of procedure. They could
not validly insist that the reckoning period to ascertain which law or rule
should apply was the time when the disciplinary complaint was originally
filed in the POEA in 1993. Moreover, Republic Act No. 8042 and its
implementing rules and regulations were already in effect when petitioners
took their appeal.  When Republic Act No. 8042 withheld the appellate
jurisdiction of the NLRC in respect of cases decided by the POEA, the
appellate jurisdiction was vested in the Secretary of Labor in accordance
with his power of supervision and control under Section 38(1), Chapter 7,
Title II, Book III of the Revised Administrative Code of 1987. Eastern
Mediterranean Maritime Ltd., et al. vs. Estanislao Surio, et al. G.R. No.
154213, August 23, 2012.
Petition for review; question of fact. While generally, only questions of law
can be raised in a petition for review on certiorari under Rule 45 of the
Rules of Court, the rule admits of certain exceptions, namely: (1) when the
 John Mark F. Sunga, 2012-0351

findings are grounded entirely on speculations, surmises, or conjectures;

(2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is a grave abuse of discretion; (4) when the
judgment is based on misappreciation of facts; (5) when the findings of
fact are conflicting; (6) when in making its findings, the same are contrary
to the admissions of both appellant and appellee; (7) when the findings are
contrary to those of the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner’s main and reply
briefs are not disputed by the respondent; and (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted
by the evidence on record. The illegality of petitioner’s dismissal was an
issue that was squarely raised before the NLRC. When the NLRC decision
was reversed by the Court of Appeals, there was a situation where “the
findings of facts are conflicting”. The petition for review filed by the
Petitioner comes within the purview of exception (5) and by analogy,
exception (7). Mylene Carvajal vs.  Luzon Development Bank and/or
Oscar Z. Ramirez. G.R. No. 186169, August 1, 2012.
Probationary employee; security of tenure. A probationary employee, like
a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of
termination, an additional ground is provided under Article 281 of the
Labor Code, i.e., the probationary employee may also be terminated for
failure to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of the
engagement.
Punctuality is a reasonable standard imposed on every employee, whether
in government or private sector. As a matter of fact, habitual tardiness is a
 John Mark F. Sunga, 2012-0351

serious offense that may very well constitute gross or habitual neglect of
duty, a just cause to dismiss a regular employee. Assuming that petitioner
was not apprised of the standards concomitant to her job, it is but common
sense that she must abide by the work hours imposed by the bank.
Satisfactory performance is and should be one of the basic standards for
regularization. Naturally, before an employer hires an employee, the
former can require the employee, upon his engagement, to undergo a trial
period during which the employer determines his fitness to qualify for
regular employment based on reasonable standards made known to him
at the time of engagement.
It is evident that the primary cause of respondent’s dismissal from her
probationary employment was her “chronic tardiness.” At the very start of
her employment, petitioner already exhibited poor working habits. Even
during her first month on the job, she already incurred eight (8) tardiness.
Respondent also cited other infractions such as unauthorized leaves of
absence, mistake in clearing of a check, and underperformance. All of
these infractions were not refuted by petitioner.Mylene Carvajal vs. Luzon
Development Bank and/or Oscar Z. Ramirez. G.R. No. 186169, August 1,
2012.
Salaries; burden of proof of payment. When there is an allegation of
nonpayment of salaries and other monetary benefits, it is the employer’s
burden to prove its payment to its employee. The employer’s evidence
must show, with a reasonable degree of certainty, that it paid and that the
workers actually received the payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar
documents are not in the possession of the worker but are in the custody
and absolute control of the employer. In the case at bar, the two official
receipts issued by Safemark, and offered as JARL’s evidence, only prove
 John Mark F. Sunga, 2012-0351

that JARL made a total partial payment of P1,891,509.50 to the said

company for its “professional services.” Since JARL admits that the said
company actually rendered services for JARL on its Caltex project, the
payment can only be assumed as covering for the said services. There is
nothing on the face of the receipts to support the conclusion that Atencio
(and not his company) received it as payment for his service as a JARL
employee. Jarl Construction and Armando K. Tejada vs. Simeon A.
Atencio. G.R. No. 175969, August 1, 2012.
Seafarers; contract. The employment of seafarers, and its incidents,
including claims for death benefits, is governed by the contracts they sign
every time they are hired or rehired. Such contracts have the force of law
between the parties as long as their stipulations are not contrary to law,
morals, public order or public policy. While the seafarers and their
employers are governed by their mutual agreements, the POEA rules and
regulations require that the POEA Standard Employment Contract, which
contains the standard terms and conditions of the seafarers’ employment
in foreign ocean-going vessels, be integrated in every seafarer’s contract.
The pertinent provision of the 1996 POEA SEC, which was in effect at the
time of Tanawan’s employment, was Section 20(B) – Compensation and
Benefits. Wallem Maritime Services, Inc. vs. Ernesto C. Tanawan. G.R.
No. 160444. August 29, 2012.
Seafarers; disability benefits. The one tasked to determine whether the
seafarer suffers from any disability or is fit to work is the company-
designated physician. As such, the seafarer must submit himself to the
company-designated physician for a post-employment medical
examination within three days from his repatriation. But the assessment of
the company-designated physician is not final, binding or conclusive on
the seafarer, the labor tribunals, or the courts. The seafarer may request a
 John Mark F. Sunga, 2012-0351

second opinion and consult a physician of his choice regarding his ailment
or injury, and the medical report issued by the physician of his choice shall
also be evaluated on its inherent merit by the labor tribunal and the court.
Tanawan submitted himself to Dr. Lim, the company-designated physician,
for a medical examination within the 3-day reglementary period from his
repatriation. The medical examination conducted focused on Tanawan’s
foot injury, the cause of his repatriation. Dr. Lim treated Tanawan for the
foot injury from December 1, 1997 until May 21, 1998, when Dr. Lim
declared him fit to work. Within that period that lasted 172 days, Tanawan
was unable to perform his job, an indication of a permanent disability.
Under the law, there is permanent disability if a worker is unable to
perform his job for more than 120 days, regardless of whether or not he
loses the use of any part of his body. Disability should be understood more
on the loss of earning capacity rather than on the medical significance of
the disability. Even in the absence of an official finding by the company-
designated physician to the effect that the seafarer suffers a disability and
is unfit for sea duty, the seafarer may still be declared to be suffering from
a permanent disability if he is unable to work for more than 120 days. On
the other hand, Tanawan’s claim for disability benefits due to the eye
injury was already barred by his failure to report the injury and to have his
eye examined by a company-designated physician. The rationale for the
rule is that reporting the illness or injury within three days from repatriation
fairly makes it easier for a physician to determine the cause of the illness
or injury.
Under the 1996 POEA SEC, it was enough to show that the injury or
illness was sustained during the term of the contract. The Court has
declared that the unqualified phrase “during the term” found in Section
20(B) thereof covered all injuries or illnesses occurring during the lifetime
 John Mark F. Sunga, 2012-0351

