G.R. No.

117040
January 27, 2000
RUBEN SERRANO, petitioner,
vs.NATIONAL LABOR RELATIONS COMMISSION and
ISETANN DEPARTMENT STORE, respondents.
MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March
30, 1994 and August 26, 1994, of the National Labor Relations
Commission (NLRC) which reversed the decision of the Labor
Arbiter and dismissed petitioner Ruben Serrano's complaint for
illegal dismissal and denied his motion for reconsideration. The
facts are as follows:
Petitioner was hired by private respondent Isetann Department
Store as a security checker to apprehend shoplifters and prevent
pilferage of merchandise.1 Initially hired on October 4, 1984 on
contractual basis, petitioner eventually became a regular
employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private respondent.2
Sometime in 1991, as a cost-cutting measure, private respondent
decided to phase out its entire security section and engage the
services of an independent security agency. For this reason, it
wrote petitioner the following memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
In view of the retrenchment program of the company, we hereby
reiterate our verbal notice to you of your termination as Security
Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint
on December 3, 1991 for illegal dismissal, illegal layoff, unfair
labor practice, underpayment of wages, and nonpayment of salary
and overtime pay.4
The parties were required to submit their position papers, on the
basis of which the Labor Arbiter defined the issues as follows:5
Whether or not there is a valid ground for the dismissal of the
complainant.
Whether or not complainant is entitled to his monetary claims for
underpayment of wages, nonpayment of salaries, 13th month pay
for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor
Arbiter rendered a decision finding petitioner to have been illegally
dismissed. He ruled that private respondent failed to establish that
it had retrenched its security section to prevent or minimize losses
to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use
reasonable standards in selecting employees whose employment
would be terminated; that private respondent had not shown that

petitioner and other employees in the security section were so

inefficient so as to justify their replacement by a security agency,
or that "cost-saving devices [such as] secret video cameras (to
monitor and prevent shoplifting) and secret code tags on the
merchandise" could not have been employed; instead, the day
after petitioner's dismissal, private respondent employed a safety
and security supervisor with duties and functions similar to those
of petitioner.1wphi1.nt
Accordingly, the Labor Arbiter ordered:6
WHEREFORE, above premises considered, judgment is hereby
decreed:
(a) Finding the dismissal of the complainant to be illegal and
concomitantly, Respondent is ordered to pay complainant full
backwages without qualification or deduction in the amount of
P74,740.00 from the time of his dismissal until reinstatement.
(computed till promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited to (3)
three years;
(b) Ordering the Respondent to immediately reinstate the
complainant to his former position as security section head or to a
reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order
is immediately executory even pending appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in
the amount of P2,020.73 and proportionate 13th month pay in the
amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of
P7,995.91, representing 10% attorney's fees based on the total
judgment award of P79,959.12.
All other claims of the complainant whether monetary or otherwise
is hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution
of March 30, 1994; reversed the decision of the Labor Arbiter and
ordered petitioner to be given separation pay equivalent to one
month pay for every year of service, unpaid salary, and
proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security
section and the hiring of an independent security agency
constituted an exercise by private respondent of "[a] legitimate
business decision whose wisdom we do not intend to inquire into
and for which we cannot substitute our judgment"; that the
distinction made by the Labor Arbiter between "retrenchment" and
the employment of cost-saving devices" under Art. 283 of the
Labor Code was insignificant because the company official who
wrote the dismissal letter apparently used the term "retrenchment"
in its "plain and ordinary sense: to layoff or remove from one's job,
regardless of the reason therefor"; that the rule of "reasonable
criteria" in the selection of the employees to be retrenched did not
apply because all positions in the security section had been
abolished; and that the appointment of a safety and security

supervisor referred to by petitioner to prove bad faith on private

respondent's part was of no moment because the position had
long been in existence and was separate from petitioner's position
as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY
THE PRIVATE RESPONDENT TO REPLACE ITS CURRENT
SECURITY SECTION A VALID GROUND FOR THE DISMISSAL
OF THE EMPLOYEES CLASSED UNDER THE LATTER?7
Petitioner contends that abolition of private respondent's Security
Checkers Section and the employment of an independent security
agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee
due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operations of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the, workers and the Department of
Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least one (1)
month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to at
least one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this
Court upheld the termination of employment of three mechanics in
a transportation company and their replacement by a company
rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the
company's cost-saving program, the services rendered by the
mechanics became redundant and superfluous, and therefore
properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any
proof that the management abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the
exercise of such prerogative.9
In Asian Alcohol Corporation v. National Labor Relations
Commission,10 the Court likewise upheld the termination of
employment of water pump tenders and their replacement by
independent contractors. It ruled that an employer's good faith in
implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent

contractor to replace the services of the terminated employees to

promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a
company] cannot be denied the faculty of promoting efficiency
and attaining economy by a study of what units are essential for
its operation. To it belongs the ultimate determination of whether
services should be performed by its personnel or contracted to
outside agencies . . . [While there] should be mutual consultation,
eventually deference is to be paid to what management
decides."11 Consequently, absent proof that management acted
in a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer.12
In the case at bar, we have only the bare assertion of petitioner
that, in abolishing the security section, private respondent's real
purpose was to avoid payment to the security checkers of the
wage increases provided in the collective bargaining agreement
approved in 1990.13 Such an assertion is not sufficient basis for
concluding that the termination of petitioner's employment was not
a bona fide decision of management to obtain reasonable return
from its investment, which is a right guaranteed to employers
under the Constitution.14 Indeed, that the phase-out of the
security section constituted a "legitimate business decision" is a
factual finding of an administrative agency which must be
accorded respect and even finality by this Court since nothing can
be found in the record which fairly detracts from such finding.15
Accordingly, we hold that the termination of petitioner's services
was for an authorized cause, i.e., redundancy. Hence, pursuant to
Art. 283 of the Labor Code, petitioner should be given separation
pay at the rate of one month pay for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an
employee for any of the authorized causes the employer must
serve "a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended
date thereof." In the case at bar, petitioner was given a notice of
termination on October 11, 1991. On the same day, his services
were terminated. He was thus denied his right to be given written
notice before the termination of his employment, and the question
is the appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen. In
Subuguero v. NLRC,16 workers in a garment factory were
temporarily laid off due to the cancellation of orders and a
garment embargo. The Labor Arbiter found that the workers had
been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand,
found that this was a case of retrenchment due to business losses
and ordered the payment of separation pay without backwages.
This Court sustained the NLRC's finding. However, as the
company did not comply with the 30-day written notice in Art. 283
of the Labor Code, the Court ordered the employer to pay the
workers P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving

dismissals which, although based on any of the just causes under
Art. 282,17 were effected without notice and hearing to the
employee as required by the implementing rules.18 As this Court
said: "It is now settled that where the dismissal of one employee is
in fact for a just and valid cause and is so proven to be but he is
not accorded his right to due process, i.e., he was not furnished
the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of, or for failure to observe,
due process."19
The rule reversed a long standing policy theretofore followed that
even though the dismissal is based on a just cause or the
termination of employment is for an authorized cause, the
dismissal or termination is illegal if effected without notice to the
employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.20 In announcing the change, this Court said:21
The Court holds that the policy of ordering the reinstatement to
the service of an employee without loss of seniority and the
payment of his wages during the period of his separation until his
actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded
due process, although his dismissal was found to be for just and
authorized cause in an appropriate proceeding in the Ministry of
Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the
services of an employee who has been shown to be guilty of the
charges that warranted his dismissal from employment. Indeed, it
will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation
before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of
each case and the gravity of the omission committed by the
employer.
The fines imposed for violations of the notice requirement have
varied from P1,000.0022 to P2,000.0023 to P5,000.0024 to
P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate
sanctions for violations of the notice experience during the last
decade or so with the Wenphil doctrine. The number of cases
involving dismissals without the requisite notice to the employee,
although effected for just or authorized causes, suggest that the

imposition of fine for violation of the notice requirement has not

been effective in deterring violations of the notice requirement.
Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the
other hand, Justice Puno says there has in effect been fostered a
policy of "dismiss now; pay later" which moneyed employers find
more convenient to comply with than the requirement to serve a
30-day written notice (in the case of termination of employment for
an authorized cause under Arts. 283-284) or to give notice and
hearing (in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the
requisite notice to be null and void even though there are just or
authorized cause for such dismissal or layoff. Consequently, in
their view, the employee concerned should be reinstated and paid
backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and
Panganiban, that we should rethink the sanction of fine for an
employer's disregard of the notice requirement. We do not agree,
however, that disregard of this requirement by an employer
renders the dismissal or termination of employment null and void.
Such a stance is actually a reversion to the discredited preWenphil rule of ordering an employee to be reinstated and paid
backwages when it is shown that he has not been given notice
and hearing although his dismissal or layoff is later found to be for
a just or authorized cause. Such rule was abandoned in Wenphil
because it is really unjust to require an employer to keep in his
service one who is guilty, for example, of an attempt on the life of
the employer or the latter's family, or when the employer is
precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's
right to notice before he is dismissed or laid off, at the same time
acknowledges the right of the employer to dismiss for any of the
just causes enumerated in Art. 282 or to terminate employment for
any of the authorized causes mentioned in Arts. 283-284. If the
Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void if
there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to uphold
the right of the employee but deny the right of the employer to
dismiss for cause. Rather, the remedy is to order the payment to
the employee of full backwages from the time of his dismissal until
the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the
causes in Arts. 283-284, i.e., installation of a labor-saving device,
but the employer did not give him and the DOLE a 30-day written
notice of termination in advance, then the termination of his
employment should be considered ineffectual and he should be

paid backwages. However, the termination of his employment

should not be considered void but he should simply be paid
separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the
notice requirement constitutes a denial of the employee's right to
due process. Prescinding from this premise, he quotes the
statement of Chief Justice Concepcion Vda. deCuaycong v. Vda.
de Sengbengco26 that "acts of Congress, as well as of the
Executive, can deny due process only under the pain of nullity,
and judicial proceedings suffering from the same flaw are subject
to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an
employee without notice and hearing, even if for a just cause, as
provided in Art. 282, or for an authorized cause, as provided in
Arts. 283-284, is a nullity. Hence, even if just or authorized cause
exist, the employee should be reinstated with full back pay. On the
other hand, Justice Panganiban quotes from the statement in
People v. Bocar27 that "[w]here the denial of the fundamental
right of due process is apparent, a decision rendered in disregard
of that right is void for lack of jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer,
however, to the denial of due process by the State, which is not
the case here. There are three reasons why, on the other hand,
violation by the employer of the notice requirement cannot be
considered a denial of due process resulting in the nullity of the
employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of employment
under the Labor Code. This is plain from the text of Art. III, 1 of
the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . ." The reason is simple:
Only the State has authority to take the life, liberty, or property of
the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are
considered civilized methods.
The second reason is that notice and hearing are required under
the Due Process Clause before the power of organized society
are brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the
employee is not faced with an aspect of the adversary system.
The purpose for requiring a 30-day written notice before an
employee is laid off is not to afford him an opportunity to be heard
on any charge against him, for there is none. The purpose rather
is to give him time to prepare for the eventual loss of his job and
the DOLE an opportunity to determine whether economic causes
do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due
Process Clause of the Constitution. The time for notice and
hearing is at the trial stage. Then that is the time we speak of

notice and hearing as the essence of procedural due process.

Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of
the latter to question the legality of his dismissal. As Art. 277(b)
provides, "Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code
is an aspect of due process is to overlook the fact that Art. 283
had its origin in Art. 302 of the Spanish Code of Commerce of
1882 which gave either party to the employer-employee
relationship the right to terminate their relationship by giving
notice to the other one month in advance. In lieu of notice, an
employee could be laid off by paying him a mesada equivalent to
his salary for one month.28 This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But
on June 12, 1954, R.A. No. 1052, otherwise known as the
Termination Pay Law, was enacted reviving the mesada. On June
21, 1957, the law was amended by R.A. No. 1787 providing for
the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.29
The Termination Pay Law was held not to be a substantive law but
a regulatory measure, the purpose of which was to give the
employer the opportunity to find a replacement or substitute, and
the employee the equal opportunity to look for another job or
source of employment. Where the termination of employment was
for a just cause, no notice was required to be given to the,
employee.30 It was only on September 4, 1981 that notice was
required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by
the then Minister of Labor and Employment to implement B.P. Blg.
130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the
amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It
cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in
case an employee leaves his job without cause and without prior
notice to his employer, his act should be void instead of simply
making him liable for damages.
The third reason why the notice requirement under Art. 283 can
not be considered a requirement of the Due Process Clause is
that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the
lawful orders of the employer, gross and habitual neglect of
duties, fraud or willful breach of trust of the employer, commission
of crime against the employer or the latter's immediate family or
duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE
will prove that many cases have been won by employees before

the grievance committees manned by impartial judges of the

company." The grievance machinery is, however, different
because it is established by agreement of the employer and the
employees and composed of representatives from both sides.
That is why, in Batangas Laguna Tayabas Bus Co. v. Court of
Appeals,31 which Justice Puno cites, it was held that "Since the
right of [an employee] to his labor is in itself a property and that
the labor agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal
amounted to deprivation of his property without due process of
law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance
machinery. Accordingly in Montemayor v. Araneta University
Foundation,32 although a professor was dismissed without a
hearing by his university, his dismissal for having made
homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process.
Some are simply part of a procedure to be followed before a right
granted to a party can be exercised. Others are simply an
application of the Justinian precept, embodied in the Civil Code,33
to act with justice, give everyone his due, and observe honesty
and good faith toward one's fellowmen. Such is the notice
requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is
to make him liable in damages, not to render his act (dismissal or
resignation, as the case may be) void. The measure of damages
is the amount of wages the employee should have received were
it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor
Code, the employer's failure to comply with the notice requirement
does not constitute a denial of due process but a mere failure to
observe a procedure for the termination of employment which
makes the termination of employment merely ineffectual. It is
similar to the failure to observe the provisions of Art. 1592, in
relation to Art.1191, of the Civil Code34 in rescinding a contract
for the sale of immovable property. Under these provisions, while
the power of a party to rescind a contract is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an
action in court or giving notice of rescission by means of a notarial
demand.35 Consequently, a notice of rescission given in the letter
of an attorney has no legal effect, and the vendee can make
payment even after the due date since no valid notice of
rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause
for the termination of employment can make the dismissal of an
employee illegal. This is clear from Art. 279 which provides:

Security of Tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee who
is unjustly dismissedfrom work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.37
Thus, only if the termination of employment is not for any of the
causes provided by law is it illegal and, therefore, the employee
should be reinstated and paid backwages. To contend, as
Justices Puno and Panganiban do, that even if the termination is
for a just or authorized cause the employee concerned should be
reinstated and paid backwages would be to amend Art. 279 by
adding another ground for considering a dismissal illegal. What is
more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for
damages.38 This disparity in legal treatment, which would result
from the adoption of the theory of the minority cannot simply be
explained by invoking resident Ramon Magsaysay's motto that
"he who has less in life should have more in law." That would be a
misapplication of this noble phrase originally from Professor
Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in
support of his view that an illegal dismissal results not only from
want of legal cause but also from the failure to observe "due
process." The Pepsi-Cola case actually involved a dismissal for
an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not
because there was a denial of due process, but because the
dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the
dismissal with illegality" was merely a dictum thrown in as
additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate
sanction for the failure to give notice is the payment of backwages
for the period when the employee is considered not to have been
effectively dismissed or his employment terminated. The sanction
is not the payment alone of nominal damages as Justice Vitug
contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior
Notice As Illegal
The refusal to look beyond the validity of the initial action taken by
the employer to terminate employment either for an authorized or
just cause can result in an injustice to the employer. For not giving
notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the life

of the employer, an employer will be forced to keep in his employ

such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social
economic force."40 But so does it declare that it "recognizes the
indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment."41 The
Constitution bids the State to "afford full protection to labor."42 But
it is equally true that "the law, in protecting the right's of the
laborer, authorizes neither oppression nor self-destruction of the
employer."43 And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his interest to
do so.
In sum, we hold that if in proceedings for reinstatement under Art.
283, it is shown that the termination of employment was due to an
authorized cause, then the employee concerned should not be
ordered reinstated even though there is failure to comply with the
30-day notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one month for every year of service,
whichever is higher. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six
months shall be considered one (1) whole year.
If the employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either case,
whether he is reinstated or only granted separation pay, he should
be paid full backwages if he has been laid off without written
notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art.
282, if it is shown that the employee was dismissed for any of the
just causes mentioned in said Art. 282, then, in accordance with
that article, he should not be reinstated. However, he must be
paid backwages from the time his employment was terminated
until it is determined that the termination of employment is for a
just cause because the failure to hear him before he is dismissed
renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the
National Labor Relations Commission is MODIFIED by ordering
private respondent Isetann Department Store, Inc. to pay
petitioner separation pay equivalent to one (1) month pay for
every year of service, his unpaid salary, and his proportionate
13th month pay and, in addition, full backwages from the time his
employment was terminated on October 11, 1991 up to the time
the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the

separation pay, backwages, and other monetary awards to

petitioner.
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo,
Buena, Gonzaga-Reyes and De Leon, Jr., JJ.,concur.
G.R. No. 158693
November 17, 2004
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
vs.NATIONAL LABOR RELATIONS COMMISSION (NLRC),
RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
ANGELES, respondents.
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court
of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017,
modifying the decision of National Labor Relations Commission
(NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged
in the business of selling and installing ornamental and
construction materials. It employed petitioners VirgilioAgabon and
Jenny Agabon as gypsum board and cornice installers on January
2, 19922 until February 23, 1999 when they were dismissed for
abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment
of money claims3 and on December 28, 1999, the Labor Arbiter
rendered a decision declaring the dismissals illegal and ordered
private respondent to pay the monetary claims. The dispositive
portion of the decision states:
WHEREFORE, premises considered, We find the termination of
the complainants illegal. Accordingly, respondent is hereby
ordered to pay them their backwages up to November 29, 1999 in
the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of
one (1) month for every year of service from date of hiring up to
November 29, 1999.
Respondent is further ordered to pay the complainants their
holiday pay and service incentive leave pay for the years 1996,
1997 and 1998 as well as their premium pay for holidays and rest
days and VirgilioAgabon's 13th month pay differential amounting
to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos,
or the aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100
(P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED
TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY
EIGHT & 93/100 (P123,828.93) Pesos for VirgilioAgabon, as per
attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found
that the petitioners had abandoned their work, and were not
entitled to backwages and separation pay. The other money
claims awarded by the Labor Arbiter were also denied for lack of
evidence.5