of the contract. Whoever claims entitlement to the benefits provided by law

should establish his right to the benefits by substantial evidence. Tanawan
did not present any proof of having sustained the eye injury during the
term of his contract. All that he submitted was his bare allegation that his
eye had been splashed with some thinner while he was on board the
vessel. Wallem Maritime Services, Inc. vs. Ernesto C. Tanawan. G.R. No.
160444. August 29, 2012.
Breach of contract; Contract substitution; Constructive dismissal; Illegal
recruitment. The agency and its principal, Modern Metal, committed a
prohibited practice and engaged in illegal recruitment when they altered or
substituted the contracts approved by the Philippine Overseas
Employment Administration (POEA). Article 34 (i) of the Labor Code
provides: It shall be unlawful for any individual, entity, licensee, or holder
of authority to substitute or alter employment contracts approved and
verified by the Department of Labor from the time of actual signing thereof
by the parties up to and including the period of expiration of the same
without the approval of the Secretary of Labor. Meanwhile, Article 38 (i) of
the Labor Code, as amended by R.A. 8042, defined “illegal recruitment” to
include the substitution or alteration, to the prejudice of the worker, of
employment contracts approved and verified by the Department of Labor
and Employment from the time of actual signing thereof by the parties up
to and including the period of the expiration of the same without the
approval of the Department of Labor and Employment.
Furthermore, the agency and Modern Metal committed breach of contract
by providing substandard working and living arrangements, when the
contract provided free and suitable housing. The living quarters were
cramped as they shared them with 27 other workers.  The lodging house
was far from the jobsite, leaving them only three to four hours of sleep
 John Mark F. Sunga, 2012-0351

every workday because of the long hours of travel to and from their place
of work, not to mention that there was no potable water in the lodging
house which was located in an area where the air was polluted.  They
complained with the agency about the hardships that they were suffering,
but the agency failed to act on their reports.  Significantly, the agency
failed to refute their claims.
Thus, with their original contracts substituted and their oppressive working
and living conditions unmitigated or unresolved, the decision to resign is
not surprising.  They were compelled by the dismal state of their
employment to give up their jobs; effectively, they were constructively
dismissed.  A constructive dismissal or discharge is “a quitting because
continued employment is rendered impossible, unreasonable or unlikely,
as, an offer involving a demotion in rank and a diminution in pay.”
Without doubt, continued employment with Modern Metal had become
unreasonable.  A reasonable mind would not approve of a substituted
contract that pays a diminished salary – from 1350 AED a month in the
original contract to 1,000 AED to 1,200 AED in the appointment letters, a
difference of 150 AED to 250 AED (not just 50 AED as the agency
claimed) or an extended employment (from 2 to 3 years) at such inferior
terms, or a “free and suitable” housing which is hours away from the job
site, cramped and crowded, without potable water and exposed to air
pollution.
We thus cannot accept the agency’s insistence that the respondents
voluntarily resigned since they personally prepared their resignation letters
in their own handwriting. Pert/CPM Manpower Exponent Co., Inc. vs.
Amando A. Vinuya, et al. G.R. No. 197528. September 5, 2012.
Disability benefit. Deemed read and incorporated into the Contract of
Employment between David and respondents are the provisions of the
 John Mark F. Sunga, 2012-0351

2000 Philippine Overseas Employment Agency Standard Employment

Contract (POEASEC). Sec. 20(B)(4) of the POEA-SEC clearly established
a disputable presumption in favor of the compensability of an illness
suffered by a seafarer during the term of his contract. Hence, unless
contrary evidence is presented by the seafarer’s employer/s, this
disputable presumption stands.
In this case, David not only relies on this disputable presumption of the
compensability of his illness but David has provided more than a
reasonable nexus between the nature of his job and the disease that
manifested itself on the sixth month of his last contract with respondents.
It is not necessary that the nature of the employment be the sole and only
reason for the illness suffered by the seafarer. It is sufficient that there is a
reasonable linkage between the disease suffered by the employee and his
work to lead a rational mind to conclude that his work may have
contributed to the establishment or, at the very least, aggravation of any
pre-existing condition he might have had.
David showed that part of his duties as a Third Officer of the crude tanker
M/T Raphael involved “overseeing the loading, stowage, securing and
unloading of cargoes.” As a necessary corollary, David was frequently
exposed to the crude oil that M/T Raphael was carrying. The chemical
components of crude oil include, among others, sulfur, vanadium and
arsenic compounds. Hydrogen sulfide and carbon monoxide may also be
encountered, while benzene is a naturally occurring chemical in crude oil.
It has been regarded that these hazardous chemicals can possibly
contribute to the formation of cancerous masses.
In this case, David was diagnosed with MFH (now known as
undifferentiated pleomorphic sarcoma [UPS]), which is a class of soft
tissue sarcoma or an illness that account for approximately 1% of the
 John Mark F. Sunga, 2012-0351