Upon denial of their motion for reconsideration, petitioners filed a

petition for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the
petitioners was not illegal because they had abandoned their
employment but ordered the payment of money claims. The
dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations
Commission is REVERSED only insofar as it dismissed
petitioner's money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997,
and 1998, as well as their service incentive leave pay for said
years, and to pay the balance of petitioner VirgilioAgabon's 13th
month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether
petitioners were illegally dismissed.7
Petitioners assert that they were dismissed because the private
respondent refused to give them assignments unless they agreed
to work on a "pakyaw" basis when they reported for duty on
February 23, 1999. They did not agree on this arrangement
because it would mean losing benefits as Social Security System
(SSS) members. Petitioners also claim that private respondent did
not comply with the twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners
were not dismissed but had abandoned their work.9 In fact,
private respondent sent two letters to the last known addresses of
the petitioners advising them to report for work. Private
respondent's manager even talked to petitioner VirgilioAgabon by
telephone sometime in June 1999 to tell him about the new
assignment at Pacific Plaza Towers involving 40,000 square
meters of cornice installation work. However, petitioners did not
report for work because they had subcontracted to perform
installation work for another company. Petitioners also demanded
for an increase in their wage to P280.00 per day. When this was
not granted, petitioners stopped reporting for work and filed the
illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like
the NLRC are accorded not only respect but even finality if the
findings are supported by substantial evidence. This is especially
so when such findings were affirmed by the Court of Appeals.11
However, if the factual findings of the NLRC and the Labor Arbiter
are conflicting, as in this case, the reviewing court may delve into
the records and examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the
facts, ruled that petitioners' dismissal was for a just cause. They
had abandoned their employment and were already working for
another employer.
To dismiss an employee, the law requires not only the existence
of a just and valid cause but also enjoins the employer to give the
employee the opportunity to be heard and to defend himself.13
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 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.
Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment.14 It is a form of neglect of
duty, hence, a just cause for termination of employment by the
employer.15 For a valid finding of abandonment, these two factors
should be present: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more
intention to work. The intent to discontinue the employment must
be shown by clear proof that it was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having
subcontracted for an installation work for another company.
Subcontracting for another company clearly showed the intention
to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January
1996, they did not report for work because they were working for
another company. Private respondent at that time warned
petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention
to sever their employer-employee relationship. The record of an
employee is a relevant consideration in determining the penalty
that should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who
deliberately absented from work without leave or permission from
his employer, for the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should apply that rule
with more reason here where petitioners were absent because
they were already working in another company.
The law imposes many obligations on the employer such as
providing just compensation to workers, observance of the
procedural requirements of notice and hearing in the termination
of employment. On the other hand, the law also recognizes the
right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good
conduct19 and loyalty. The employer may not be compelled to
continue to employ such persons whose continuance in the
service will patently be inimical to his interests.20
After establishing that the terminations were for a just and valid
cause, we now determine if the procedures for dismissal were
observed.

The procedure for terminating an employee is found in Book VI,

Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor
Code:
Standards of due process: requirements of notice. In all cases
of termination of employment, the following standards of due
process shall be substantially observed:
I. For termination of employment based on just causes as defined
in Article 282 of the Code:
(a) 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;
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) 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.
In case of termination, the foregoing notices shall be served on
the employee's last known address.
Dismissals based on just causes contemplate acts or omissions
attributable to the employee while dismissals based on authorized
causes involve grounds under the Labor Code which allow the
employer to terminate employees. A termination for an authorized
cause requires payment of separation pay. When the termination
of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no
longer possible where the dismissal was unjust, separation pay
may be granted.
Procedurally, (1) if the dismissal is based on a just cause under
Article 282, the employer must give the employee two written
notices and a hearing or opportunity to be heard if requested by
the employee before terminating the employment: a notice
specifying the grounds for which dismissal is sought a hearing or
an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal
is based on authorized causes under Articles 283 and 284, the
employer must give the employee and the Department of Labor
and Employment written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations may be derived:
(1) the dismissal is for a just cause under Article 282 of the Labor
Code, for an authorized cause under Article 283, or for health
reasons under Article 284, and due process was observed; (2) the
dismissal is without just or authorized cause but due process was
observed; (3) the dismissal is without just or authorized cause and
there was no due process; and (4) the dismissal is for just or
authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the
employer will not suffer any liability.
In the second and third situations where the dismissals are illegal,
Article 279 mandates that the employee is entitled to

reinstatement without loss of seniority rights and other privileges

and full backwages, inclusive of allowances, and other benefits or
their monetary equivalent computed from the time the
compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the
procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for noncompliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The
dismissal should be upheld because it was established that the
petitioners abandoned their jobs to work for another company.
Private respondent, however, did not follow the notice
requirements and instead argued that sending notices to the last
known addresses would have been useless because they did not
reside there anymore. Unfortunately for the private respondent,
this is not a valid excuse because the law mandates the twin
notice requirements to the employee's last known address.21
Thus, it should be held liable for non-compliance with the
procedural requirements of due process.
A review and re-examination of the relevant legal principles is
appropriate and timely to clarify the various rulings on
employment termination in the light of Serrano v. National Labor
Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal
if the employee was not given any notice. In the 1989 case of
Wenphil Corp. v. National Labor Relations Commission,23 we
reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not
entitled to reinstatement and backwages because the dismissal
was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper
and caused trouble during office hours, defying superiors who
tried to pacify him. We concluded that reinstating the employee
and awarding backwages "may encourage him to do even worse
and will render a mockery of the rules of discipline that employees
are required to observe."24 We further held that:
Under the circumstances, the dismissal of the private respondent
for just cause should be maintained. He has no right to return to
his former employment.
However, the petitioner must nevertheless be held to account for
failure to extend to private respondent his right to an investigation
before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of
each case and the gravity of the omission committed by the
employer.25

The rule thus evolved: where the employer had a valid reason to
dismiss an employee but did not follow the due process
requirement, the dismissal may be upheld but the employer will be
penalized to pay an indemnity to the employee. This became
known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the
sanction was changed. We held that the violation by the employer
of the notice requirement in termination for just or authorized
causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the
employer must pay full backwages from the time of termination
until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in
Serrano was the significant number of cases involving dismissals
without requisite notices. We concluded that the imposition of
penalty by way of damages for violation of the notice requirement
was not serving as a deterrent. Hence, we now required payment
of full backwages from the time of dismissal until the time the
Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss
now and pay later" by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider
the full meaning of Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment,
the employer shall not terminate the services of an employee
except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his
actual reinstatement.
This means that the termination is illegal only if it is not for any of
the justified or authorized causes provided by law. Payment of
backwages and other benefits, including reinstatement, is justified
only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and
injustice which elicited strong dissent has prompted us to revisit
the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the
Constitution embodies a system of rights based on moral
principles so deeply imbedded in the traditions and feelings of our
people as to be deemed fundamental to a civilized society as
conceived by our entire history. Due process is that which
comports with the deepest notions of what is fair and right and
just.26 It is a constitutional restraint on the legislative as well as
on the executive and judicial powers of the government provided
by the Bill of Rights.
Due process under the Labor Code, like Constitutional due
process, has two aspects: substantive, i.e., the valid and
authorized causes of employment termination under the Labor

Code; and procedural, i.e., the manner of dismissal. Procedural

due process requirements for dismissal are found in the
Implementing Rules of P.D. 442, as amended, otherwise known
as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as
amended by Department Order Nos. 9 and 10.27 Breaches of
these due process requirements violate the Labor Code.
Therefore statutory due process should be differentiated from
failure to comply with constitutional due process.
Constitutional due process protects the individual from the
government and assures him of his rights in criminal, civil or
administrative proceedings; while statutory due process found in
the Labor Code and Implementing Rules protects employees from
being unjustly terminated without just cause after notice and
hearing.
In Sebuguero v. National Labor Relations Commission,28 the
dismissal was for a just and valid cause but the employee was not
accorded due process. The dismissal was upheld by the Court but
the employer was sanctioned. The sanction should be in the
nature of indemnification or penalty, and depends on the facts of
each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,29 it was ruled
that even if the employee was not given due process, the failure
did not operate to eradicate the just causes for dismissal. The
dismissal being for just cause,albeit without due process, did not
entitle the employee to reinstatement, backwages, damages and
attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine
Services, Inc. v. National Labor Relations Commission,30 which
opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has
not been properly observed by an employer, it would not be right
to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with
the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It
might be pointed out that the notice to be given and the hearing to
be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the
employer. Nevertheless, peculiar circumstances might obtain in
certain situations where to undertake the above steps would be
no more than a useless formality and where, accordingly, it would
not be imprudent to apply the res ipsa loquitur rule and award, in
lieu of separation pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent
doctrines in the law on employment termination, we believe that in
cases involving dismissals for cause but without observance of
the twin requirements of notice and hearing, the better rule is to
abandon the Serrano doctrine and to follow Wenphil by holding
that the dismissal was for just cause but imposing sanctions on
the employer. Such sanctions, however, must be stiffer than that

imposed in Wenphil. By doing so, this Court would be able to

achieve a fair result by dispensing justice not just to employees,
but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for
valid or authorized causes but not complying with statutory due
process may have far-reaching consequences.
This would encourage frivolous suits, where even the most
notorious violators of company policy are rewarded by invoking
due process. This also creates absurd situations where there is a
just or authorized cause for dismissal but a procedural infirmity
invalidates the termination. Let us take for example a case where
the employee is caught stealing or threatens the lives of his coemployees or has become a criminal, who has fled and cannot be
found, or where serious business losses demand that operations
be ceased in less than a month. Invalidating the dismissal would
not serve public interest. It could also discourage investments that
can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not
meant to be a sword to oppress employers. The commitment of
this Court to the cause of labor does not prevent us from
sustaining the employer when it is in the right, as in this case.32
Certainly, an employer should not be compelled to pay employees
for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a
person who is admittedly guilty of misfeasance or malfeasance
and whose continued employment is patently inimical to the
employer. The law protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer.33
It must be stressed that in the present case, the petitioners
committed a grave offense, i.e., abandonment, which, if the
requirements of due process were complied with, would
undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article
282 should not be protected by the Social Justice Clause of the
Constitution. Social justice, as the term suggests, should be used
only to correct an injustice. As the eminent Justice Jose P. Laurel
observed, social justice must be founded on the recognition of the
necessity of interdependence among diverse units of a society
and of the protection that should be equally and evenly extended
to all groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of the
state of promoting the health, comfort, and quiet of all persons,
and of bringing about "the greatest good to the greatest
number."34
This is not to say that the Court was wrong when it ruled the way
it did in Wenphil, Serrano and related cases. Social justice is not
based on rigid formulas set in stone. It has to allow for changing
times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a
balanced approach to labor-management relations and dispense
justice with an even hand in every case:

We have repeatedly stressed that social justice or any justice for

that matter is for the deserving, whether he be a millionaire in
his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in favor of the poor to
whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor
simply because they are poor, or reject the rich simply because
they are rich, for justice must always be served for the poor and
the rich alike, according to the mandate of the law.35
Justice in every case should only be for the deserving party. It
should not be presumed that every case of illegal dismissal would
automatically be decided in favor of labor, as management has
rights that should be fully respected and enforced by this Court.
As interdependent and indispensable partners in nation-building,
labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the
rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the
lack of statutory due process should not nullify the dismissal, or
render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as
ruled in Reta v. National Labor Relations Commission.36 The
indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought to
deter in the Serrano ruling. The sanction should be in the nature
of indemnification or penalty and should depend on the facts of
each case, taking into special consideration the gravity of the due
process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order
that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by
him.37
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the
form of nominal damages to an employee who has been
dismissed if, in effecting such dismissal, the employer fails to
comply with the requirements of due process. The Court, after
considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employee's one month
salary. This indemnity is intended not to penalize the employer but
to vindicate or recognize the employee's right to statutory due
process which was violated by the employer.39
The violation of the petitioners' right to statutory due process by
the private respondent warrants the payment of indemnity in the
form of nominal damages. The amount of such damages is
addressed to the sound discretion of the court, taking into account
the relevant circumstances.40 Considering the prevailing
circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to
deter employers from future violations of the statutory due
process rights of employees. At the very least, it provides a

vindication or recognition of this fundamental right granted to the

latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in
holding that it failed to pay petitioners' holiday pay, service
incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money
claims. Private respondent is liable for petitioners' holiday pay,
service incentive leave pay and 13th month pay without
deductions.
As a general rule, one who pleads payment has the burden of
proving it. Even where the employee must allege non-payment,
the general rule is that the burden rests on the employer to prove
payment, rather than on the employee to prove non-payment. The
reason for the rule is that the pertinent personnel files, payrolls,
records, remittances and other similar documents which will
show that overtime, differentials, service incentive leave and other
claims of workers have been paid are not in the possession of
the worker but in the custody and absolute control of the
employer.41
In the case at bar, if private respondent indeed paid petitioners'
holiday pay and service incentive leave pay, it could have easily
presented documentary proofs of such monetary benefits to
disprove the claims of the petitioners. But it did not, except with
respect to the 13th month pay wherein it presented cash vouchers
showing payments of the benefit in the years disputed.42
Allegations by private respondent that it does not operate during
holidays and that it allows its employees 10 days leave with pay,
other than being self-serving, do not constitute proof of payment.
Consequently, it failed to discharge the onus probandi thereby
making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from
petitioner VirgilioAgabon's 13th month pay, we find the same to be
unauthorized. The evident intention of Presidential Decree No.
851 is to grant an additional income in the form of the 13th month
pay to employees not already receiving the same43 so as "to
further protect the level of real wages from the ravages of worldwide inflation."44 Clearly, as additional income, the 13th month
pay is included in the definition of wage under Article 97(f) of the
Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in
terms of money whether fixed or ascertained on a time, task,
piece , or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be
done, or for services rendered or to be rendered and includes the
fair and reasonable value, as determined by the Secretary of
Labor, of board, lodging, or other facilities customarily furnished
by the employer to the employee"
from which an employer is prohibited under Article 11345 of the
same Code from making any deductions without the employee's

knowledge and consent. In the instant case, private respondent

failed to show that the deduction of the SSS loan and the value of
the shoes from petitioner VirgilioAgabon's 13th month pay was
authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner VirgilioAgabon included the
same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims
awarded by the Labor Arbiter ordering the private respondent to
pay each of the petitioners holiday pay for four regular holidays
from 1996 to 1998, in the amount of P6,520.00, service incentive
leave pay for the same period in the amount of P3,255.00 and the
balance of VirgilioAgabon's thirteenth month pay for 1998 in the
amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED.
The decision of the Court of Appeals dated January 23, 2003, in
CA-G.R. SP No. 63017, finding that petitioners' Jenny and
VirgilioAgabon abandoned their work, and ordering private
respondent to pay each of the petitioners holiday pay for four
regular holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of VirgilioAgabon's thirteenth month
pay for 1998 in the amount of P2,150.00 isAFFIRMED with the
MODIFICATION that private respondent Riviera Home
Improvements, Inc. is furtherORDERED to pay each of the
petitioners the amount of P30,000.00 as nominal damages for
non-compliance with statutory due process.
G.R. No. 113271 October 16, 1997
WATEROUS DRUG CORPORATION and MS. EMMA CO,
petitioners,
vs.NATIONAL LABOR RELATIONS COMMISSION and
ANTONIA MELODIA CATOLICO, respondents.
DAVIDE, JR., J.:
Nor is he a true Servant [who] buys dear to share in the Profit with
the Seller. 1
This petition for certiorari under Rule 65 of the Rules of Court
seeks to declare private respondent Antonia MelodiaCatolico
(hereafter Catolico) not a "true Servant," thereby assailing the 30
September 1993 decision 2 and December 1993 Resolution 3 of
the National Labor Relations Commission (NLRC) in NLRC-NCR
CA No. 005160-93, which sustained the reinstatement and
monetary awards in favor of private respondent 4 and denied the
petitioners' motion for reconsideration. 5
The facts are as follows:
Catolico was hired as a pharmacist by petitioner Waterous Drug
Corporation (hereafter WATEROUS) on 15 August 1988.
On 31 July 1989, Catolico received a memorandum 6 from
WATEROUS Vice President-General Manager Emma R. Co
warning her not to dispense medicine to employees chargeable to
the latter's accounts because the same was a prohibited practice.
On the same date, Co issued another memorandum 7 to Catolico
warning her not to negotiate with suppliers of medicine without
consulting the Purchasing Department, as this would impair the