known malignant tumors. As stated by Dr. Peña of the MMC, who was
consulted by the company-designated physician, the etiology of soft tissue
sarcomas are multifactorial. However, some factors are associated with a
higher risk. These factors include exposure to chemical carcinogens like
some of the chemical components of crude oil. Jessie V. David,
represented by his wife, Ma. Theresa S. David, and children, Katherine
and Kristina David vs. OSG Shipmanagement Manila, Inc. and/or
Michaelmar Shipping Services. G.R. No. 197205. September 26, 2012.
Dismissal; Unfair labor practice; Liability of corporate officers; Moral and
exemplary damages. 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 defend himself; and (b) the dismissal must be
for a valid cause as provided in Article 282 of the Labor Code, or for any of
the authorized causes under Articles 283 and 284 of the same Code.  In
the case before us, both elements are completely lacking.  Respondents
were dismissed without any just or authorized cause and without being
given the opportunity to be heard and defend themselves.  The law
mandates that the burden of proving the validity of the termination of
employment rests with the employer.  Failure to discharge this evidentiary
burden would necessarily mean that the dismissal was not justified and,
therefore, illegal.  Unsubstantiated suspicions, accusations, and
conclusions of employers do not provide for legal justification for
dismissing employees.  In case of doubt, such cases should be resolved in
favor of labor, pursuant to the social justice policy of labor laws and the
Constitution.
Anent the charge of unfair labor practice, Article 248 (a) of the Labor Code
considers it an unfair labor practice when an employer interferes, restrains
or coerces employees in the exercise of their right to self-organization or
 John Mark F. Sunga, 2012-0351

the right to form an association.  In order to show that the employer

committed unfair labor practice under the Labor Code, substantial
evidence is required to support the claim.  Substantial evidence has been
defined as such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.  In the case at bar, respondents were
indeed unceremoniously dismissed from work by reason of their intent to
form and organize a union.
A corporation, being a juridical entity, may act only through its directors,
officers and employees.  Obligations incurred by them, while acting as
corporate agents, are not their personal liability but the direct
accountability of the corporation they represent.  However, corporate
officers may be deemed solidarily liable with the corporation for the
termination of employees if they acted with malice or bad faith.  In the
present case, the lower tribunals unanimously found that Percy and
Harbutt, in their capacity as corporate officers of Burgos, acted maliciously
in terminating the services of respondents without any valid ground and in
order to suppress their right to self-organization. Section 31 of the
Corporation Code makes a director personally liable for corporate debts if
he willfully and knowingly votes for or assents to patently unlawful acts of
the corporation.  It also makes a director personally liable if he is guilty of
gross negligence or bad faith in directing the affairs of the corporation. 
Thus, Percy and Harbutt, having acted in bad faith in directing the affairs
of Burgos, are jointly and severally liable with the latter for respondents’
dismissal.
The awards of moral and exemplary damages in favor of respondents are
also in order.  Moral damages may be recovered where the dismissal of
the employee was tainted by bad faith or fraud, or where it constituted an
act oppressive to labor, and done in a manner contrary to morals, good
 John Mark F. Sunga, 2012-0351

customs or public policy, while exemplary damages are recoverable only if

the dismissal was done in a wanton, oppressive, or malevolent manner. 
The grant of attorney’s fees is likewise proper.  Attorney’s fees may
likewise be awarded to respondents who were illegally dismissed in bad
faith and were compelled to litigate or incur expenses to protect their rights
by reason of the oppressive acts of petitioners.  The unjustified act of
petitioners had obviously compelled respondents to institute an action
primarily to protect their rights and interests which warrants the granting of
the award. Park Hotel, et al. vs. Manolo Soriano, et al. G.R. No. 171118.
September 10, 2012.
Employment termination; Substantive and procedural due process; Mass
leave; Strike.  Petitioners were illegally dismissed as they were not
afforded substantive and procedural due process. To justify the dismissal
of an employee on the ground of serious misconduct, the employer must
first establish that the employee is guilty of improper conduct, that the
employee violated an existing and valid company rule or regulation, or that
the employee is guilty of a wrongdoing. In the instant case, Biomedica
failed to even present a copy of the rules and to prove that petitioners
were made aware of such regulations. The accusation is for engaging in a
mass leave tantamount to an illegal strike. The phrase “mass leave” may
refer to a simultaneous availment of authorized leave benefits by a large
number of employees in a company. Here, only 5 employees were absent
on the same day. They did not go on strike, which is a temporary stoppage
of work by the concerted action of employees as a result of any industrial
or labor dispute. “Concerted” is defined as “mutually contrived or planned”
or “performed in unison”. In the case at bar, the 5 petitioners went on
leave for various reasons. They were in different places to attend to their
personal needs or affairs.
 John Mark F. Sunga, 2012-0351

The petitioners were charged with conducting an illegal strike, not a mass
leave, without specifying the exact acts that the company considers as
constituting an illegal strike or violative of company policies. Such
allegation falls short of the requirement in King of Kings Transport, Inc. of
“a detailed narration of the facts and circumstances that will serve as basis
for the charge against the employees.” A bare mention of an “illegal strike”
will not suffice. Further, while Biomedica cites the provisions of the
company policy which petitioners purportedly violated, it failed to quote
said provisions in the notice so petitioners can be adequately informed of
the nature of the charges against them and intelligently file their
explanation and defenses to said accusations.
Moreover, the period of 24 hours allotted to petitioners to answer the
notice was severely insufficient and in violation of the implementing rules
of the Labor Code. Under the implementing rule of Art. 277, an employee
should be given “reasonable opportunity” to file a response to the notice.
In addition, Biomedica did not set the charges against petitioners for
hearing or conference. While petitioners did not submit any written
explanation to the charges, it is incumbent for Biomedica to set the matter
for hearing or conference to hear the defenses and receive evidence of
the employees. More importantly, Biomedica is duty-bound to exert efforts,
during said hearing or conference, to hammer out a settlement of its
differences with petitioners. These prescriptions Biomedica failed to
satisfy. Lastly, Biomedica again deviated from the dictated contents of a
written notice of termination as laid down in Sec. 2, Book V, Rule XIII of
the Implementing Rules that it should embody the facts and circumstances
to support the grounds justifying the termination. Alex Q. Naranjo, et al.
vs. Biomedica Health Care, Inc., et al. G.R. No. 193789. September 19,
2012.
 John Mark F. Sunga, 2012-0351

Employee dismissal; Reinstatement. Following Article 279 of the Labor

Code, an employee who is unjustly dismissed from work is entitled to
reinstatement without loss of seniority rights and other privileges and to his
full backwages computed from the time he was illegally dismissed.
However, considering that respondent Dakila was terminated one (1) day
prior to his compulsory retirement on May 2, 2007, his reinstatement is no
longer feasible. Accordingly, the NLRC correctly held him entitled to the
payment of his retirement benefits pursuant to the CBA. On the other
hand, his backwages should be computed only for days prior to his
compulsory retirement which in this case is only a day. Consequently, the
award of reinstatement wages pending appeal must be deleted for lack of
basis. The New Philippine Skylanders, Inc. and/or Jennifer M. Eñano-Bote
vs. Francisco N. Dakila.G.R. No. 199547. September 24, 2012
Evidence; Constructive dismissal; Transfer; Substantial evidence. In labor
cases, strict adherence with the technical rules is not required.  This liberal
policy, however, should still conform to the rudiments of equitable
principles of law.  For instance, belated submission of evidence may only
be allowed if the delay is adequately justified and the evidence is clearly
material to establish the party’s cause. Labor tribunals, such as the NLRC,
are not precluded from receiving evidence submitted on appeal as
technical rules are not binding in cases submitted before them.  However,
any delay in the submission of evidence should be adequately explained
and should adequately prove the allegations sought to be proven. In the
present case, MORESCO II’s belated submission of evidence cannot be
permitted. MORESCO II did not cite any reason why it had failed to file its
position paper or present its cause before the Labor Arbiter despite
sufficient notice and time given to do so.  Only after an adverse decision
was rendered did it present its defense and rebut the evidence of
 John Mark F. Sunga, 2012-0351

Cagalawan by alleging that his transfer was made in response to the

letter-request of the area manager of the Ginoog sub-office asking for
additional personnel to meet its collection quota.  To our mind, however,
the belated submission of the said letter-request without any valid
explanation casts doubt on its credibility, especially so when the same is
not a newly discovered evidence.
The rule is that it is within the ambit of the employer’s prerogative to
transfer an employee for valid reasons and according to the requirement
of its business, provided that the transfer does not result in demotion in
rank or diminution of salary, benefits and other privileges.  This Court has
always considered the management’s prerogative to transfer its
employees in pursuit of its legitimate interests.  But this prerogative should
be exercised without grave abuse of discretion and with due regard to the
basic elements of justice and fair play, such that if there is a showing that
the transfer was unnecessary or inconvenient and prejudicial to the
employee, it cannot be upheld. Here, while we find that the transfer of
Cagalawan neither entails any demotion in rank since he did not have
tenurial security over the position of head of the disconnection crew, nor
result to diminution in pay as this was not sufficiently proven by him,
MORESCO II’s evidence is nevertheless not enough to show that said
transfer was required by the exigency of the electric cooperative’s
business interest.  Simply stated, the evidence sought to be admitted by
MORESCO II is not substantial to prove that there was a genuine
business urgency that necessitated the transfer.
When there is doubt between the evidence submitted by the employer and
that submitted by the employee, the scales of justice must be tilted in favor
of the employee.  This is consistent with the rule that an employer’s cause
could only succeed on the strength of its own evidence and not on the
 John Mark F. Sunga, 2012-0351

weakness of the employee’s evidence.  Thus, MORESCO II cannot rely on

the weakness of Ortiz’s certification in order to give more credit to its own
evidence.  Self-serving and unsubstantiated declarations are not sufficient
where the quantum of evidence required to establish a fact is substantial
evidence, described as more than a mere scintilla.  The evidence must be
real and substantial, and not merely apparent.  MORESCO II has
miserably failed to discharge the onus of proving the validity of
Cagalawan’s transfer. Misamis Oriental II Electric Service Cooperative
(MORESCO II) vs. Virgilio M. Cagalawan. G.R. No. 175170. September 5,
2012.
Retirement benefits. While it is true that based on prevailing jurisprudence,
disallowed benefits received in good faith need not be refunded, the case
before us may be distinguished from those cases with that ruling because
the monies involved here are retirement benefits. Retirement benefits
belong to a different class of benefits.  All the cases with that ruling
involved benefits such as cash gifts, representation allowances, rice
subsidies, uniform allowances, per diems, transportation allowances, and
the like.  The foregoing allowances or fringe benefits are given in addition
to one’s salary, either to reimburse him for expenses he might have
incurred in relation to his work, or as a form of supplementary
compensation.  On the other hand, retirement benefits are given to one
who is separated from employment either voluntarily or compulsorily. 
Such benefits, subject to certain requisites imposed by law and/or
contract, are given to the employee on the assumption that he can no
longer work.  They are also given as a form of reward for the services he
had rendered.  The purpose is not to enrich him but to help him during his
non-productive years.
 John Mark F. Sunga, 2012-0351

Our Decision does not preclude the retirees from receiving retirement
benefits provided by existing retirement laws.  What they are prohibited
from getting are the additional benefits under the GSIS RFP, which we
found to have emanated from a void and illegal board resolution.  To allow
the payees to retain the disallowed benefits would amount to their unjust
enrichment to the prejudice of the GSIS, whose avowed purpose is to
maintain its actuarial solvency to finance the retirement, disability, and life
insurance benefits of its members. Government Service Insurance System
(GSIS), et al. vs. Commission on Audit (COA), et al. G.R. No. 162372.
September 11, 2012.
Release/Quitclaim; Separation pay. The release/quitclaim affidavits are
invalid for being against public policy for two reasons: (1) the terms of the
settlement are unconscionable; the separation pay for termination due to
reorganization/restructuring was deficient by Php400,000.00 for each
employee; they were given only half of the amount they were legally
entitled to; and (2) the absence of voluntariness when the employees
signed the document, it was their dire circumstances and inability to
support their families that finally drove them to accept the amount offered.
Without jobs and with families to support, they dallied in executing the
quitclaim instrument, but were eventually forced to sign given their
circumstances. To be sure, a settlement under these terms is not and
cannot be a reasonable one, given especially the respondent’s length of
service – 25 years for Ybarola and 19 years for Rivera.  Radio Mindanao
Network, Inc. and Eric S. Canoy vs. Domingo Z. Ybarola, et al. G.R. No.
198662. September 12, 2012.
Res judicata. “Res judicata means a matter adjudged; a thing judicially
acted upon or decided; a thing or matter settled by judgment.”   It denotes
“that a final judgment or decree on the merits by a court of competent
 John Mark F. Sunga, 2012-0351