company's control of purchases and, besides she was not

authorized to deal directly with the suppliers.
As regards the first memorandum, Catolico did not deny her
responsibility but explained that her act was "due to negligence,"
since fellow employee Irene Soliven "obtained the medicines in
bad faith and through misrepresentation when she claimed that
she was given a charge slip by the Admitting Dept." Catolico then
asked the company to look into the fraudulent activities of Soliven.
8
In a memorandum 9 dated 21 November 1989, WATEROUS
Supervisor Luzviminda E. Bautro warned Catolico against the
"rush delivery of medicines without the proper documents."
On 29 January 1990, WATEROUS Control Clerk Eugenio Valdez
informed Co that he noticed an irregularity involving Catolico and
Yung Shin Pharmaceuticals, Inc. (hereafter YSP), which he
described as follows:
. . . A case in point is medicine purchased under our Purchase
Order (P.O.) No. 19045 with YSP Sales Invoice No. 266
representing purchase of ten (10) bottles of Voren tablets at
P384.00 per unit. Previews P.O.s issued to YSP, Inc. showed that
the price per bottle is P320.00 while P.O. No. 19045 is priced at
P384.00 or an over price of P64.00 per bottle (or total of
P640.00). WDRC paid the amount of P3,840.00 thru MBTC
Check No. 222832 dated December 15, 1988. Verification was
made to YSP, Inc. to determine the discrepancy and it was found
that the cost per bottle was indeed overpriced. YSP, Inc.
Accounting Department (Ms. Estelita Reyes) confirmed that the
difference represents refund of jack-up price of ten bottles of
Voren tablets per sales invoice no. 266 as per their check voucher
no. 629552 (shown to the undersigned), which was paid to Ms.
Catolico through China Bank check no. 892068 dated November
9, 1989 .
The undersigned talked to Ms. Catolico regarding the check but
she denied having received it and that she is unaware of the
overprice. However, upon conversation with Ms. Saldana, EDRC
Espana Pharmacy Clerk, she confirmed that the check amounting
to P640.00 was actually received by Ms. Catolico. As a matter of
fact, Ms. Catolico even asked Ms. Saldana if she opened the
envelope containing the check but Ms. Saldana answered her
"talagangganyan, bukas." It appears that the amount in question
(P640.00) had been pocketed by Ms. Catolico. 10
Forthwith, in her memorandum 11 dated 37 January 1990, Co
asked Catolico to explain, within twenty-four hours, her side of the
reported irregularity. Catolico asked for additional time to give her
explanation, 12 and she was granted a 48-hour extension from 1
to 3 February 1990. However, on 2 February 1990, she was
informed that effective 6 February 1990 to 7 March 1990, she
would be placed on preventive suspension to protect the interests
of the company. 13
In a letter dated 2 February 1990, Catolico requested access to
the file containing Sales Invoice No. 266 for her to be able to
make a satisfactory explanation. In said letter she protested

Saldaa's invasion of her privacy when Saldaa opened an

envelope addressed to Catolico. 14
In a letter 15 to Co dated 10 February 1990, Catolico, through her
counsel, explained that the check she received from YSP was a
Christmas gift and not a "refund of overprice." She also averred
that the preventive suspension was ill-motivated, as it sprang from
an earlier incident between her and Co's secretary, Irene Soliven.
On 5 March 1990, WATEROUS Supervisor LuzvimindaBautro,
issued a memorandum 16 notifying Catolico of her termination;
thus:
We received your letter of explanation and your lawyer's letter
dated Feb. 2, 1990 and Feb. 10, 1990 respectively regarding our
imposition of preventive suspension on you for acts of dishonesty.
However, said letters failed to rebut the evidences [sic] in our
possession which clearly shows that as a Pharmacist stationed at
Espana Branch, you actually made Purchase Orders at YSP
Phils., Inc. for 10 bottles of Voren tablets at P384.00/bottle with
previous price of P320.00/bottle only. A check which you received
in the amount of P640.00 actually represents the refund of over
price of said medicines and this was confirmed by Ms. Estelita
Reyes, YSP Phils., Inc. Accounting Department.
Your actuation constitutes an act of dishonesty detrimental to the
interest of the company. Accordingly, you are hereby terminated
effective March 8, 1990.
On 5 May 1990, Catolico filed before the Office of the Labor
Arbiter a complaint for unfair labor practice, illegal dismissal, and
illegal suspension. 17
In his decision 18 of 10 May 1993, Labor Arbiter Alex Arcadio
Lopez found no proof of unfair labor practice against petitioners.
Nevertheless, he decided in favor of Catolico because petitioners
failed to "prove what [they] alleged as complainant's dishonesty,"
and to show that any investigation was conducted. Hence, the
dismissal was without just cause and due process. He thus
declared the dismissal and suspension illegal but disallowed
reinstatement, as it would not be to the best interest of the parties.
Accordingly, he awarded separation pay to Catolico computed at
one-half month's pay for every year of service; back wages for
one year; and the additional sum of P2,000.00 for illegal
suspension "representing 30 days work." Arbiter Lopez computed
the award in favor of Catolico as follows:
30 days Preventive Suspension P2,000.00
Backwages 26,858.50
1/12 of P26,858.50 2,238.21
Separation pay (3 years) 4,305.15

TOTAL AWARD P35,401.86

Petitioners seasonably appealed from the decision and urged the

NLRC to set it aside because the Labor Arbiter erred in finding
that Catolico was denied due process and that there was no just
cause to terminate her services.

In its decision 19 of 30 September 1993, the NLRC affirmed the

findings of the Labor Arbiter on the ground that petitioners were
not able to prove a just cause for Catolico's dismissal from her
employment. It found that petitioner's evidence consisted only of
the check of P640.00 drawn by YSP in favor of complainant,
which her co-employee saw when the latter opened the envelope.
But, it declared that the check was inadmissible in evidence
pursuant to Sections 2 and 3(1 and 2) of Article III of the
Constitution. 20 It concluded:
With the smoking gun evidence of respondents being rendered
inadmissible, by virtue of the constitutional right invoked by
complainants, respondents' case falls apart as it is bereft of
evidence which cannot be used as a legal basis for complainant's
dismissal.
The NLRC then dismissed the appeal for lack of merit, but
modified the dispositive portion of the appealed decision by
deleting the award for illegal suspension as the same was already
included in the computation of the aggregate of the awards in the
amount of P35,401.86.
Their motion for reconsideration having been denied, petitioners
filed this special civil action for certiorari, which is anchored on the
following grounds:
I. Public respondent committed grave abuse of discretion in its
findings of facts.
II. Due process was duly accorded to private respondent.
III. Public respondent gravely erred in applying Section 3, Article
III of the 1987 Constitution.
As to the first and second grounds, petitioners insist that Catolico
had been receiving "commissions" from YSP, or probably from
other suppliers, and that the check issued to her on 9 November
1989 was not the first or the last. They also maintained that
Catolico occupied a confidential position and that Catolico's
receipt of YSP's check, aggravated by her "propensity to violate
company rules," constituted breach of confidence. And contrary to
the findings of NLRC, Catolico was given ample opportunity to
explain her side of the controversy.
Anent the third ground, petitioners submit that, in light of the
decision in the People v. Marti, 21 the constitutional protection
against unreasonable searches and seizures refers to the
immunity of one's person from interference by government and
cannot be extended to acts committed by private individuals so as
to bring it within the ambit of alleged unlawful intrusion by the
government.
In its Manifestation in Lieu of Comment, the Office of the Solicitor
General (OSG) disagreed with the NLRC's decision, as it was of
the persuasion that (a) the conclusions reached by public
respondent are inconsistent with its findings of fact; and (b) the
incident involving the opening of envelope addressed to private
respondent does not warrant the application of the constitutional
provisions. It observed that Catolico was given "several
opportunities" to explain her side of the check controversy, and
concluded that the opportunities granted her and her subsequent

explanation "satisfy the requirements of just cause and due

process." The OSG was also convinced that Catolico's dismissal
was based on just cause and that Catolico's admission of the
existence of the check, as well as her "lame excuse" that it was a
Christmas gift from YSP, constituted substantial evidence of
dishonesty. Finally, the OSG echoed petitioners' argument that
there was no violation of the right of privacy of communication in
this case, 22 adding that petitioner WATEROUS was justified in
opening an envelope from one of its regular suppliers as it could
assume that the letter was a business communication in which it
had an interest.
In its Comment which we required to be filed in view of the
adverse stand of the OSG, the NLRC contends that petitioners
miserably failed to prove their claim that it committed grave abuse
of discretion in its findings of fact. It then prays that we dismiss
this petition.
In her Comment, Catolico asserts that petitioners' evidence is too
"flimsy" to justify her dismissal. The check in issue was given to
her, and she had no duty to turn it over to her employer. Company
rules do not prohibit an employee from accepting gifts from
clients, and there is no indication in the contentious check that it
was meant as a refund for overpriced medicines. Besides, the
check was discovered in violation of the constitutional provision
on the right to privacy and communication; hence, as correctly
held by the NLRC, it was inadmissible in evidence.
Catolico likewise disputes petitioners' claim that the audit report
and her initial response that she never received a check were
sufficient to justify her dismissal. When she denied having
received a check from YSP, she meant that she did not receive
any refund of overprice, consistent with her position that what she
received was a token gift. All that can be gathered from the audit
report is that there was apparently an overcharge, with no basis to
conclude that Catolico pocketed the amount in collusion with YSP.
She thus concluded that her dismissal was based on a mere
suspicion.
Finally, Catolico insists that she could not have breached the trust
and confidence of WATEROUS because, being merely a
pharmacist, she did not handle "confidential information or
sensitive properties." She was doing the task of a saleslady:
selling drugs and making requisitions when supplies were low.
A thorough review of the record leads us to no other conclusion
than that, except as to the third ground, the instant petition must
fail.
Concededly, Catolico was denied due process. Procedural due
process requires that an employee be apprised of the charge
against him, given reasonable time to answer the charge, allowed
ample opportunity to be heard and defend himself, and assisted
by a representative if the employee so
desires. 23 Ample opportunity connotes every kind of assistance
that management must accord the employee to enable him to
prepare adequately for his defense, including legal representation.
24

In the case at bar, although Catolico was given an opportunity to

explain her side, she was dismissed from the service in the
memorandum of 5 March 1990 issued by her Supervisor after
receipt of her letter and that of her counsel. No hearing was ever
conducted after the issues were joined through said letters. The
Supervisor's memorandum spoke of "evidences [sic] in
[WATEROUS] possession," which were not, however, submitted.
What the "evidences" [sic] other than the sales invoice and the
check were, only the Supervisor knew.
Catolico was also unjustly dismissed. It is settled that the burden
is on the employer to prove just and valid cause for dismissing an
employee, and its failure to discharge that burden would result in
a finding that the dismissal is unjustified. 25 Here, WATEROUS
proved unequal to the task.
It is evident from the Supervisor's memorandum that Catolico was
dismissed because of an alleged anomalous transaction with YSP.
Unfortunately for petitioners, their evidence does not establish
that there was an overcharge. Control Clerk Eugenio C. Valdez,
who claims to have discovered Catolico's inappropriate
transaction, stated in his affidavit: 26
4. My findings revealed that on or before the month of July 31,
1989, Ms. Catolico in violation of the [company] procedure, made
an under the table deal with YSP Phils. to supply WDRC needed
medicines like Voren tablets at a jack-up price of P384.00 per
bottle of 50 mg. which has a previous price of only P320.00;
5. I verified the matter to YSP Phils. to determine the discrepancy
and I found out that the cost per bottle was indeed overpriced.
The Accounting Department of YSP Phils. through Ms. Estelita
Reyes confirmed that there was really an overprice and she said
that the difference was refunded through their check voucher no.
629552 which was shown to me and the payee is
MelodiaCatolico, through a China Bank Check No. 892068 dated
November 9, 1989.
It clearly appears then that Catolico's dismissal was based on
hearsay information. Estelita Reyes never testified nor executed
an affidavit relative to this case; thus, we have to reject the
statements attributed to her by Valdez. Hearsay evidence carries
no probative value. 27
Besides, it was never shown that petitioners paid for the Voren
tablets. While Valdez informed Co, through the former's
memorandum 28 of 29 January 1990, that WATEROUS paid YSP
P3,840.00 "thru MBTC Check No. 222832," the said check was
never presented in evidence, nor was any receipt from YSP
offered by petitioners.
Moreover, the two purchase orders for Voren tablets presented by
petitioners do not indicate an overcharge. The purchase order
dated 16 August 1989 29 stated that the Voren tablets cost
P320.00 per box, while the purchase order dated 5 October 1989
30 priced the Voren tablets at P384.00 per bottle. The difference
in price may then be attributed to the different packaging used in
each purchase order.

Assuming that there was an overcharge, the two purchase orders

for the Voren tablets were recommended by Director-MMG Mario
R. Panuncio, verified by AVP-MNG Noli M. Lopez and approved
by Vice President-General Manager Emma R. Co. The purchase
orders were silent as to Catolico's participation in the purchase. If
the price increase was objectionable to petitioners, they or their
officers should have disapproved the transaction. Consequently,
petitioners had no one to blame for their predicament but
themselves. This set of facts emphasizes the exceedingly
incredible situation proposed by petitioners. Despite the
memorandum warning Catolico not to negotiate with suppliers of
medicine, there was no proof that she ever transacted, or that she
had the opportunity to transact, with the said suppliers. Again, as
the purchase orders indicate, Catolico was not at all involved in
the sale of the Voren tablets. There was no occasion for Catolico
to initiate, much less benefit from, what Valdez called an "under
the table deal" with YSP.
Catolico's dismissal then was obviously grounded on mere
suspicion, which in no case can justify an employee's dismissal.
Suspicion is not among the valid causes provided by the Labor
Code for the termination of
employment; 31 and even the dismissal of an employee for loss of
trust and confidence must rest on substantial grounds and not on
the employer's arbitrariness, whims, caprices, or suspicion. 32
Besides, Catolico was not shown to be a managerial employee, to
which class of employees the term "trust and confidence" is
restricted. 33
As regards the constitutional violation upon which the NLRC
anchored its decision, we find no reason to revise the doctrine laid
down in People vs. Marti 34 that the Bill of Rights does not protect
citizens from unreasonable searches and seizures perpetrated by
private individuals. It is not true, as counsel for Catolico claims,
that the citizens have no recourse against such assaults. On the
contrary, and as said counsel admits, such an invasion gives rise
to both criminal and civil liabilities.
Finally, since it has been determined by the Labor Arbiter that
Catolico's reinstatement would not be to the best interest of the
parties, he correctly awarded separation pay to Catolico.
Separation pay in lieu of reinstatement is computed at one
month's salary for every year of service. 35 In this case, however,
Labor Arbiter Lopez computed the separation pay at one-half
month's salary for every year of service. Catolico did not oppose
or raise an objection. As such, we will uphold the award of
separation pay as fixed by the Labor Arbiter.
WHEREFORE, the instant petition is hereby DISMISSED and the
challenged decision and resolution of the National Labor
Relations Commission dated 30 September 1993 and 2
December 1993, respectively, in NLRC-NCR CA No. 005160-93
are AFFIRMED, except as to its reason for upholding the Labor
Arbiter's decision, viz., that the evidence against private
respondent was inadmissible for having been obtained in violation
of her constitutional rights of privacy of communication and