jurisdiction is conclusive of the rights of the parties or their privies in all

latter suits on all points and matters determined in the former suit.  For res
judicata, in its concept as a bar by former judgment to apply, the following
must be present:
1.         The former judgment or order is final;
2.         It is rendered by a court having jurisdiction over the subject matter
and the parties;
3.         It is a judgment or an order on the merits; and,
4.         There is between the first and the second identity of parties,
identity of subject matter, and identity of cause of action.
The Decision of this Court in G.R. Nos. 159460 and 159461 became final
and executory on May 20, 2011.  It is a decision based on the merits of the
case and rendered by this Court in the exercise of its appellate jurisdiction
after the parties invoked its jurisdiction.  There is also, between the two
sets of consolidated cases, identity of the parties, subject matter and
causes of action.  The parties in G.R. No. 159460 and 159461 are also
impleaded as parties in these consolidated cases.  And while some of the
parties herein are not included in G.R. Nos. 159460 and 159461, the same
are only few.  In any event, it is well-settled that only substantial, and not
absolute, identity of the parties is required for res judicata to lie.  “There is
substantial identity of the parties when there is a community of interest
between a party in the first case and a party in the second case albeit the
latter was not impleaded in the first case.”
With regard to identity of cause of action, it has been held that there is
identity of causes of action when the same evidence will sustain both
actions or when the facts essential to the maintenance of the two actions
are identical.  Here, the bone of contention in both sets of consolidated
cases boils down to the nature and consequences of complainants’ April
 John Mark F. Sunga, 2012-0351

3, 2000 mass action.  The antecedent facts that gave rise to all the cases
were the same.  Necessarily, therefore, the same evidence would sustain
all actions.  Such similarity in the evidence required to sustain all actions is
also borne out by the identity of the issues involved in all these cases. 
While the parties have presented a plethora of arguments which we earlier
discussed at length, the same nonetheless boil down to the same crucial
issues formulated in G.R. Nos. 159460 and 159461.
It should be recalled that in G.R. No. 153799, the complainants assailed
the Resolutions dated January 14, 2002 and February 20, 2002 of the
CA’s Fourth Division granting Metrobank’s request for injunctive reliefs. 
They claimed that the reinstatement aspect of the Labor Arbiter’s Decision
is immediately executory.  Hence, they are entitled to backwages from the
time the Labor Arbiter promulgated his Decision until it was reversed by
the NLRC.
As discussed above, however, the November 15, 2010 Decision of this
Court in G.R. Nos. 159460 and 159461 already adjudicated the respective
rights and liabilities of the parties.  Said Decision pronouncing the
monetary awards to which the parties herein are entitled became final and
executory on May 20, 2011.  Under the rule on immutability of judgment,
this Court cannot alter or modify said Decision.  It is a well-established rule
that once a judgment has become final and executory, it is no longer
susceptible to any modification. Solidbank Union, et al. vs. Metropolitan
Bank and Trust Company/Metropolitan Bank and Trust Company vs.
Solidbank Union, et al./Solidbank Corporation, etc., et al. vs. Solidbank
Union, et al./Solidbank Union, et al. vs. Metropolitan Bank and Trust
Company. G.R. No. 153799/G.R. No. 157169/G.R. No. 157327/G.R. No.
157506. September 17, 2012.
 John Mark F. Sunga, 2012-0351

Reinstatement; Strained relations. A determination of the applicability of

the doctrine of strained relations is essentially a factual question and, thus,
not a proper subject in this petition.  This rule, however, admits of
exceptions.  In cases where the factual findings of the LA and the NLRC
are conflicting, the Court, in the exercise if equity jurisdiction, may review
and re-evaluate the factual issues and look into the records of the case
and re-examine the questioned findings.
As the records bear out, the LA found that patent animosity existed
between ACMC and Bides considering the confrontation that took place
between the latter and Matthew.  The confrontation coupled with Bides’
refusal to be reinstated led to the LA’s finding of “strained relations”
necessitating an award of separation pay in lieu of reinstatement.  The
NLRC, on the other hand, deleted the said award for lack of factual basis. 
The CA reinstated the LA’s finding of “strained relations” and explained
that too much enmity had developed between ACMC and Bides that
necessarily barred the latter’s reinstatement.
The Court is well aware that reinstatement is the rule and, for the
exception of “strained relations” to apply, it should be proved that it is likely
that, if reinstated, an atmosphere of antipathy and antagonism would be
generated as to adversely affect the efficiency and productivity of the
employee concerned.
Under the doctrine of strained relations, the payment of separation pay is
considered an acceptable alternative to reinstatement when the latter
option is no longer desirable or viable.  On one hand, such payment
liberates the employee from what could be a highly oppressive work
environment.  On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no
longer trust.  Moreover, the doctrine of strained relations has been made
 John Mark F. Sunga, 2012-0351

applicable to cases where the employee decides not to be reinstated and

demands for separation pay.
In the present case, Bides has consistently maintained, from the
proceedings in the LA up to the CA, his refusal to be reinstated due to his
fear of reprisal which he could experience as a consequence of his return. 
By doing so, Bides unequivocally foreclosed reinstatement as a relief.
Apo Chemical Manufacturing and Michael Cheng vs. Ronaldo A.
Bides. G.R. No. 186002. September 19, 2012.
Seafarers disability benefits; Attorney’s fees. In determining the disability
benefits due a seafarer the POEA Standard Employment Contract (SEC),
specifically its schedule of benefits, medical findings, Article 192 (c)(1) of
the Labor Code, and Rule X, Section 2 of its implementing rules and
regulations must be considered. The initial treatment period of 120 days
may be extended up to a maximum of 240 days under the conditions
prescribed by law.
Under Article 2298 of the Civil Code, attorney’s fees can be recovered
“[w]hen the defendant’s act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest.”  This
Court sees no reason why damages or attorney’s fees should be awarded
to Penales.  It is obvious that he did not give the petitioners’ company-
designated physician ample time to assess and evaluate his condition, or
to treat him properly for that matter.  The petitioners had a valid reason for
refusing to pay his claims, especially when they were complying with the
terms of the POEA SEC with regard to his allowances and
treatment. Pacific Ocean Manning Inc., et al. vs. Benjamin D.
Penales. G.R. No. 162809. September 5, 2012.
 John Mark F. Sunga, 2012-0351