against unreasonable searches and seizures which is hereby set

aside.
G.R. No. L-19052
December 29, 1962
MANUEL F. CABAL, petitioner, vs.HON. RUPERTO KAPUNAN,
JR., and THE CITY FISCAL OF MANILA, respondents.
CONCEPCION, J.:
This is an original petition for certiorari and prohibition with
preliminary injunction, to restrain the Hon. RupertoKapunan, Jr.,
as Judge of the Court of First Instance of Manila, from further
proceeding in Criminal Case No. 60111 of said court, and to set
aside an order of said respondent, as well as the whole
proceedings in said criminal case. .
On or about August 1961, Col. Jose C. Maristela of the Philippine
Army filed with the Secretary of Nation Defense a letter-complaint
charging petitioner Manuel Cabal, then Chief of Staff of the Armed
Forces of the Philippines, with "graft, corrupt practices,
unexplained wealth, conduct unbecoming of an officer and
gentleman dictatorial tendencies, giving false statements of his as
sets and liabilities in 1958 and other equally reprehensible acts".
On September 6, 1961, the President of the Philippines created a
committee of five (5) members, consisting of former Justice
Marceliana R. Montemayor, as Chairman, former Justices
Buenaventura Ocampo and SoteroCabahug, and Generals Basilio
J. Valdez and Guillermo B. Francisco, to investigate the charge of
unexplained wealth contained in said letter-complaint and submit
its report and recommendations as soon as possible. At the
beginning of the investigation, on September 15, 1961, the
Committee, upon request of complainant Col. Maristela, or
considered petitioner herein to take the witness stand and be
sworn to as witness for Maristela, in support of his
aforementioned charge of unexplained wealth. Thereupon,
petitioner objected, personally and through counsel, to said
request of Col. Maristela and to the aforementioned order of the
Committee, invoking his constitutional right against selfincrimination. The Committee insisted that petitioner take the
witness stand and be sworn to, subject to his right to refuse to
answer such questions as may be incriminatory. This
notwithstanding, petitioner respectfully refused to be sworn to as a
witness to take the witness stand. Hence, in a communication
dated September 18, 1961, the Committee referred the matter to
respondent City Fiscal of Manila, for such action as he may deem
proper. On September 28, 1961, the City Fiscal filed with the
Court of First Instance of Manila a "charge" reading as follows:
The undersigned hereby charges Manuel F. Cabal with contempt
under section 580 of the Revised Administrative Code in relation
to sections I and 7, Rule 64 of the Rules of Court, committed as
follows:
That on or about September 15, 1961, in the investigation
conducted at the U.P. Little Theater:, Padre Faura, Manila, by the
Presidential Committee, which was created by the President of
the Republic of the Philippines in accordance with law to
investigate the charges of alleged acquisition by respondent of

unexplained
wealth
and
composed
of
Justice
MarcelianoMontemayor, as Chairman, and Justices Buenaventura
Ocampo and SoteroCabahug and Generals Basilio Valdez and
Guillermo Francisco, as members, with the power, among others,
to compel the attendance of witnesses and take their testimony
under oath, respondent who was personally present at the time
before the Committee in compliance with a subpoena duly issued
to him, did then and there willfully, unlawfully, and contumaciously,
without any justifiable cause or reason refusal and fail and still
refuses and fails to obey the lawful order of the Committee to take
the witness stand, be sworn and testify as witness in said
investigation, in utter disregard of the lawful authority of the
Committee and thereby obstructing and degrading the
proceedings before said body.
Wherefore, it is respectfully prayed that respondent be summarily
adjudged guilty of contempt of the Presidential Committee and
accordingly disciplined as in contempt of court imprisonment until
such time as he shall obey the subject order of said committee.
This charge, docketed as Criminal Case No. 60111 of said court,
was assigned to Branch XVIII thereof, presided over by
respondent Judge. On October 2, 1961, the latter issued an order
requiring petitioner to show cause and/or answer the charge filed
against him within ten (10) days. Soon thereafter, or on October 4,
1961, petitioner filed with respondent Judge a motion to quash the
charge and/or order to show cause, upon the ground: (1) that the
City Fiscal has neither authority nor personality to file said char
and the same is null and void, for, if criminal, the charge has been
filed without a preliminary investigation, and, civil, the City Fiscal
may not file it, his authority in respect of civil cases being limited
to representing the City of Manila; (2) that the facts charged
constitute no offense for section 580 of the Revised Administrative
Code, upon which the charge is based, violates due process, in
that it is vague and uncertain as regards the offense therein
defined and the fine imposable therefor and that it fail to specify
whether said offense shall be treated also contempt of an inferior
court or of a superior court (3) that more than one offense is
charged, for the contempt imputed to petitioner is sought to be
punished as contempt of an inferior court, as contempt of a
superior court an as contempt under section 7 of Rule 64 of the
Rules Court; (4) that the Committee had no power to order an
require petitioner to take the witness stand and be sworn to, upon
the request of Col. Maristela, as witness for the latter, inasmuch
as said order violates petitioner's constitutional right against selfincrimination.
By resolution dated October 14, 1961. respondent Judge denied
said motion to quash. Thereupon, or on October 20, 1961,
petitioner began the present action for the purpose adverted to
above, alleging that, unless restrained by this court, respondent
Judge may summarily punish him for contempt, and that such
action would not be appealable.
In their answer, respondents herein allege, inter alia, that the
investigation being conducted by the Committee above referred to

is administrative, not criminal, in nature; that the legal provision

relied upon by petitioner in relation to preliminary investigations
(Section '08-C, Republic Act No. 409, as amended by Republic
Act No. 1201) is inapplicable to contempt proceedings; that, under
section 580 of the Revised Administrative Code. contempt against
an administrative officer is to be dealt with as contempt of a
superior court; that petitioner herein is charged with only one
offense; and that, tinder the constitutional guarantee against selfincrimination, petitioner herein may refuse, not to take the witness
stand, but to answer incriminatory questions.
At the outset, it is not disputed that the accused in a criminal case
may refuse, not only to answer incriminatory questions, but, also,
to take the witness stand (3 Wharton's Criminal Evidence, pp.
1959-1960; 98 C.J.S., p. 264). Hence, the issue before us boils
down to whether or not the proceedings before the
aforementioned Committee is civil or criminal in character.
In this connection, it should be noted that, although said
Committee was created to investigate the administrative charge of
unexplained wealth, there seems to be no question that Col.
Maristela does not seek the removal of petitioner herein as Chief
of Staff of the Armed Forces of the Philippines. As a matter of fact
he no longer holds such office. It seems, likewise conceded that
the purpose of the charge against petitioner is to apply the
provisions of Republic Act No. 1379, as amended, otherwise
known as the Anti-Graft Law, which authorizes the forfeiture to the
State of property of a public officer or employee which is
manifestly out of proportion to his salary as such public officer or
employee and his other lawful income and the income from
legitimately acquired property. Such for forfeiture has been held,
however, to partake of the nature of a penalty.
In a strict signification, a forfeiture is a divestiture property without
compensation, in consequence of a default an offense, and the
term is used in such a sense in this article. A forfeiture, as thus
defined, is imposed by way of punishment not by the mere
convention of the parties, but by the lawmaking power, to insure a
prescribed course of conduct. It is a method deemed necessary
by the legislature to restrain thecommission of an offense and to
aid in the prevention of such a offense. The effect of such a
forfeiture is to transfer the title to the specific thing from the owner
to the sovereign power (23 Am. Jur. 599) (Emphasis ours.)
In Black's Law Dictionary a "forfeiture" is defined to be "the
incurring of a liability to pay a definite sum of money as the
consequence of violating the provisions of some statute or refusal
to comply with some requirement of law." It may be said to be a
penalty imposed for misconduct or breach of duty. (Com. vs.
French, 114 S.W. 255.)
As a consequence, proceedings for forfeiture of proper are
deemed criminal or penal, and, hence, the exemption of
defendants in criminal case from the obligation to be witnesses
against themselves are applicable thereto.
Generally speaking, informations for the forfeiture of goods that
seek no judgment of fine or imprisonment against any person are

deemed to be civil proceedings in rem. Such proceedings are

criminal in nature to the extent that where the person using the
res illegally is the owner or rightful possessor of it, the forfeiture
proceeding is in the nature of a punishment. They have been held
to be so far in the nature criminal proceedings that a general
verdict on several count in an information is upheld if one count is
good.According to the authorities such proceedings, where the
owner of the property appears, are so far considered as quasicriminal proceeding as to relieve the owner from being a witness
against himself and to prevent the compulsory production of his
books and papers. ... (23 Am. Jur. 612; emphasis ours.)
Although the contrary view formerly obtained, the late decisions
are to the effect that suits for forfeitures incurred by the
commission of offenses against the law are so far of quasicriminal nature as to be within the reason of criminal proceedings
for all purposes of ... that portion of the Fifth Amendment which
declares that no person shall be compelled in any criminal case to
be a witness against himself. .... It has frequently been held upon
constitutional grounds under the various State Constitution, that a
witness or party called as witness cannot be made to testify
against himself as to matters which would subject his property to
forfeiture. At early common law no person could be compelled to
testify against himself or to answer any question which would
have had a tendency to expose his property to a forfeiture or to
form a link in a chain of evidence for that purpose, as well as to
incriminate him. Under this common-law doctrine of protection
against compulsory disclosures which would tend to subject the
witness to forfeiture, such protection was claimed and availed of
in some early American cases without placing the basis of the
protection upon constitutional grounds. (23 Am. Jur., 616;
emphasis ours.)
Proceedings for forfeitures are generally considered to be civil
and in the nature of proceedings in rem. The statute providing that
no judgment or other proceedings in civil cases shall be arrested
or reversed for any defect or want of form is applicable to them. In
some aspects, however, suits for penalties and forfeitures are of
quasi-criminal nature and within the reason of criminal
proceedings for all the purposes of ... that portion of the Fifth
Amendment which declares, that no person shall be compelled in
any criminal case to be a witness against himself. The proceeding
is one against the owner, as well as against the goods; for it is his
breach of the laws which has to be proved to establish the
forfeiture and his property is sought to be forfeited. (15 Am. Jur.,
Sec. 104, p. 368; emphasis ours.)lawphil.net
The rule protecting a person from being compelled to furnish
evidence which would incriminate him existsnot only when he is
liable criminally to prosecution and punishment, but also when his
answer would tend to expose him to a ... forfeiture .... (58 Am.
Jur., See. 43, p. 48; emphasis ours.)
As already observed, the various constitutions provide that no
person shall be compelled in any criminal case to be a witness
against himself. This prohibition against compelling a person to

take the stand as a witness against himself applied only to

criminal, quasi-criminal, and penal proceedings, including a
proceeding civil in form for forfeiture of property by reason of the
commission of an offense, but not a proceeding in which the
penalty recoverable is civil or remedial in nature, .... (58 Am. Jur.,
Sec. 44, p. 49: emphasis ours.)
The privilege of a witness not to incriminate himself is not
infringed by merely asking the witness a question which he
refuses to answer. The privilege is simply an option of refusal, and
not a prohibition of inquiry. A question is not improper merely
because the answer may tend to incriminate but, where a witness
exercises his constitutional right not to answer, a question by
counsel as to whether the reason for refusing to answer is
because the answer may tend to incriminate the witness is
improper.
The possibility that the examination of the witness will be pursued
to the extent of requiring self-incrimination will not justify the
refusal to answer questions. However, where the position of the
witness is virtually that of an accused on trial, it would appear that
he may invoke the privilege in support of a blanket refusal to
answer any and all questions. (C.J.S., p. 252; emphasis ours.)
A person may not be compelled to testify in an action against him
for a penalty or to answer any question as a witness which would
subject him to a penalty or forfeiture, where the penalty or
forfeiture is imposed as a vindication of the public justice of the
state.
In general, both at common law and under a constitution provision
against compulsory self-incrimination, a person may not be
compelled to answer any question as a witness which would
subject him to a penalty orforfeiture, or testify in action against
him for a penalty.
The privilege applies where the penalty or forfeiture recoverable,
or is imposed in vindication of the public justice the state as a
statutory fine or penalty, or a fine or penalty for violation of a
municipal ordinance, even though the action or proceeding for its
enforcement is not brought in a criminal court but is prosecuted
through the modes of procedure applicable to ordinary civil
remedy. (98 C. J. S., pp. 275-6.)
Thus, in Boyd vs. U.S. (116 U.S. 616, 29 L. ed. 746), it was held
that the information, in a proceeding to declaration a forfeiture of
certain property because of the evasion of a certain revenue law,
"though technically a civil proceeding is in substance and effect a
criminal one", and that suits for penalties and forfeitures are within
the reason criminal proceedings for the purposes of that portion
the Fifth Amendment of the Constitution of the U.S. which
declares that no person shall be compelled in a criminal case to
be a witness against himself. Similarly, a proceeding for the
removal of an officer was held, in Thurston vs. Clark (107 Cal.
285, 40 pp. 435, 437), to be in substance criminal, for said portion
of the Fifth Amendment applies "to all cases in which the action
prosecution is not to establish, recover or redress private and civil
rights, but to try and punish persons charged with the commission

of public offenses" and "a criminal case is a action, suit or cause

instituted to punish an infraction the criminal laws, and, with this
object in view, it matters not in what form a statute may clothe it; it
is still a criminal case ...". This view was, in effect confirmed in
Lees vs. U.S. (37 L. ed. 1150-1151). Hence, the Lawyer Reports
Annotated (Vol. 29, p. 8), after an extensive examination of
pertinent cases, concludes that said constitutional provision
applies whenever the proceeding is not "purely remedial", or
intended "as a redress for a privategrievance", but primarily to
punish "a violation of duty or a public wrong and to deter others
from offending in likewise manner. ...".
We are unmindful of the doctrine laid down in Almeda vs. Perez,
L-18428 (August 30, 1962) in which the theory that, after the filing
of respondents' answer to a petition for forfeiture under Republic
Act No. 1379, said petition may not be amended as to substance
pursuant to our rules of criminal procedure, was rejected by this
Court upon the ground that said forfeiture proceeding in civil in
nature. This doctrine refers, however, to the purely
proceduralaspect of said proceeding, and has no bearing the
substantial rights of the respondents therein, particularly their
constitutional right against self-incrimination.
WHEREFORE, the writ prayed for is granted and respondent
Judge hereby enjoined permanently from proceeding further in
Criminal Case No. 60111 of the Court of First Instance of Manila.
It is so ordered.
G.R. No. L-25018
May 26, 1969
ARSENIO PASCUAL, JR., petitioner-appellee, vs.BOARD OF
MEDICAL EXAMINERS, respondent-appellant, SALVADOR
GATBONTON and ENRIQUETA GATBONTON, intervenorsappellants.
Conrado B. Enriquez for petitioner-appellee.
FERNANDO, J.:
The broad, all-embracing sweep of the self-incrimination clause,1
whenever appropriately invoked, has been accorded due
recognition by this Court ever since the adoption of the
Constitution.2 Bermudez v. Castillo,3decided in 1937, was quite
categorical. As we there stated: "This Court is of the opinion that
in order that the constitutional provision under consideration may
prove to be a real protection and not a dead letter, it must be
given a liberal and broad interpretation favorable to the person
invoking it." As phrased by Justice Laurel in his concurring
opinion: "The provision, as doubtless it was designed, would be
construed with the utmost liberality in favor of the right of the
individual intended to be served." 4
Even more relevant, considering the precise point at issue, is the
recent case of Cabal v. Kapunan,5where it was held that a
respondent in an administrative proceeding under the Anti-Graft
Law 6 cannot be required to take the witness stand at the
instance of the complainant. So it must be in this case, where
petitioner was sustained by the lower court in his plea that he

could not be compelled to be the first witness of the complainants,

he being the party proceeded against in an administrative charge
for malpractice. That was a correct decision; we affirm it on
appeal.
ArsenioPascual, Jr., petitioner-appellee, filed on February 1, 1965
with the Court of First Instance of Manila an action for prohibition
with prayer for preliminary injunction against the Board of Medical
Examiners, now respondent-appellant. It was alleged therein that
at the initial hearing of an administrative case7 for alleged
immorality, counsel for complainants announced that he would
present as his first witness herein petitioner-appellee, who was
the respondent in such malpractice charge. Thereupon, petitionerappellee, through counsel, made of record his objection, relying
on the constitutional right to be exempt from being a witness
against himself. Respondent-appellant, the Board of Examiners,
took note of such a plea, at the same time stating that at the next
scheduled hearing, on February 12, 1965, petitioner-appellee
would be called upon to testify as such witness, unless in the
meantime he could secure a restraining order from a competent
authority.
Petitioner-appellee then alleged that in thus ruling to compel him
to take the witness stand, the Board of Examiners was guilty, at
the very least, of grave abuse of discretion for failure to respect
the
constitutional
right
against
self-incrimination,
the
administrative proceeding against him, which could result in
forfeiture or loss of a privilege, being quasi-criminal in character.
With his assertion that he was entitled to the relief demanded
consisting of perpetually restraining the respondent Board from
compelling him to testify as witness for his adversary and his
readiness or his willingness to put a bond, he prayed for a writ of
preliminary injunction and after a hearing or trial, for a writ of
prohibition.
On February 9, 1965, the lower court ordered that a writ of
preliminary injunction issue against the respondent Board
commanding it to refrain from hearing or further proceeding with
such an administrative case, to await the judicial disposition of the
matter upon petitioner-appellee posting a bond in the amount of
P500.00.
The answer of respondent Board, while admitting the facts
stressed that it could call petitioner-appellee to the witness stand
and interrogate him, the right against self-incrimination being
available only when a question calling for an incriminating answer
is asked of a witness. It further elaborated the matter in the
affirmative defenses interposed, stating that petitioner-appellee's
remedy is to object once he is in the witness stand, for respondent
"a plain, speedy and adequate remedy in the ordinary course of
law," precluding the issuance of the relief sought. Respondent
Board, therefore, denied that it acted with grave abuse of
discretion.
There was a motion for intervention by Salvador Gatbonton and
EnriquetaGatbonton, the complainants in the administrative case
for malpractice against petitioner-appellee, asking that they be

allowed to file an answer as intervenors. Such a motion was

granted and an answer in intervention was duly filed by them on
March 23, 1965 sustaining the power of respondent Board, which
for them is limited to compelling the witness to take the stand, to
be distinguished, in their opinion, from the power to compel a
witness to incriminate himself. They likewise alleged that the right
against self-incrimination cannot be availed of in an administrative
hearing.
A decision was rendered by the lower court on August 2, 1965,
finding the claim of petitioner-appellee to be well-founded and
prohibiting respondent Board "from compelling the petitioner to act
and testify as a witness for the complainant in said investigation
without his consent and against himself." Hence this appeal both
by respondent Board and intervenors, the Gatbontons. As noted
at the outset, we find for the petitioner-appellee.
1. We affirm the lower court decision on appeal as it does
manifest fealty to the principle announced by us inCabal v.
Kapunan. 8 In that proceeding for certiorari and prohibition to
annul an order of Judge Kapunan, it appeared that an
administrative charge for unexplained wealth having been filed
against petitioner under the Anti-Graft Act,9the complainant
requested the investigating committee that petitioner be ordered
to take the witness stand, which request was granted. Upon
petitioner's refusal to be sworn as such witness, a charge for
contempt was filed against him in the sala of respondent Judge.
He filed a motion to quash and upon its denial, he initiated this
proceeding. We found for the petitioner in accordance with the
well-settled principle that "the accused in a criminal case may
refuse, not only to answer incriminatory questions, but, also, to
take the witness stand."
It was noted in the opinion penned by the present Chief Justice
that while the matter referred to an a administrative charge of
unexplained wealth, with the Anti-Graft Act authorizing the
forfeiture of whatever property a public officer or employee may
acquire, manifestly out proportion to his salary and his other lawful
income, there is clearly the imposition of a penalty. The
proceeding for forfeiture while administrative in character thus
possesses a criminal or penal aspect. The case before us is not
dissimilar; petitioner would be similarly disadvantaged. He could
suffer not the forfeiture of property but the revocation of his
license as a medical practitioner, for some an even greater
deprivation.
To the argument that Cabal v. Kapunan could thus distinguished,
it suffices to refer to an American Supreme Court opinion highly
persuasive in character. 10 In the language of Justice Douglas:
"We conclude ... that the Self-Incrimination Clause of the Fifth
Amendment has been absorbed in the Fourteenth, that it extends
its protection to lawyers as well as to other individuals, and that it
should not be watered down by imposing the dishonor of
disbarment and the deprivation of a livelihood as a price for
asserting it." We reiterate that such a principle is equally

applicable to a proceeding that could possibly result in the loss of

the privilege to practice the medical profession.
2. The appeal apparently proceeds on the mistaken assumption
by respondent Board and intervenors-appellants that the
constitutional guarantee against self-incrimination should be
limited to allowing a witness to object to questions the answers to
which could lead to a penal liability being subsequently incurred. It
is true that one aspect of such a right, to follow the language of
another American decision, 11 is the protection against "any
disclosures which the witness may reasonably apprehend could
be used in a criminal prosecution or which could lead to other
evidence that might be so used." If that were all there is then it
becomes diluted.lawphi1.et
The constitutional guarantee protects as well the right to silence.
As far back as 1905, we had occasion to declare: "The accused
has a perfect right to remain silent and his silence cannot be used
as a presumption of his guilt." 12Only last year, in Chavez v. Court
of Appeals, 13 speaking through Justice Sanchez, we reaffirmed
the doctrine anew that it is the right of a defendant "to forego
testimony, to remain silent, unless he chooses to take the witness
stand with undiluted, unfettered exercise of his own free
genuine will."
Why it should be thus is not difficult to discern. The constitutional
guarantee, along with other rights granted an accused, stands for
a belief that while crime should not go unpunished and that the
truth must be revealed, such desirable objectives should not be
accomplished according to means or methods offensive to the
high sense of respect accorded the human personality. More and
more in line with the democratic creed, the deference accorded an
individual even those suspected of the most heinous crimes is
given due weight. To quote from Chief Justice Warren, "the
constitutional foundation underlying the privilege is the respect a
government ... must accord to the dignity and integrity of its
citizens." 14
It is likewise of interest to note that while earlier decisions
stressed the principle of humanity on which this right is
predicated, precluding as it does all resort to force or compulsion,
whether physical or mental, current judicial opinion places equal
emphasis on its identification with the right to privacy. Thus
according to Justice Douglas: "The Fifth Amendment in its SelfIncrimination clause enables the citizen to create a zone of
privacy which government may not force to surrender to his
detriment." 15 So also with the observation of the late Judge
Frank who spoke of "a right to a private enclave where he may
lead a private life. That right is the hallmark of our democracy." 16
In the light of the above, it could thus clearly appear that no
possible objection could be legitimately raised against the
correctness of the decision now on appeal. We hold that in an
administrative hearing against a medical practitioner for alleged
malpractice, respondent Board of Medical Examiners cannot,
consistently with the self-incrimination clause, compel the person
proceeded against to take the witness stand without his consent.

WHEREFORE, the decision of the lower court of August 2, 1965

is affirmed. Without pronouncement as to costs.
G.R. Nos. 170384-85
March 9, 2007
LORNA
DISING
PUNZAL,
Petitioner,
vs.ETSI
TECHNOLOGIES, INC., WERNER GEISERT, and CARMELO D.
REMUDARO, Respondents.
CARPIO MORALES, J.:
Petitioner, Lorna DisingPunzal, had been working for respondent,
ETSI Technologies, Inc. (ETSI), for 12 years prior to the
termination of her services on November 26, 2001 on which date
she was holding the position of Department Secretary.
On October 30, 2001, petitioner sent an electronic mail (e-mail)
message to her officemates announcing the holding of a
Halloween party that was to be held in the office the following day.
The e-mail message read verbatim:
Dear ETSI-JMT Colleagues,
Good day!
As you all know, tomorrow is the day before HALLOWEEN. And
many of our kids will go around "TRICK OR TREATING". We will
be dressing them up in costumes of all sorts, from cute to
outrageous, from wild to "scary."
What we want to have is a similar activity here in the office. So we
invite you to participate in this effort. You can also dress your kids
up in funny costumes. Also the kids will then go around the office
Trick or Treating. So, we ask you to prepare your Treats, like
candies, biscuits, cookies, etc., (Cash is also welcome for parents
like me . . . he he he)
Why are we doing this? Well, we just want the kids to have a good
time. Kung gusto ninyo, mag-costume din kayo.
Alright! See you tomorrow morning, [October 31, 2001].1
(Underscoring supplied)
Petitioners immediate superior, respondent Carmelo Remudaro
(Remudaro), who was one of those to whom the e-mail message
was sent, advised petitioner to first secure the approval of the
Senior Vice President, respondent Werner Geisert (Geisert), for
the holding of the party in the office.
Petitioner soon learned that Geisert did not approve of the plan to
hold a party in the office. She thereupon sent also on October 30,
2001 another e-mail message to her officemates, reading
verbatim:
Sorry for the mail that I sent you, unfortunately the SVP of ETSI
Technologies, Inc. did not agree to our idea to bring our children in
the office for the TRICK or TREATING. He was so unfairpara
bang palagisiyanginiisahansatrabahobakit most of the parents
na mag-joined anganak ay naka-VL naman. Anyway,
solohinnalangniyabukasang office.
Anyway, to those parents who would like to bring their Kids in
Megamall there will be Trick or Treating at McDonalds Megamall
Bldg. A at 10:00 AM tomorrow and lets not spoil the fun for our
kids.2 (Underscoring supplied)
Remudaro and Arnold Z. David (David), the Assistant Vice
President of Human Resources/TQM of ETSI, later informed

petitioner, by letter of November 13, 2001, that Geisert got a copy

of her e-mail message and that he required her to explain in
writing within 48 hours why she
. . . should not be given disciplinary action for committing Article
IV, No. 5 & 8 Improper conduct or acts of discourtesy or
disrespect and Making malicious statements concerning
Company Officer, whereby such offenses may be subject to
suspension to termination depending upon the gravity of the
offense/s as specified in our ETSIs Code of Conduct and
Discipline.3 (Emphasis in the original)
Petitioner replied by letter of November 14, 2001 that she had no
malicious intention in sending the second e-mail message and
that she "never expected such kind of words can be called as
acts of discourtesy or disrespect." 4
On November 19, 2001, Geisert and Remudaro conferred with
petitioner to give her a chance to explain her side.5
David and Remudaro subsequently sent petitioner a letter on
November 26, 2001, finding her explanation "not acceptable" and
terminating her services, effective immediately, "for committing
Article IV, No[s]. 5 & 8, Improper conduct or act of discourtesy or
disrespect and making malicious statements concerning company
officer."6
On February 11, 2002, petitioner filed before the National Labor
Relations Commission (NLRC) a complaint7 for illegal dismissal
against ETSI, Geisert, and Remudaro.
By Order of November 26, 2002, the Labor Arbiter dismissed
petitioners complaint, finding that she was legally dismissed for
serious misconduct, and that she was afforded due process.8
On petitioners appeal, the NLRC, by Resolution9 dated October
27, 2003, found that while she was indeed guilty of misconduct,
the penalty of dismissal was disproportionate to her infraction.10
The NLRC thus ordered that petitioner was entitled to
reinstatement which, however, was no longer feasible due to
strained relations. The NLRC thus ordered that petitioner be
awarded separation pay equivalent to one month pay for every
year of service, a period of at least six months to be considered
one whole year.11
Noting that petitioner was not entirely faultless, the NLRC denied
her prayer for backwages12 as well as her prayer for exemplary
and moral damages and attorneys fees in the absence of the
legal conditions justifying their award.13
Both parties filed their respective motions for reconsideration14
which the NLRC denied.15 Both parties thereupon filed their
respective petitions for certiorari16 with the Court of Appeals.
In the petition of petitioner, docketed as CA-G.R. SP No. 83296,
she questioned the denial of her prayer for backwages.17 Upon
the other hand, in the petition of respondent ETSI, et al., docketed
as CA-G.R. SP No. 83205, they questioned the finding of illegal
dismissal, the grant of separation pay, and the imputation of
liability to Geisert and Remudaro.18
In her comment to the petition of ETSI, et al. in CA-G.R. SP No.
83205, petitioner raised the issue of due process, alleging that her

employer did not inform her of her right to be assisted by counsel

during the conference with respondents Geisert and Remudaro.19
By Decision20 of May 13, 2005, the Court of Appeals, which
priorly consolidated the petitions of both parties, held that
petitioners dismissal was in order:21
The gravity of Punzals infraction is borne by the fact that her email message to the workers of ETSI tended to cast scorn and
disrespect toward a senior vice president of the company. The
message itself resounds of subversion and undermines the
authority and credibility of management.
x xxx
Also, this message was not a mere expression of dissatisfaction
privately made by one person to another, but was circulated to
everyone in the work area. The message was sent close at the
heels of SVP Geiserts disapproval of Punzals plan to hold a
Halloween affair in the office, because the said event would
disrupt the operations and peace and order in the office. Punzal
therefore displayed a tendency to act without managements
approval, and even against managements will, as she invited her
co-workers to join a trick or treating activity at another venue
during office hours.
The message also comes across as an encouragement to ignore
SVP Geiserts authority, and portrayed him as unworthy of respect
because of his unpopular personality.
This is in clear violation of Article IV, Section 5 of the companys
Code of Conduct and Discipline, which clearly imposes the
penalty of "suspension to dismissal, depending upon the gravity of
the offense" in cases where an employee displays "improper
conduct or acts of discourtesy or disrespect to fellow employees,
visitors, guests, clients, at any time."
The imposition of the penalty of dismissal is proper, because of
the gravity of Punzals misconduct, as earlier pointed out, and
considering that:
(1) Punzals statements were discourteous and disrespectful not
only to a mere co-employee, but to a high ranking executive
official of the company;
(2) Punzals statements tended to ridicule and undermine the
credibility and authority of SVP Geisert, and even encouraged
disobedience to the said officer;
(3) Punzals message was sent to a great number of employees
of ETSI, which tended to sow dissent and disrespect to
management among a great number of employees of ETSI;
(4) Punzals message could not have been made in good faith,
because the message itself used language that placed SVP
Geisert in ridicule and portrayed him as an object of scorn,
betraying the senders bad faith.
Given these circumstances, the fact that Punzals infraction
occurred only once should be largely insignificant. The gravity and
publicity of the offense as well as its adverse impact in the
workplace is more than sufficient to place the same in the level of
a serious misconduct.22 (Underscoring supplied)

Contrary to petitioners contention, the Court of Appeals also

found that due process was observed in her dismissal.23
The Court of Appeals thus reinstated the Labor Arbiters Order.
Thus it disposed:
WHEREFORE, premises considered, the petition filed by Lorna
DisingPunzal in CA-G.R. SP No. 83296 is hereby DISMISSED,
while the petition filed by ETSI, Werner Geisert and Carmelo D.
Remudaro is hereby GRANTED. The assailed Resolutions, dated
October 27, 2003 and January 28, 2004, of the respondent
National Labor Relations Commission are hereby SET ASIDE. In
lieu thereof, the Decision of Labor Arbiter Joel S. Lustria, dated
November 26, 2002, dismissing the complaint filed by Lorna
DisingPunzal is hereby REINSTATED.
SO ORDERED.24 (Underscoring supplied)
Hence, petitioners present Petition for Review on Certiorari,25
faulting the appellate court to have erred
. . . WHEN IT RULED THAT PETITIONERS STATEMENT WAS
DISCOURTEOUS AND DISRESPECTFUL CONSTITUTING
GROSS DISRESPECT AND SERIOUS MISCONDUCT;
. . . WHEN IT FOUND THAT DUE PROCESS WAS ACCORDED
THE PETITIONER;
. . . WHEN IT FAILED TO AWARD THE PETITIONER HER
RIGHT TO REINSTATEMENT AND BACKWAGES.26
Petitioner posits that her second e-mail message was merely an
exercise of her right to freedom of expression without any malice
on her part.27
On the other hand, ETSI, et al. maintain that petitioners second
e-mail message was tainted with bad faith and constituted a grave
violation of the companys code of discipline.28
In Philippines Today, Inc. v. NLRC,29 this Court, passing on the
attitude or respect that an employee is expected to observe
towards an employer, held:
Alegres choice of words and way of expression betray his
allegation that the memorandum was simply an "opportunity to
open the eyes of (Petitioner) Belmonte to the work environment in
petitioners newspaper with the end in view of persuading (her) to
take a hand at improving said environment." Apprising his
employer (or top-level management) of his frustrations in his job
and differences with his immediate superior is certainly not done
in an abrasive, offensive, and disrespectful manner. A cordial or,
at the very least, civil attitude, according due deference to ones
superiors, is still observed, especially among high-ranking
management officers. The Court takes judicial notice of the
Filipino values of pakikisama and paggalang which are not only
prevalent among members of a family and community but within
organizations as well, including work sites. An employee is
expected to extend due respect to management, the employer
being the "proverbial hen that lays the golden egg," so to speak.
An aggrieved employee who wants to unburden himself of his
disappointments and frustrations in his job or relations with his
immediate superior would normally approach said superior
directly or otherwise ask some other officer possibly to mediate

and discuss the problem with the end in view of settling their
differences without causing ferocious conflicts. No matter how
[much] the employee dislikes the employer professionally, and
even if he is in a confrontational disposition, he cannot afford to
be disrespectful and dare to talk with an unguarded tongue and/or
with a bileful pen.30 (Underscoring supplied)
A scrutiny of petitioners second e-mail message shows that her
remarks were not merely an expression of her opinion about
Geiserts decision; they were directed against Geisert himself, viz:
"He was so unfair . . . para bang palagisiyanginiisahansatrabaho. .
. Anyway, solohinnalang niya bukasang office." (Emphasis
supplied)31
As the Court of Appeals noted, petitioner, in her closing statement
"Anyway, to those parents who would like to bring their Kids in
Megamall there will be Trick or Treating at McDonalds x xx
tomorrow and lets not spoil the fun for our kids"32 even invited
her co-workers to join a trick or treating activity at another venue
during office hours33 (10:00 AM), October 31, 2001 being a
Wednesday and there is no showing that it was declared a
holiday, encouraging them to ignore Geiserts authority.
Additionally, petitioner sent the e-mail message in reaction to
Geiserts decision which he had all the right to make. That it has
been a tradition in ETSI to celebrate occasions such as
Christmas, birthdays, Halloween, and others34does not remove
Geiserts prerogative to approve or disapprove plans to hold such
celebrations in office premises and during company time. It is
settled that
x xx it is the prerogative of management to regulate, according to
its discretion and judgment, all aspects of employment. This flows
from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its
business. Such management prerogative may be availed of
without fear of any liability so long as it is exercised in good faith
for the advancement of the employers interest and not for the
purpose of defeating or circumventing the rights of employees
under special laws or valid agreement and are not exercised in a
malicious, harsh, oppressive, vindictive or wanton manner or out
of malice or spite.35 (Underscoring supplied)
In the case at bar, the disapproval of the plan to hold the
Halloween party on October 31, 2001 may not be considered to
have been actuated by bad faith. As the Labor Arbiter noted:
It may not be ignored that holding a trick or treat party in the office
premises of respondent ETSI would certainlyaffect the operations
of the office, since children will be freely roaming around the office
premises, things may get misplaced and the noise in the office will
simply be too hard to ignore. Contrary to complainants position, it
is immaterial if the parents of the children who will participate in
the trick or treat will be on vacation leave, since it is the work of
the employees who will not be on leave and who will be working
on that day which will be disrupted, possibly resulting in the
disruption of the operations of the company.36 (Underscoring
supplied)