Appeal to the National Labor Relations Commission (NLRC); Requisites

for perfection of appeal; Joint declaration under oath accompanying the
surety bond; Substantial compliance with procedural rules.  There was
substantial compliance with the NLRC Rules of Procedure when the
respondents PAL Maritime Corporation and Western Shipping Agencies,
Pte., Ltd. filed, albeit belatedly, the Joint Declaration Under Oath, which is
required when an employer appeals from the Labor Arbiter’s decision
granting a monetary award and posts a surety bond.  Under the NLRC
rules, the following requisites are required to perfect the employer’s
appeal: (1) it must be filed within the reglementary period; (2) it must be
under oath, with proof of payment of the required appeal fee and the
posting of a cash or surety bond; and (3) it must be accompanied by
typewritten or printed copies of the memorandum of appeal, stating the
grounds relied upon, the supporting arguments, the reliefs prayed for, and
a statement of the date of receipt of the appealed decision, with proof of
service on the other party of said appeal.  If the employer posts a surety
bond, the NLRC rules further require the submission by the employer, his
or her counsel, and the bonding company of a joint declaration under oath
attesting that the surety bond posted is genuine and that it shall be in
effect until the final disposition of the case.
In the case at bar, the respondents posted a surety bond equivalent to the
monetary award and filed the notice of appeal and the appeal
memorandum within the reglementary period.  When the NLRC
subsequently directed the filing of a Joint Declaration Under Oath, the
respondents immediately complied with the said order.  There was only a
late submission of the Joint Declaration.  Considering that there was
substantial compliance with the rules, the same may be liberally
construed.  The application of technical rules may be relaxed in labor
 John Mark F. Sunga, 2012-0351

cases to serve the demands of substantial justice. Rolando L. Cervantes

vs. PAL Maritime Corporation and/or Western Shipping Agencies, Pte.,
Ltd.  G.R. No. 175209. January 16, 2013.
Completeness of service by registered mail; Exception to the general rule
regarding a corporation’s verification and certification of non-forum
shopping; Interpretation of school CBA.  A school CBA must be read in
conjunction with statutory and administrative regulations governing faculty
qualifications.  Such regulations form part of a valid CBA without need for
the parties to make express reference to the same.
In the case at bar, the University of the East (UE) repeatedly extended
only semester-to-semester faculty appointments to the respondents
Pepanio and Bueno, since they had not completed postgraduate degrees. 
The respondents, however, claimed that the 1994 CBA between UE and
the faculty union did not yet require a master’s degree for a teacher to
acquire regular status.  Having rendered more than three consecutive
years of full-time service to the school, the respondents insisted that UE
should have given them permanent appointments.
The Supreme Court observed that the policy requiring college teachers to
have postgraduate degrees was provided in the Manual of Regulations
issued as early as 1992 by the Department of Education, Culture and
Sports (DECS), now the Department of Education.  In promulgating the
Manual of Regulations, DECS exercised its power of regulation over
educational institutions, which includes prescribing the minimum academic
qualifications for teaching personnel.  The legislature subsequently
transferred the power to prescribe such qualifications for teachers in
institutions of higher learning to the Commission on Higher Education
(CHED).  However, the 1992 Manual of Regulations issued by DECS
 John Mark F. Sunga, 2012-0351

continued to apply to colleges and universities until 2010, when CHED

issued a Revised Manual of Regulations.
Thus, the requirement of a master’s degree for college teachers, as
originally provided in the 1992 Manual of Regulations, was deemed
incorporated in the 1994 CBA between UE and the faculty union. 
Furthermore, the subsequent CBA in 2001, which provided for the
extension of conditional probationary status to the respondents, subject to
their obtaining a master’s degree within the probationary period, clearly
showed that UE intended to subject the respondents’ appointments to the
standards set by the law.
The requirement of a master’s degree for tertiary education teachers is not
unreasonable, considering that the operation of educational institutions
involves public interest.  The government has a right to ensure that only
qualified persons, in possession of sufficient academic knowledge and
teaching skills, are allowed to teach in such institutions.
The Supreme Court also overruled the respondents’ contention that UE
filed its appeal to the NLRC beyond the required ten (10)-day period.  For
completeness of service by registered mail, the reckoning period starts
either from the date of actual receipt of the mail by the addressee or after
five (5) days from the date he or she received the first notice from the
postmaster.  In this case, the respondents averred that, on March 17,
2005, the postmaster gave UE’s counsel a notice to claim the mail
containing the Labor Arbiter’s decision.  The respondents claimed that
UE’s counsel was deemed in receipt of the decision 5 days after the giving
of the notice, or on March 22, 2005.  Thus, according to the respondents,
when UE filed its appeal to the NLRC on April 14, 2005, the 10-day
reglementary period had already lapsed.  The Supreme Court, however,
ruled that there must be conclusive proof that the registry notice was
 John Mark F. Sunga, 2012-0351

received by or at least served on the addressee.  In this case, the records

did not show that UE’s counsel in fact received the alleged registry notice
requiring him to claim the mail.  On the other hand, UE was able to
present a registry return receipt showing that its counsel actually received
a copy of the Labor Arbiter’s decision on April 4, 2005.  Reckoned from
this date, the 10-day reglementary period had not yet lapsed when UE
filed its appeal to the NLRC on April 14, 2005.
Anent UE’s failure to comply with the general rule that the Board of
Directors or Board of Trustees of a corporation must authorize the person
who shall sign the verification and certification of non-forum shopping
accompanying a petition, the Supreme Court held that such authorization
is not necessary when it is self-evident that the signatory is in a position to
verify the truthfulness and correctness of the allegations in the petition. 
The Supreme Court declared that Dean Eleanor Javier, who signed UE’s
verification and certification, was in such a position, since she knew the
factual antecedents of the case and she actually communicated with the
respondents regarding the required postgraduate qualification.  University
of the East, et al. vs. Analiza F. Pepanio and Mariti D. Bueno.  G.R. No.
193897. January 23, 2013.
Disease as a ground for termination; Retirement under the Labor Code;
Age and tenure requirements for retirement; Financial assistance. Under
the Labor Code provision on disease as a ground for termination (formerly,
Article 284, but now renumbered pursuant to Republic Act No. 10151), it
must be the employer who initiates the termination of the employee’s
services.  The aforementioned provision cannot be applied in this case,
considering that it was the late petitioner Padillo, and not the Rural Bank of
Nabunturan, Inc. (Bank), who severed the employment relations.  With his
memory impaired after suffering a mild stroke due to hypertension, Padillo
 John Mark F. Sunga, 2012-0351

wrote a letter to the Bank, expressing his intention to avail of an early

retirement package.  The clear import of Padillo’s letter and the fact that
he had stopped reporting for work even before sending the said letter
shows that he voluntarily retired.  Given the inapplicability of the Labor
Code provision on disease as a ground for termination, it necessarily
follows that Padillo’s claim for separation pay must be denied.
As regards Padillo’s claim for retirement benefits, the provision of the
Labor Code on retirement (formerly, Art. 287, but now renumbered
pursuant to R.A. No. 10151) states that, in the absence of any applicable
agreement, an employee who has served at least five (5) years in the
company may retire upon reaching the age of sixty (60) years, but not
beyond sixty-five (65) years, to be entitled to retirement pay equivalent to
at least one-half (1/2) month salary for every year of service, with a
fraction of at least six (6) months being considered as one whole year. 
Notably, the aforementioned age and tenure requirements are cumulative,
and non-compliance with either negates the employee’s entitlement to the
retirement pay under the Labor Code.  In this case, the Bank did not have
a retirement plan or any other contract with its employees, setting the
terms and conditions for retirement.  Padillo also served the Bank for
twenty-nine (29) years, far more than the 5-year tenure requirement. 
Padillo, however, did not meet the age requirement, considering that he
was only fifty-five (55) years old, or less than 60 years of age, when he
retired.  Thus, Padillo’s claim for retirement pay must also be denied.
Nevertheless, the Supreme Court awarded Padillo financial assistance in
the amount of P75,000, considering the length of time which had
supervened before the disposition of this case and Padillo’s unblemished
record of 29 years of service to the Bank.  The award was in addition to
the P100,000 benefit receivable under the Philam Life Plan that the Bank
 John Mark F. Sunga, 2012-0351

had procured in favor of Padillo.  Eleazar S. Padillo vs. Rural Bank of

Nabunturan, Inc., et al.  G.R. No. 199338. January 21, 2013.
Redundancy as an authorized cause for termination; Difference between
retirement and termination due to redundancy; General rule regarding the
factual findings of the NLRC and the exceptions thereto.  Under the Labor
Code, redundancy is one of the authorized causes for termination of
employment.  The following are the requisites for the valid implementation
of a redundancy program:  (a) the employer must serve a written notice to
the affected employees and to the Department of Labor and Employment
(DOLE) at least one month before the intended date of termination; (b) the
employer must pay the employees separation pay equivalent to at least
one month pay or at least one month pay for every year of service,
whichever is higher; (c) the employer must abolish the redundant positions
in good faith; and (d) the employer must set fair and reasonable criteria in
ascertaining which positions are redundant and may be abolished.  The
Supreme Court has also held that a company cannot simply declare
redundancy without basis.  To exhibit its good faith and to show that there
were fair and reasonable criteria in ascertaining redundant positions, a
company claiming to be over manned must produce adequate proof of the
same.
In the case at bar, the General Milling Corporation (GMC) furnished
respondent Viajar a written notice informing her of the termination of her
services on the ground of redundancy.  GMC also submitted to the DOLE
an Establishment Termination Report, regarding the employees, including
Viajar, whose positions were deemed redundant.  Viajar and the DOLE
received the respective notices one month before the effective date of the
employees’ termination.  Furthermore, GMC issued to Viajar two checks
amounting to P440,253.02 and P21,211.35, representing her separation
 John Mark F. Sunga, 2012-0351

pay.  However, the Supreme Court held that, notwithstanding compliance

with the requirements on notice and the payment of separation pay, GMC
is still considered to have illegally dismissed Viajar because the company
failed to present substantial proof to support its general allegations of
redundancy.  GMC could have presented evidence to substantiate
redundancy, such as a new staffing pattern or feasibility studies or
proposals on the viability of newly created positions, job descriptions and
the approval by management of the restructuring program, or the
company’s audited financial reports.  However, no such evidence was
submitted by GMC.
On the other hand, Viajar presented proof negating GMC’s claim of
redundancy and clearly showing GMC’s bad faith in implementing the
redundancy program: (1) GMC had hired new employees before it
terminated Viajar’s employment; (2) Vaijar was barred from entering the
company premises even before the effectivity of her separation; and (3)
Viajar was also forced to sign an “Application for Retirement and Benefits”
so that she could avail of her separation pay.  The last circumstance is
significant, considering that there is a difference between voluntary
retirement and forced termination of an employee.  Retirement from
service is contractual or based on a bilateral agreement of the employer
and the employee, while termination of employment is statutory or
governed by the Labor Code and other related laws.  Voluntary retirement
cuts employment ties, leaving no residual employer liability; involuntary
retirement amounts to a discharge, rendering the employer liable for
termination without cause.  GMC’s demand that Viajar sign an Application
for Retirement and Benefits, when she had already been informed of the
termination of her services due to redundancy, shows that this case
involves not a voluntary retirement, but an illegal termination.
 John Mark F. Sunga, 2012-0351

While the Labor Arbiter and the NLRC both found that Viajar was validly
dismissed, the general rule that the factual findings of the NLRC must be
accorded respect and finality is not applicable in this case.  One of the
exceptions to the said rule covers instances when the findings of fact of
the trial court, or of the quasi-judicial agencies concerned, are conflicting
or contradictory with those of the Court of Appeals, as in the present
case.  Another exception to the general rule is when the said findings are
not supported by substantial evidence or the inference or conclusion
arrived at is manifestly erroneous.  In the case at bar, the Supreme Court
agreed with the Court of Appeals that the NLRC’s conclusion that Viajar
was legally dismissed is manifestly erroneous.  General Milling
Corporation vs. Violeta L. Viajar.  G.R. No. 181738. January 30, 2013.
Reinstatement; Backwages.  It is basic in jurisprudence that illegally
dismissed workers are entitled to reinstatement with backwages plus
interest at the legal rate.
This labor controversy started when the employer Automotive Engine
Rebuilders, Inc. (AER) and the Progresibong Unyon ng mga Manggagawa
sa AER (Union) filed charges against each other for violating labor laws. 
AER filed a complaint against the Union and eighteen (18) of its members
for conducting an illegal strike.  On the other hand, thirty-two (32)
employees filed a complaint against AER for unfair labor practices, illegal
dismissal, illegal suspension, and run-away shop.  In a previous decision
(G.R. No. 160138, July 13, 2011), the Supreme Court had held that both
parties were at fault or in pari delicto; hence, the complaining employees
should be reinstated but without backwages.  The Motion for Partial
Reconsideration filed by the Union is resolved in the present case.
The Supreme Court found that, of the 32 employees who filed the
complaint against AER, only 18 had been charged by AER with illegal
 John Mark F. Sunga, 2012-0351