Given the reasonableness of Geiserts decision that provoked

petitioner to send the second e-mail message, the observations of
the Court of Appeals that "the message x xx resounds of
subversion and undermines the authority and credibility of
management"37 and that petitioner "displayed a tendency to act
without managements approval, and even against managements
will" are well taken.38
Moreover, in circulating the second e-mail message, petitioner
violated Articles III (8) and IV (5) of ETSIs Code of Conduct on
"making false or malicious statements concerning the Company,
its officers and employees or its products and services"39 and
"improper conduct or acts of discourtesy or disrespect to fellow
employees, visitors, guests, clients, at any time."40
Petitioner invokes Samson v. National Labor Relations
Commission41 where this Court held that the dismissal of the
therein petitioner was too harsh a penalty for uttering "Si EDT
[Epitacio D. Titong, the General Manager and President of the
employer], bullshit yan," "sabihinmokay EDT yan" and
"sabihinmokay EDT, bullshit yan," while making the "dirty finger"
gesture, and warning that the forthcoming national sales
conference of the company would be a "very bloody one."
Petitioners reliance on Samson is misplaced. First, in that case,
this Court found that the misconduct committed was not related
with the employees work as the offensive remarks were verbally
made during an informal Christmas gathering of the employees,
an occasion "where tongues are more often than not loosened by
liquor or other alcoholic beverages"42 and "it is to be expected x
xx that employees freely express their grievances and gripes
against their employers."43
In petitioners case, her assailed conduct was related to her work.
It reflects an unwillingness to comply with reasonable
management directives.
While in Samson, Samson was held to be merely expressing his
dissatisfaction over a management decision,44 in this case, as
earlier shown, petitioners offensive remarks were directed against
Geisert.
Additionally, in Samson, this Court found that unlike in Autobus
Workers Union (AWU) v. NLRC45 where dismissal was held to be
an appropriate penalty for uttering insulting remarks to the
supervisor,46 Samson uttered the insulting words against EDT in
the latters absence.47 In the case at bar, while petitioner did not
address her e-mail message to Geisert, she circulated it knowing
or at least, with reason to know that it would reach him. As
ETSI notes, "[t]hat [petitioner] circulated this e-mail message with
the knowledge that it would reach the eyes of management may
be reasonably concluded given that the first e-mail message
reached her immediate supervisors attention."48
Finally, in Samson, this Court found that the "lack of urgency on
the part of the respondent company in taking any disciplinary
action against [the employee] negates its charge that the latters
misbehavior constituted serious misconduct."49 In the case at bar,

the management acted 14 days after petitioner circulated the

quoted e-mail message.50
Petitioner asks that her 12 years of service to ETSI during which,
so she claims, she committed no other offense be taken as a
mitigating circumstance.51 This Court has held, however, that "the
longer an employee stays in the service of the company, the
greater is his responsibility for knowledge and compliance with the
norms of conduct and the code of discipline in the company."52
In fine, petitioner, having been dismissed for just cause, is neither
entitled to reinstatement nor to backwages.
Petitioners contention that she was denied due process is welltaken however, as the records do not show that she was informed
of her right to be represented by counsel during the conference
with Geisert and Remudaro.
The protestations of ETSI, et al. that the right to be informed of
the right to counsel does not apply to investigations before
administrative bodies and that law and jurisprudence merely give
the employee the option to secure the services of counsel in a
hearing or conference53 fall in light of the clear provision of Article
277 (b) of the Labor Code that
the employer xxx shall afford [the worker whose employment is
sought to be terminated] ample opportunity to be heard and to
defend himself with the assistance of his representatives if he so
desires in accordance with company rules and regulations
pursuant to guidelines set by the Department of Labor and
Employment,
and this Courts explicit pronouncement that "[a]mple opportunity
connotes every kind of assistance that management must accord
the employee to enable him to prepare adequately for his defense
including legal representation."54
Following Agabon, et al. v. National Labor Relations
Commission,55 the violation of petitioners statutory due process
right entitles her to an award of nominal damage, which this Court
fixes at P30,000.56
WHEREFORE, the petition is in part GRANTED. The questioned
decision is AFFIRMED with the MODIFICATIONthat respondent
ETSI Technologies, Inc. is ordered to pay petitioner, Lorna Punzal,
nominal damages in the amount of P30,000.
G.R. No. 127553 November 28, 1997
EDDIE MANUEL, ROMEO BANA, ROGELIO PAGTAMA, JR.
and JOEL REA, petitioners, vs.N.C. CONSTRUCTION
SUPPLY, JOHNNY LIM, ANITA SY and NATIONAL LABOR
RELATIONS COMMISSION (SECOND DIVISION), respondents.
PUNO, J.:
This special civil action for certiorari seeks to review the decision
of the National Labor Relations Commission (NLRC) dated June
27, 1996 in NLRC-NCR-00-07-04925-95 entitled Eddie Manuel,
Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea v. N.C.
Construction Supply, Johnny Lim and Anita Sy. 1
Petitioners Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and
Joel Rea were employed as drivers at N.C. Construction Supply

owned by private respondents Johnny Lim (a.k.a. Lao ChingEng)

and Anita Sy.
On June 3, 1995, the security guards of respondent company
caught Aurelio Guevara, a company driver, and Jay Calso, his
helper ("pahinante"), taking out from the company premises two
rolls of electrical wire worth P500.00 without authority. Calso was
brought to the Pasig Police station for questioning. During the
investigation, Calso named seven other employees who were
allegedly involved in a series of thefts at respondent company,
among them petitioners Manuel, Bana, Pagtama, Jr. and Rea. 2
On June 5, 1995, petitioners received separate notices from
respondent company informing them that they were positively
identified by their co-worker, Jay Calso, as perpetrators of the
series of thefts committed at respondent company. They were
thus invited to the Pasig police station for investigation regarding
their alleged involvement in the offense.
Atty. Ramon Reyes, private respondents' counsel conducted in
their behalf an investigation regarding petitioners' involvement in
the theft. Atty. Reyes interrogated the petitioners on their alleged
participation in the series of thefts committed at respondent
company. Petitioners initially denied the charge. However, after
being positively identified by Jay Calso, petitioners admitted their
guilt and offered to resign in exchange for the withdrawal of any
criminal charge against them. 3 Petitioners Bana and Rea filed
separate resignation letters while petitioners Manuel and
Pagtama, Jr. tendered their resignations orally. Petitioner Bana's
resignation letter 4 reads:
Dear Bong,
Saganitongsitwasyonnagpapasalamatrinakonahumantongsaganit
oparahindinatumagalangmasama
naming
gawain.
Pirolubosrinakonagpapasalamatsaiyongpagpapatawadsa akin, at
angmasasabikolangna I'm very, very sorry na lang.
Kasialammonamannakaposnakapostalagaako. Kaya alammo
halos hindinangaako nag-a-absent dahilsasahodkolangkapos pa
sapamilyako. Kaya sanasapag-resign kosanamabigyanmo man
langakonangkauntiparamakapamasahi
man
langpau-wisa
Mindanao kasamaangmgaanakko. Yon lang. . .
Petitioner Rea's resignation letter, 5 on the other hand, states:
Boss,
Dahilsahindimagandaangakingnaging
performance
sainyosaloobng
NC
Construction
Supply
sanakakahiyanaakingnasangkutanmagreresignna
ho
ako,
magsisimulaHunyo
6,
1995.
Siguronaman
Boss
alamnamanninyoangtotoonakikisamalangakosamgadatininyongta
uhandahilkailangankotalagangtrabahokahitlabag
man
saakingkaloobananggumawanghindimaganda.
Boss, kahitpaanosanamaintindihanmoako, tatanggalinnyona ho
akosanabigyannyonalangakongkahitpamasahenaminpauwingprob
insyaparamakapagbagongbuhaynaako.
Salamatpo.
Atty. Reyes accepted petitioners' resignation effective June 5,
1995.

On July 17, 1995, petitioners filed a complaint against private

respondents for illegal dismissal. Petitioners alleged that they
were not informed of the charge against them nor were they given
an opportunity to dispute the same. They also alleged that their
admission made at the Pasig police station regarding their
involvement in the theft as well as their resignation were not
voluntary but were obtained by private respondents' lawyer by
means of threat and intimidation.
Labor Arbiter Manuel R. Caday ruled in favor of petitioners and
found their dismissal to be illegal. He held that private
respondents failed to show a just cause for the termination of
petitioners' services. He declared that petitioners' admission
regarding their involvement in the theft was inadmissible in
evidence as it was taken without the assistance of counsel, in
violation of Section 12 Article III of the 1987 Constitution. 6 He
also held that petitioners were not afforded due process before
their services were terminated. Hence, Labor Arbiter Caday
ordered private respondents to reinstate petitioners to their former
position without loss of seniority rights and to pay them full
backwages. He also ordered private respondents to pay
petitioners their service incentive leave benefits plus attorney's
fees. 7
On appeal, the NLRC reversed the decision of the Labor Arbiter. It
ruled that petitioners were dismissed for a just cause. It held that
petitioners failed to adduce competent evidence to show a
vitiation of their admission regarding their participation in the theft.
It further stated that such admission may be admitted in evidence
because Section 12 Article III of the 1987 Constitution applies only
to criminal proceedings but not to administrative proceedings. The
NLRC, however, agreed with the Labor Arbiter that petitioners
were denied due process. Hence, it ordered private respondents
to pay petitioners the amount of P1,000.00 as indemnity. The
dispositive portion of the decision reads:
WHEREFORE, premises duly considered, the decision appealed
from is hereby reversed and set aside. A new one is hereby
entered ordering respondents to pay to the complainants the
amount of P1,000.00 each as and for indemnity for failure of the
respondents to observe due process.
SO ORDERED. 8
Petitioners filed the instant petition on the following grounds:
1. The National Labor Relations Commission committed grave
abuse of discretion in declaring the dismissal legal;
2. The National Labor Relations Commission committed grave
abuse of discretion in declaring that the admission of petitioners is
admissible in evidence despite the fact that it was obtained in a
hostile environment and without the presence or assistance of
counsel;
3. The National Labor Relations Commission committed grave
abuse of discretion in finding that respondents N.C. Construction
Supply et al. are right in withdrawing their trust and confidence
with petitioners without any valid and legal basis. 9
We affirm the decision of the NLRC.

An employer has a right to terminate the services of an employee

subject to both substantive and procedural limitations. This means
that (1) the dismissal must be for a just or authorized cause
provided in the Labor Code, 10and (2) the employee must be
accorded due process before his employment is terminated. The
validity of the dismissal hinges on the employer's compliance with
these two requirements. 11
In the case at bar, petitioners who were employed as drivers at
respondent company were found guilty of stealing company
property consisting of electrical wire, welding rod, G.I. sheet, steel
bar and plywood. Article 282 of the Labor Code authorizes an
employer to terminate the services of an employee for loss of trust
and confidence, provided that the loss of confidence arises from
particular proven facts. The law does not require proof beyond
reasonable doubt of the employee's misconduct. Substantial
evidence is sufficient. 12 Substantial evidence has been defined
as such relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion. 13
Petitioners' culpability in the instant case was sufficiently proved
by private respondents. Jay Calso, an employee of respondent
company who has personal knowledge about the series of thefts
that has been going on at respondent company, positively
identified petitioners as among the perpetrators of the theft.
Petitioners have not shown any ill motive on the part of Calso to
implicate them in the offense, unless it was true. In addition,
petitioners admitted their participation in the theft during an
investigation conducted by private respondents' lawyer.
We are not convinced by petitioners' allegation that such
admission was obtained by means of threat or intimidation as
such allegation is couched in general terms and is unsupported by
evidence.
We also reject petitioners' argument that said admission is
inadmissible as evidence against them under Section 12 Article III
of the 1987 Constitution. The right to counsel under Section 12 of
the Bill of Rights is meant to protect a suspect in a criminal case
under custodial investigation. Custodial investigation is the stage
where the police investigation is no longer a general inquiry into
an unsolved crime but has begun to focus on a particular suspect
who had been taken into custody by the police to carry out a
process of interrogation that lends itself to elicit incriminating
statements. It is when questions are initiated by law enforcement
officers after a person has been taken into custody or otherwise
deprived of his freedom of action in any significant way. The right
to counsel attaches only upon the start of such investigation. 14
Therefore, the exclusionary rule under paragraph (3) Section 12
of the Bill of Rights applies only to admission made in a criminal
investigation but not to those made in an administrative
investigation.
In the case at bar, the admission was made by petitioners during
the course of the investigation conducted by private respondents'
counsel to determine whether there is sufficient ground to
terminate their employment. Petitioners were not under custodial

investigation as they were not yet accused by the police of

committing a crime. The investigation was merely an
administrative investigation conducted by the employer, not a
criminal investigation. The questions were propounded by the
employer's lawyer, not by police officers. The fact that the
investigation was conducted at the police station did not
necessarily put petitioners under custodial investigation as the
venue of the investigation was merely incidental. Hence, the
admissions made by petitioners during such investigation may be
used as evidence to justify their dismissal.
Private respondents, however, failed to observe due process in
terminating the employment of petitioners. Due process demands
that the employer should furnish the worker whose employment is
sought to be terminated a written notice containing a statement of
the cause(s) for termination and afford him ample opportunity to
be heard and to defend himself with the assistance of a
representative if he so desires. Specifically, the employer must
furnish the worker with two written notices before termination of
employment can be legally effected: (1) notice which apprises the
employee of the particular acts or omissions for which his
dismissal is sought, and (2) the subsequent notice which informs
the employee of the employer's decision to dismiss him. 15 There
is no showing in this case that private respondents furnished
petitioners which such notices. Private respondents, through their
counsel, Atty. Reyes, immediately terminated petitioners' services
upon conclusion of the investigation. Private respondents must
therefore indemnify petitioners for failure to observe due process
before dismissing them from work.
IN VIEW WHEREOF, the petition is DISMISSED. The assailed
decision is hereby AFFIRMED. No costs.
G.R. No. 168081
October 17, 2008
ARMANDO G. YRASUEGUI, petitioners, vs.PHILIPPINE
AIRLINES, INC., respondents.
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight
steward who was dismissed because of his failure to adhere to
the weight standards of the airline company.
He is now before this Court via a petition for review on certiorari
claiming that he was illegally dismissed. To buttress his stance, he
argues that (1) his dismissal does not fall under 282(e) of the
Labor Code; (2) continuing adherence to the weight standards of
the company is not a bona fide occupational qualification; and (3)
he was discriminated against because other overweight
employees were promoted instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We
uphold the legality of dismissal. Separation pay, however, should
be awarded in favor of the employee as an act of social justice or
based on equity. This is so because his dismissal is not for
serious misconduct. Neither is it reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight
steward of Philippine Airlines, Inc. (PAL). He stands five feet and

eight inches (58") with a large body frame. The proper weight for
a man of his height and body structure is from 147 to 166 pounds,
the ideal weight being 166 pounds, as mandated by the Cabin
and Crew Administration Manual1 of PAL.
The weight problem of petitioner dates back to 1984. Back then,
PAL advised him to go on an extended vacation leave from
December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the companys
weight standards, prompting another leave without pay from
March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return
to work. But petitioners weight problem recurred. He again went
on leave without pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds
over his ideal weight. In line with company policy, he was
removed from flight duty effective May 6, 1989 to July 3, 1989. He
was formally requested to trim down to his ideal weight and report
for weight checks on several dates. He was also told that he may
avail of the services of the company physician should he wish to
do so. He was advised that his case will be evaluated on July 3,
1989.2
On February 25, 1989, petitioner underwent weight check. It was
discovered that he gained, instead of losing, weight. He was
overweight at 215 pounds, which is 49 pounds beyond the limit.
Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon
personally visited petitioner at his residence to check on the
progress of his effort to lose weight. Petitioner weighed 217
pounds, gaining 2 pounds from his previous weight. After the visit,
petitioner made a commitment3 to reduce weight in a letter
addressed to Cabin Crew Group Manager Augusto Barrios. The
letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss
from 217 pounds to 200 pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable
percentage until such time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the
designated time schedule you will set for my weight check.
Respectfully Yours,
F/S Armando Yrasuegui4
Despite the lapse of a ninety-day period given him to reach his
ideal weight, petitioner remained overweight. On January 3, 1990,
he was informed of the PAL decision for him to remain grounded
until such time that he satisfactorily complies with the weight
standards. Again, he was directed to report every two weeks for
weight checks.
Petitioner failed to report for weight checks. Despite that, he was
given one more month to comply with the weight requirement. As
usual, he was asked to report for weight check on different dates.
He was reminded that his grounding would continue pending
satisfactory compliance with the weight standards.5

Again, petitioner failed to report for weight checks, although he

was seen submitting his passport for processing at the PAL Staff
Service Division.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly.
He was given another set of weight check dates.6 Again,
petitioner ignored the directive and did not report for weight
checks. On June 26, 1990, petitioner was required to explain his
refusal to undergo weight checks.7
When petitioner tipped the scale on July 30, 1990, he weighed at
212 pounds. Clearly, he was still way over his ideal weight of 166
pounds.
From then on, nothing was heard from petitioner until he followed
up his case requesting for leniency on the latter part of 1992. He
weighed at 219 pounds on August 20, 1992 and 205 pounds on
November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on
weight requirements. He was given ten (10) days from receipt of
the charge within which to file his answer and submit
controverting evidence.8
On December 7, 1992, petitioner submitted his Answer.9 Notably,
he did not deny being overweight. What he claimed, instead, is
that his violation, if any, had already been condoned by PAL since
"no action has been taken by the company" regarding his case
"since 1988." He also claimed that PAL discriminated against him
because "the company has not been fair in treating the cabin crew
members who are similarly situated."
On December 8, 1992, a clarificatory hearing was held where
petitioner manifested that he was undergoing a weight reduction
program to lose at least two (2) pounds per week so as to attain
his ideal weight.10
On June 15, 1993, petitioner was formally informed by PAL that
due to his inability to attain his ideal weight, "and considering the
utmost leniency" extended to him "which spanned a period
covering a total of almost five (5) years," his services were
considered terminated "effective immediately."11
His motion for reconsideration having been denied,12 petitioner
filed a complaint for illegal dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13
that petitioner was illegally dismissed. The dispositive part of the
Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered, declaring the complainants dismissal illegal, and
ordering the respondent to reinstate him to his former position or
substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on
June 15, 1993 until reinstated, which for purposes of appeal is
hereby set from June 15, 1993 up to August 15, 1998 at
P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.

SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner.15
However, the weight standards need not be complied with under
pain of dismissal since his weight did not hamper the performance
of his duties.16 Assuming that it did, petitioner could be
transferred to other positions where his weight would not be a
negative factor.17 Notably, other overweight employees, i.e., Mr.
Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of
being disciplined.18
Both parties appealed to the National Labor Relations
Commission (NLRC).19
On October 8, 1999, the Labor Arbiter issued a writ of execution
directing the reinstatement of petitioner without loss of seniority
rights and other benefits.20
On February 1, 2000, the Labor Arbiter denied21 the Motion to
Quash Writ of Execution22 of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash
to the NLRC.23
On June 23, 2000, the NLRC rendered judgment24 in the
following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter
dated 18 November 1998 as modified by our findings herein, is
hereby AFFIRMED and that part of the dispositive portion of said
decision concerning complainants entitlement to backwages shall
be deemed to refer to complainants entitlement to his full
backwages, inclusive of allowances and to his other benefits or
their monetary equivalent instead of simply backwages, from date
of dismissal until his actual reinstatement or finality hereof.
Respondent is enjoined to manifests (sic) its choice of the form of
the reinstatement of complainant, whether physical or through
payroll within ten (10) days from notice failing which, the same
shall be deemed as complainants reinstatement through payroll
and execution in case of non-payment shall accordingly be issued
by the Arbiter. Both appeals of respondent thus, are
DISMISSEDfor utter lack of merit.25
According to the NLRC, "obesity, or the tendency to gain weight
uncontrollably regardless of the amount of food intake, is a
disease in itself."26 As a consequence, there can be no
intentional defiance or serious misconduct by petitioner to the
lawful order of PAL for him to lose weight.27
Like the Labor Arbiter, the NLRC found the weight standards of
PAL to be reasonable. However, it found as unnecessary the
Labor Arbiter holding that petitioner was not remiss in the
performance of his duties as flight steward despite being
overweight. According to the NLRC, the Labor Arbiter should have
limited himself to the issue of whether the failure of petitioner to
attain his ideal weight constituted willful defiance of the weight
standards of PAL.28
PAL moved for reconsideration to no avail.29 Thus, PAL elevated
the matter to the Court of Appeals (CA) via a petition for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure.30

By Decision dated August 31, 2004, the CA reversed31 the

NLRC:
WHEREFORE, premises considered, we hereby GRANT the
petition. The assailed NLRC decision is declared NULL and VOID
and is hereby SET ASIDE. The private respondents complaint is
hereby DISMISSED. No costs.
SO ORDERED.32
The CA opined that there was grave abuse of discretion on the
part of the NLRC because it "looked at wrong and irrelevant
considerations"33 in evaluating the evidence of the parties.
Contrary to the NLRC ruling, the weight standards of PAL are
meant to be a continuing qualification for an employees
position.34 The failure to adhere to the weight standards is an
analogous cause for the dismissal of an employee under Article
282(e) of the Labor Code in relation to Article 282(a). It is not
willful disobedience as the NLRC seemed to suggest.35 Said the
CA, "the element of willfulness that the NLRC decision cites is an
irrelevant consideration in arriving at a conclusion on whether the
dismissal is legally proper."36 In other words, "the relevant
question to ask is not one of willfulness but one of
reasonableness of the standard and whether or not the employee
qualifies or continues to qualify under this standard."37
Just like the Labor Arbiter and the NLRC, the CA held that the
weight standards of PAL are reasonable.38 Thus, petitioner was
legally dismissed because he repeatedly failed to meet the
prescribed weight standards.39 It is obvious that the issue of
discrimination was only invoked by petitioner for purposes of
escaping the result of his dismissal for being overweight.40
On May 10, 2005, the CA denied petitioners motion for
reconsideration.41 Elaborating on its earlier ruling, the CA held
that the weight standards of PAL are a bona fide occupational
qualification which, in case of violation, "justifies an employees
separation from the service."42
Issues
In this Rule 45 petition for review, the following issues are posed
for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONERS OBESITY CAN BE A
GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF
ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONERS DISMISSAL FOR
OBESITY CAN BE PREDICATED ON THE "BONA FIDE
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY
DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE
OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER
GIVEN FLYING DUTIES OR PROMOTED;

IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED WHEN IT BRUSHED ASIDE PETITIONERS CLAIMS
FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING
MOOT AND ACADEMIC.43 (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article
282(e) 44 of the Labor Code.
A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of
an employee in order to keep the job. Tersely put, an employee
may be dismissed the moment he is unable to comply with his
ideal weight as prescribed by the weight standards. The dismissal
of the employee would thus fall under Article 282(e) of the Labor
Code. As explained by the CA:
x xx [T]he standards violated in this case were not mere "orders"
of the employer; they were the "prescribed weights" that a cabin
crew must maintain in order to qualify for and keep his or her
position in the company. In other words, they were standards that
establish continuing qualifications for an employees position. In
this sense, the failure to maintain these standards does not fall
under Article 282(a) whose express terms require the element of
willfulness in order to be a ground for dismissal. The failure to
meet the employers qualifying standards is in fact a ground that
does not squarely fall under grounds (a) to (d) and is therefore
one that falls under Article 282(e) the "other causes analogous
to the foregoing."
By its nature, these "qualifying standards" are norms that apply
prior to and after an employee is hired. They apply prior to
employment because these are the standards a job applicant
must initially meet in order to be hired. They apply after hiring
because an employee must continue to meet these standards
while on the job in order to keep his job. Under this perspective, a
violation is not one of the faults for which an employee can be
dismissed pursuant to pars. (a) to (d) of Article 282; the employee
can be dismissed simply because he no longer "qualifies" for his
job irrespective of whether or not the failure to qualify was willful
or intentional. x x x45
Petitioner, though, advances a very interesting argument. He
claims that obesity is a "physical abnormality and/or illness."46
Relying on Nadura v. Benguet Consolidated, Inc.,47 he says his
dismissal is illegal:
Conscious of the fact that Naduras case cannot be made to fall
squarely within the specific causes enumerated in subparagraphs
1(a) to (e), Benguet invokes the provisions of subparagraph 1(f)
and says that Naduras illness occasional attacks of asthma is
a cause analogous to them.
Even a cursory reading of the legal provision under consideration
is sufficient to convince anyone that, as the trial court said, "illness
cannot be included as an analogous cause by any stretch of
imagination."

It is clear that, except the just cause mentioned in sub-paragraph

1(a), all the others expressly enumerated in the law are due to the
voluntary and/or willful act of the employee. How Naduras illness
could be considered as "analogous" to any of them is beyond our
understanding, there being no claim or pretense that the same
was contracted through his own voluntary act.48
The reliance on Nadura is off-tangent. The factual milieu in
Nadura is substantially different from the case at bar.First, Nadura
was not decided under the Labor Code. The law applied in that
case was Republic Act (RA) No. 1787.Second, the issue of flight
safety is absent in Nadura, thus, the rationale there cannot apply
here. Third, in Nadura, the employee who was a miner, was laid
off from work because of illness, i.e., asthma. Here, petitioner was
dismissed for his failure to meet the weight standards of PAL. He
was not dismissed due to illness. Fourth, the issue in Nadura is
whether or not the dismissed employee is entitled to separation
pay and damages. Here, the issue centers on the propriety of the
dismissal of petitioner for his failure to meet the weight standards
of PAL. Fifth, inNadura, the employee was not accorded due
process. Here, petitioner was accorded utmost leniency. He was
given more than four (4) years to comply with the weight
standards of PAL.
In the case at bar, the evidence on record militates against
petitioners claims that obesity is a disease. That he was able to
reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude,
determination, and self-discipline. Indeed, during the clarificatory
hearing on December 8, 1992, petitioner himself claimed that
"[t]he issue is could I bring my weight down to ideal weight which
is 172, then the answer is yes. I can do it now."49
True, petitioner claims that reducing weight is costing him "a lot of
expenses."50 However, petitioner has only himself to blame. He
could have easily availed the assistance of the company
physician, per the advice of PAL.51 He chose to ignore the
suggestion. In fact, he repeatedly failed to report when required to
undergo weight checks, without offering a valid explanation. Thus,
his fluctuating weight indicates absence of willpower rather than
an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department
of Mental Health, Retardation and Hospitals,52decided by the
United States Court of Appeals (First Circuit). In that case, Cook
worked from 1978 to 1980 and from 1981 to 1986 as an
institutional attendant for the mentally retarded at the Ladd Center
that was being operated by respondent. She twice resigned
voluntarily with an unblemished record. Even respondent admitted
that her performance met the Centers legitimate expectations. In
1988, Cook re-applied for a similar position. At that time, "she
stood 52" tall and weighed over 320 pounds." Respondent
claimed that the morbid obesity of plaintiff compromised her ability
to evacuate patients in case of emergency and it also put her at
greater risk of serious diseases.

Cook contended that the action of respondent amounted to

discrimination on the basis of a handicap. This was in direct
violation of Section 504(a) of the Rehabilitation Act of 1973,53
which incorporates the remedies contained in Title VI of the Civil
Rights Act of 1964. Respondent claimed, however, that morbid
obesity could never constitute a handicap within the purview of
the Rehabilitation Act. Among others, obesity is a mutable
condition, thus plaintiff could simply lose weight and rid herself of
concomitant disability.
The appellate Court disagreed and held that morbid obesity is a
disability under the Rehabilitation Act and that respondent
discriminated against Cook based on "perceived" disability. The
evidence included expert testimony that morbid obesity is a
physiological disorder. It involves a dysfunction of both the
metabolic system and the neurological appetite suppressing
signal system, which is capable of causing adverse effects within
the musculoskeletal, respiratory, and cardiovascular systems.
Notably, the Court stated that "mutability is relevant only in
determining the substantiality of the limitation flowing from a given
impairment," thus "mutability only precludes those conditions that
an individual can easily and quickly reverse by behavioral
alteration."
Unlike Cook, however, petitioner is not morbidly obese. In the
words of the District Court for the District of Rhode Island, Cook
was sometime before 1978 "at least one hundred pounds more
than what is considered appropriate of her height." According to
the Circuit Judge, Cook weighed "over 320 pounds" in 1988.
Clearly, that is not the case here. At his heaviest, petitioner was
only less than 50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the
context of his work as flight attendant, becomes an analogous
cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended,
but is nonetheless voluntary. As the CA correctly puts it,
"[v]oluntariness basically means that the just cause is solely
attributable to the employee without any external force influencing
or controlling his actions. This element runs through all just
causes under Article 282, whether they be in the nature of a
wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks
the element of intent found in Article 282(a), (c), and (d)."54
II. The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense.
Employment in particular jobs may not be limited to persons of a
particular sex, religion, or national origin unless the employer can
show that sex, religion, or national origin is an actual qualification
for performing the job. The qualification is called a bona fide
occupational qualification (BFOQ).55 In the United States, there
are a few federal and many state job discrimination laws that
contain an exception allowing an employer to engage in an
otherwise unlawful form of prohibited discrimination when the

action is based on a BFOQ necessary to the normal operation of

a business or enterprise.56
Petitioner contends that BFOQ is a statutory defense. It does not
exist if there is no statute providing for it.57Further, there is no
existing BFOQ statute that could justify his dismissal.58
Both arguments must fail.
First, the Constitution,59 the Labor Code,60 and RA No. 727761
or the Magna Carta for Disabled Persons62 contain provisions
similar to BFOQ.
Second, in British Columbia Public Service Employee
Commission (BSPSERC) v. The British Columbia Government
and Service Employees Union (BCGSEU),63 the Supreme Court
of Canada adopted the so-called "Meiorin Test" in determining
whether an employment policy is justified. Under this test, (1) the
employer must show that it adopted the standard for a purpose
rationally connected to the performance of the job;64 (2) the
employer must establish that the standard is reasonably
necessary65 to the accomplishment of that work-related purpose;
and (3) the employer must establish that the standard is
reasonably necessary in order to accomplish the legitimate workrelated purpose. Similarly, in Star Paper Corporation v. Simbol,66
this Court held that in order to justify a BFOQ, the employer must
prove that (1) the employment qualification is reasonably related
to the essential operation of the job involved; and (2) that there is
factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the
duties of the job.67
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ.68 BFOQ is valid "provided it
reflects an inherent quality reasonably necessary for satisfactory
job performance."69
In Duncan Association of Detailman-PTGWTO v. GlaxoWellcome
Philippines, Inc.,70 the Court did not hesitate to pass upon the
validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the
company policy is reasonable considering that its purpose is the
protection of the interests of the company against possible
competitor infiltration on its trade secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be
applied if it has no supporting statute. Too, the Labor Arbiter,71
NLRC,72 and CA73 are one in holding that the weight standards
of PAL are reasonable. A common carrier, from the nature of its
business and for reasons of public policy, is bound to observe
extraordinary diligence for the safety of the passengers it
transports.74 It is bound to carry its passengers safely as far as
human care and foresight can provide, using the utmost diligence
of very cautious persons, with due regard for all the
circumstances.75
The law leaves no room for mistake or oversight on the part of a
common carrier. Thus, it is only logical to hold that the weight
standards of PAL show its effort to comply with the exacting

obligations imposed upon it by law by virtue of being a common

carrier.
The business of PAL is air transportation. As such, it has
committed itself to safely transport its passengers. In order to
achieve this, it must necessarily rely on its employees, most
particularly the cabin flight deck crew who are on board the
aircraft. The weight standards of PAL should be viewed as
imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of
the weight standards for cabin crew is flight safety. It cannot be
gainsaid that cabin attendants must maintain agility at all times in
order to inspire passenger confidence on their ability to care for
the passengers when something goes wrong. It is not farfetched
to say that airline companies, just like all common carriers, thrive
due to public confidence on their safety records. People,
especially the riding public, expect no less than that airline
companies transport their passengers to their respective
destinations safely and soundly. A lesser performance is
unacceptable.
The task of a cabin crew or flight attendant is not limited to serving
meals or attending to the whims and caprices of the passengers.
The most important activity of the cabin crew is to care for the
safety of passengers and the evacuation of the aircraft when an
emergency occurs. Passenger safety goes to the core of the job
of a cabin attendant. Truly, airlines need cabin attendants who
have the necessary strength to open emergency doors, the agility
to attend to passengers in cramped working conditions, and the
stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin
attendant are important factors to consider in case of emergency.
Aircrafts have constricted cabin space, and narrow aisles and exit
doors. Thus, the arguments of respondent that "[w]hether the
airlines flight attendants are overweight or not has no direct
relation to its mission of transporting passengers to their
destination"; and that the weight standards "has nothing to do with
airworthiness of respondents airlines," must fail.
The rationale in Western Air Lines v. Criswell76 relied upon by
petitioner cannot apply to his case. What was involved there were
two (2) airline pilots who were denied reassignment as flight
engineers upon reaching the age of 60, and a flight engineer who
was forced to retire at age 60. They sued the airline company,
alleging that the age-60 retirement for flight engineers violated the
Age Discrimination in Employment Act of 1967. Age-based BFOQ
and being overweight are not the same. The case of overweight
cabin attendants is another matter. Given the cramped cabin
space and narrow aisles and emergency exit doors of the
airplane, any overweight cabin attendant would certainly have
difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to
perform their task. That an obese cabin attendant occupies more
space than a slim one is an unquestionable fact which courts can
judicially recognize without introduction of evidence.77 It would