strike, leaving 14 excluded from the employer’s complaint.  As no charges

had been filed against the 14 workers, they cannot be found guilty of
illegal strike.  Neither can they be considered in pari delicto.  However, of
the 14 employees, five failed to write their names and affix their signatures
in the Membership Resolution attached to their petition before the Court of
Appeals, authorizing the union president to represent them.  Thus, while
these five employees will also be reinstated, they cannot be granted
backwages.  On the other hand, the nine workers who signed their names
in the aforementioned Membership Resolution will be reinstated with
backwages plus interest at the legal rate.  Automotive Engine Rebuilders,
Inc. (AER), et al. vs. Progresibong Unyon ng mga Manggagawa sa AER,
et al. / Progresibong Unyon ng mga Manggagawa sa AER, et al. vs.
Automotive Engine Rebuilders, Inc., et al.  G.R. Nos. 160138 and 160192.
January 16, 2013.
Resignation; Resignation in relation to the subsequent filing of an illegal
dismissal case. Petitioner Cervantes’s claim that he did not resign but was
terminated from employment is untenable.  Resignation is the voluntary
act of an employee who finds himself in a situation where he believes that
personal reasons cannot be sacrificed in favor of the exigency of the
service, such that he has no other choice but to disassociate himself from
his employment.
In the present case, Cervantes’s employer merely informed him of the
numerous complaints against him.  It was Cervantes himself who opted to
be relieved from his post and who initiated his repatriation to Manila.  This
is clear from the tenor of his telex message, which reads in part: 
“ANYHOW TO AVOID REPETITION [ON] MORE HARSH REPORTS TO
COME.  BETTER ARRANGE MY RELIEVER [AND] C/O BUSTILLO
RELIEVER ALSO.  UPON ARR NEXT USA LOADING PORT FOR THEIR
 John Mark F. Sunga, 2012-0351

SATISFACTION.”  Cervantes’s message contains an unmistakable

demand to be relieved of his assignment.  His employer merely accepted
his resignation.  Thus, the rule that the filing of a complaint for illegal
dismissal is inconsistent with resignation does not hold true in this case. 
The clear tenor of Cervantes’s resignation letter and the filing of this case
one year after his alleged termination shows that the complaint for illegal
dismissal was a mere afterthought.  Rolando L. Cervantes vs. PAL
Maritime Corporation and/or Western Shipping Agencies, Pte., Ltd.  G.R.
No. 175209. January 16, 2013.
Voluntary Arbitration; Plenary authority and jurisdiction of a voluntary
arbitrator; Concept and exercise of management prerogative; Limitations
on the exercise of management prerogative; Nature of collective
bargaining agreements (CBA).  Goya, Inc.’s contention that the Voluntary
Arbitrator (VA) exceeded his power in ruling on a matter not covered by
the sole issue submitted for voluntary arbitration is untenable.  In a prior
case, the Supreme Court has ruled that, in general, the arbitrator is
expected to decide those questions expressly stated and limited in the
submission agreement.  However, since arbitration is the final resort for
the adjudication of disputes, the arbitrator can assume that he has the
power to make a final settlement.  The VA has plenary jurisdiction and
authority to interpret the CBA and to determine the scope of his or her own
authority.  Subject to judicial review, this leeway of authority and adequate
prerogative is aimed at accomplishing the rationale of the law on voluntary
arbitration – speedy labor justice.
In the case at bar, Goya, Inc. and Goya, Inc. Employees Union (Union)
submitted for voluntary arbitration the sole issue of whether or not the
company is guilty of an unfair labor practice in engaging the services of
PESO, a third party service provider, under existing CBA, laws, and
 John Mark F. Sunga, 2012-0351

jurisprudence.  The Union claimed that the hiring of contractual workers

from PESO violated the CBA provision that prescribes only three
categories of workers in the company, namely: the probationary, the
regular, and the casual employees.  Instead of hiring contractual workers,
Goya, Inc. should have hired probationary or casual employees, who
could have become additional Union members, pursuant to the union
security clause in the CBA.  The VA ruled that while Goya, Inc. was not
guilty of any unfair labor practice, it still committed a violation of the CBA,
though such violation was not gross in character.  The Supreme Court
held that the VA’s ruling is interrelated and intertwined with the sole issue
submitted for arbitration.  The ruling was necessary to make a complete
and final adjudication of the dispute between the parties.
Furthermore, Goya, Inc.’s assertion that its hiring of contractual workers
was a valid exercise of management prerogative is erroneous.  Declaring
that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise
thereof.  While the VA and the Court of Appeals ruled that the act of
contracting out or outsourcing work is within the purview of management
prerogative, they did not declare such act to be a valid exercise thereof. 
As repeatedly held, the exercise of management prerogative is not
unlimited; it is subject to the limitations found in the law, CBA, or general
principles of fair play and justice.
In this case, the CBA provision prescribing the categories of employees in
the company and the union security clause are interconnected and must
be given full force and effect.  The parties in a CBA are free to establish
such stipulations they may deem convenient, provided that the same are
not contrary to law, morals, good customs, public order, or public policy. 
Where the CBA is clear and unambiguous, the literal meaning of its
 John Mark F. Sunga, 2012-0351

stipulations shall control.  The CBA becomes the law between the parties,
and compliance therewith is mandated by the express policy of the
law.  Goya, Inc. vs. Goya, Inc. Employees Union-FFW.  G.R. No. 170054.
January 21, 2013.