also be absurd to require airline companies to reconfigure the

aircraft in order to widen the aisles and exit doors just to
accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the
possibility of impeding passengers from evacuating the aircraft,
should the occasion call for it. The job of a cabin attendant during
emergencies is to speedily get the passengers out of the aircraft
safely. Being overweight necessarily impedes mobility. Indeed, in
an emergency situation, seconds are what cabin attendants are
dealing with, not minutes. Three lost seconds can translate into
three lost lives. Evacuation might slow down just because a widebodied cabin attendant is blocking the narrow aisles. These
possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight
standards of PAL were made known to him prior to his
employment. He is presumed to know the weight limit that he
must maintain at all times.78 In fact, never did he question the
authority of PAL when he was repeatedly asked to trim down his
weight. Bona fides exigitut quod convenit fiat. Good faith demands
that what is agreed upon shall be done. Kung angtao ay
tapatkanyangtutuparinangnapagkasunduan.
Too, the weight standards of PAL provide for separate weight
limitations based on height and body frame for both male and
female cabin attendants. A progressive discipline is imposed to
allow non-compliant cabin attendants sufficient opportunity to
meet the weight standards. Thus, the clear-cut rules obviate any
possibility for the commission of abuse or arbitrary action on the
part of PAL.
III. Petitioner failed to substantiate his claim that he was
discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a
convenient excuse to discriminate against him.79 We are
constrained, however, to hold otherwise. We agree with the CA
that "[t]he element of discrimination came into play in this case as
a secondary position for the private respondent in order to escape
the consequence of dismissal that being overweight entailed. It is
a confession-and-avoidance position that impliedly admitted the
cause of dismissal, including the reasonableness of the applicable
standard and the private respondents failure to comply."80 It is a
basic rule in evidence that each party must prove his affirmative
allegation.81
Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support
the finding of discriminatory treatment. Petitioner cannot establish
discrimination by simply naming the supposed cabin attendants
who are allegedly similarly situated with him. Substantial proof
must be shown as to how and why they are similarly situated and
the differential treatment petitioner got from PAL despite the
similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed
overweight cabin attendants, petitioner miserably failed to indicate

their respective ideal weights; weights over their ideal weights; the
periods they were allowed to fly despite their being overweight;
the particular flights assigned to them; the discriminating
treatment they got from PAL; and other relevant data that could
have adequately established a case of discriminatory treatment by
PAL. In the words of the CA, "PAL really had no substantial case
of discrimination to meet."82
We are not unmindful that findings of facts of administrative
agencies, like the Labor Arbiter and the NLRC, are accorded
respect, even finality.83 The reason is simple: administrative
agencies are experts in matters within their specific and
specialized jurisdiction.84 But the principle is not a hard and fast
rule. It only applies if the findings of facts are duly supported by
substantial evidence. If it can be shown that administrative bodies
grossly misappreciated evidence of such nature so as to compel a
conclusion to the contrary, their findings of facts must necessarily
be reversed. Factual findings of administrative agencies do not
have infallibility and must be set aside when they fail the test of
arbitrariness.85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated
evidence. We thus annul their findings.
To make his claim more believable, petitioner invokes the equal
protection clause guaranty86 of the Constitution. However, in the
absence of governmental interference, the liberties guaranteed by
the Constitution cannot be invoked.87 Put differently, the Bill of
Rights is not meant to be invoked against acts of private
individuals.88 Indeed, the United States Supreme Court, in
interpreting the Fourteenth Amendment,89 which is the source of
our equal protection guarantee, is consistent in saying that the
equal protection erects no shield against private conduct, however
discriminatory or wrongful.90 Private actions, no matter how
egregious, cannot violate the equal protection guarantee.91
IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for
reinstatement and wages have not been mooted. He is entitled to
reinstatement and his full backwages, "from the time he was
illegally dismissed" up to the time that the NLRC was reversed by
the CA.92
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to his
dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer
shall not stay the execution for reinstatement provided herein.
The law is very clear. Although an award or order of reinstatement
is self-executory and does not require a writ of execution,93 the
option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to
the labor tribunals, or even to the courts.

Contrary to the allegation of petitioner that PAL "did everything

under the sun" to frustrate his "immediate return to his previous
position,"94 there is evidence that PAL opted to physically
reinstate him to a substantially equivalent position in accordance
with the order of the Labor Arbiter.95 In fact, petitioner duly
received the return to work notice on February 23, 2001, as
shown by his signature.96
Petitioner cannot take refuge in the pronouncements of the Court
in a case97 that "[t]he unjustified refusal of the employer to
reinstate the dismissed employee entitles him to payment of his
salaries effective from the time the employer failed to reinstate
him despite the issuance of a writ of execution"98 and ""even if
the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and
pay the wages of the employee during the period of appeal until
reversal by the higher court."99 He failed to prove that he
complied with the return to work order of PAL. Neither does it
appear on record that he actually rendered services for PAL from
the moment he was dismissed, in order to insist on the payment
of his full backwages.
In insisting that he be reinstated to his actual position despite
being overweight, petitioner in effect wants to render the issues in
the present case moot. He asks PAL to comply with the
impossible. Time and again, the Court ruled that the law does not
exact compliance with the impossible.100
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to
separation pay. This may be deduced from the language of Article
279 of the Labor Code that "[a]n employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement."
Luckily for petitioner, this is not an ironclad rule.
Exceptionally, separation pay is granted to a legally dismissed
employee as an act "social justice,"101 or based on "equity."102
In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the moral
character of the employee.103
Here, We grant petitioner separation pay equivalent to one-half
(1/2) months pay for every year of service.104 It should include
regular allowances which he might have been receiving.105 We
are not blind to the fact that he was not dismissed for any serious
misconduct or to any act which would reflect on his moral
character. We also recognize that his employment with PAL lasted
for more or less a decade.
WHEREFORE, the appealed Decision of the Court of Appeals is
AFFIRMED but MODIFIED in that petitioner Armando G.
Yrasuegui is entitled to separation pay in an amount equivalent to

one-half (1/2) months pay for every year of service, which should
include his regular allowances.
G.R. No. 162994
September 17, 2004
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO
A.
TECSON,
petitioners,
vs.GLAXO
WELLCOME
PHILIPPINES, INC., Respondent.
TINGA, J.:
Confronting the Court in this petition is a novel question, with
constitutional overtones, involving the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying
employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1
dated May 19, 2003 and the Resolution dated March 26, 2004 of
the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent
GlaxoWellcome
Philippines,
Inc.
(Glaxo)
as
medical
representative on October 24, 1995, after Tecson had undergone
training and orientation.
Thereafter, Tecson signed a contract of employment which
stipulates, among others, that he agrees to study and abide by
existing company rules; to disclose to management any existing
or future relationship by consanguinity or affinity with coemployees or employees of competing drug companies and
should management find that such relationship poses a possible
conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that
an employee is expected to inform management of any existing or
future relationship by consanguinity or affinity with co-employees
or employees of competing drug companies. If management
perceives a conflict of interest or a potential conflict between such
relationship and the employees employment with the company,
the management and the employee will explore the possibility of a
"transfer to another department in a non-counterchecking
position" or preparation for employment outside the company after
six months.
Tecson was initially assigned to market Glaxos products in the
Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with
Bettsy, an employee of Astra Pharmaceuticals3(Astra), a
competitor of Glaxo. Bettsy was Astras Branch Coordinator in
Albay. She supervised the district managers and medical
representatives of her company and prepared marketing
strategies for Astra in that area.
Even before they got married, Tecson received several reminders
from his District Manager regarding the conflict of interest which
his relationship with Bettsy might engender. Still, love prevailed,
and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his
marriage to Bettsy gave rise to a conflict of interest. Tecsons
superiors reminded him that he and Bettsy should decide which
one of them would resign from their jobs, although they told him

that they wanted to retain him as much as possible because he

was performing his job well.
Tecson requested for time to comply with the company policy
against entering into a relationship with an employee of a
competitor company. He explained that Astra, Bettsys employer,
was planning to merge with Zeneca, another drug company; and
Bettsy was planning to avail of the redundancy package to be
offered by Astra. With Bettsys separation from her company, the
potential conflict of interest would be eliminated. At the same time,
they would be able to avail of the attractive redundancy package
from Astra.
In August 1999, Tecson again requested for more time resolve the
problem. In September 1999, Tecson applied for a transfer in
Glaxos milk division, thinking that since Astra did not have a milk
division, the potential conflict of interest would be eliminated. His
application was denied in view of Glaxos "least-movementpossible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan CitySurigao City-Agusan del Sur sales area. Tecson asked Glaxo to
reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and
brought the matter to Glaxos Grievance Committee. Glaxo,
however, remained firm in its decision and gave Tescon until
February 7, 2000 to comply with the transfer order. Tecson defied
the transfer order and continued acting as medical representative
in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was
paid his salary, but was not issued samples of products which
were competing with similar products manufactured by Astra. He
was also not included in product conferences regarding such
products.
Because the parties failed to resolve the issue at the grievance
machinery level, they submitted the matter for voluntary
arbitration. Glaxo offered Tecson a separation pay of one-half ()
month pay for every year of service, or a total of P50,000.00 but
he declined the offer. On November 15, 2000, the National
Conciliation and Mediation Board (NCMB) rendered its Decision
declaring as valid Glaxos policy on relationships between its
employees and persons employed with competitor companies,
and affirming Glaxos right to transfer Tecson to another sales
territory.
Aggrieved, Tecson filed a Petition for Review with the Court of
Appeals assailing the NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision
denying the Petition for Review on the ground that the NCMB did
not err in rendering its Decision. The appellate court held that
Glaxos policy prohibiting its employees from having personal
relationships with employees of competitor companies is a valid
exercise of its management prerogatives.4

Tecson filed a Motion for Reconsideration of the appellate courts

Decision, but the motion was denied by the appellate court in its
Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the
Court of Appeals erred in affirming the NCMBs finding that the
Glaxos policy prohibiting its employees from marrying an
employee of a competitor company is valid; and (ii) the Court of
Appeals also erred in not finding that Tecson was constructively
dismissed when he was transferred to a new sales territory, and
deprived of the opportunity to attend products seminars and
training sessions.6
Petitioners contend that Glaxos policy against employees
marrying employees of competitor companies violates the equal
protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They
claim that the policy restricts the employees right to marry.7
They also argue that Tecson was constructively dismissed as
shown by the following circumstances: (1) he was transferred
from the Camarines Sur-Camarines Norte sales area to the
Butuan-Surigao-Agusan sales area, (2) he suffered a diminution
in pay, (3) he was excluded from attending seminars and training
sessions for medical representatives, and (4) he was prohibited
from promoting respondents products which were competing with
Astras products.8
In its Comment on the petition, Glaxo argues that the company
policy prohibiting its employees from having a relationship with
and/or marrying an employee of a competitor company is a valid
exercise of its management prerogatives and does not violate the
equal protection clause; and that Tecsons reassignment from the
Camarines Norte-Camarines Sur sales area to the Butuan CitySurigao City and Agusan del Sur sales area does not amount to
constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and
sale of pharmaceutical products, it has a genuine interest in
ensuring that its employees avoid any activity, relationship or
interest that may conflict with their responsibilities to the company.
Thus, it expects its employees to avoid having personal or family
interests in any competitor company which may influence their
actions and decisions and consequently deprive Glaxo of
legitimate profits. The policy is also aimed at preventing a
competitor company from gaining access to its secrets,
procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se
but only proscribes existing or future relationships with employees
of competitor companies, and is therefore not violative of the
equal protection clause. It maintains that considering the nature of
its business, the prohibition is based on valid grounds.11
According to Glaxo, Tecsons marriage to Bettsy, an employee of
Astra, posed a real and potential conflict of interest. Astras
products were in direct competition with 67% of the products sold
by Glaxo. Hence, Glaxos enforcement of the foregoing policy in
Tecsons case was a valid exercise of its management

prerogatives.12 In any case, Tecson was given several months to

remedy the situation, and was even encouraged not to resign but
to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the
assailed company policy because when he signed his contract of
employment, he was aware that such policy was stipulated
therein. In said contract, he also agreed to resign from respondent
if the management finds that his relationship with an employee of
a competitor company would be detrimental to the interests of
Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales
area and his exclusion from seminars regarding respondents new
products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was
relocated from the Camarines Sur-Camarines Norte sales area to
the Butuan City-Surigao City and Agusandel Sur sales area.
Glaxo asserts that in effecting the reassignment, it also
considered the welfare of Tecsons family. Since Tecsons
hometown was in Agusandel Sur and his wife traces her roots to
Butuan City, Glaxo assumed that his transfer from the Bicol region
to the Butuan City sales area would be favorable to him and his
family as he would be relocating to a familiar territory and
minimizing his travel expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar
concerning the new anti-asthma drug was due to the fact that said
product was in direct competition with a drug which was soon to
be sold by Astra, and hence, would pose a potential conflict of
interest for him. Lastly, the delay in Tecsons receipt of his sales
paraphernalia was due to the mix-up created by his refusal to
transfer to the Butuan City sales area (his paraphernalia was
delivered to his new sales area instead of Naga City because the
supplier thought he already transferred to Butuan).16
The Court is tasked to resolve the following issues: (1) Whether
the Court of Appeals erred in ruling that Glaxos policy against its
employees marrying employees from competitor companies is
valid, and in not holding that said policy violates the equal
protection clause of the Constitution; (2) Whether Tecson was
constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo
being questioned by petitioners provides:

10. You agree to disclose to management any existing or future

relationship you may have, either by consanguinity or affinity with
co-employees or employees of competing drug companies.
Should it pose a possible conflict of interest in management
discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by
the existing company rules of Glaxo, and to study and become
acquainted with such policies.18 In this regard, the Employee

Handbook of Glaxo expressly informs its employees of its rules

regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or
interest that may run counter to the responsibilities which they
owe GlaxoWellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or
otherwise, in any competitor supplier or other businesses which
may consciously or unconsciously influence their actions or
decisions and thus deprive GlaxoWellcome of legitimate profit.
b. To refrain from using their position in GlaxoWellcome or
knowledge of Company plans to advance their outside personal
interests, that of their relatives, friends and other businesses.
c. To avoid outside employment or other interests for income
which would impair their effective job performance.
d. To consult with Management on such activities or relationships
that may lead to conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by
consanguinity or affinity with co-employees of competing drug
companies are expected to disclose such relationship to the
Management. If management perceives a conflict or potential
conflict of interest, every effort shall be made, together by
management and the employee, to arrive at a solution within six
(6) months, either by transfer to another department in a noncounter checking position, or by career preparation toward outside
employment after GlaxoWellcome. Employees must be prepared
for possible resignation within six (6) months, if no other solution
is feasible.19
No reversible error can be ascribed to the Court of Appeals when
it ruled that Glaxos policy prohibiting an employee from having a
relationship with an employee of a competitor company is a valid
exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other confidential programs
and information from competitors, especially so that it and Astra
are rival companies in the highly competitive pharmaceutical
industry.
The prohibition against personal or marital relationships with
employees of competitor companies upon Glaxos employees is
reasonable under the circumstances because relationships of that
nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its
interests against the possibility that a competitor company will
gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests
cannot be denied. No less than the Constitution recognizes the
right of enterprises to adopt and enforce such a policy to protect
its right to reasonable returns on investments and to expansion
and growth.20 Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of labor, it

does not mean that every labor dispute will be decided in favor of
the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest
of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business
practice to guard business confidentiality and protect a
competitive position by even-handedly disqualifying from jobs
male and female applicants or employees who are married to a
competitor. Consequently, the court ruled than an employer that
discharged an employee who was married to an employee of an
active competitor did not violate Title VII of the Civil Rights Act of
1964.23The Court pointed out that the policy was applied to men
and women equally, and noted that the employers business was
highly competitive and that gaining inside information would
constitute a competitive advantage.
The challenged company policy does not violate the equal
protection clause of the Constitution as petitioners erroneously
suggest. It is a settled principle that the commands of the equal
protection clause are addressed only to the state or those acting
under color of its authority.24 Corollarily, it has been held in a long
array of U.S. Supreme Court decisions that the equal protection
clause erects no shield against merely private conduct, however,
discriminatory or wrongful.25 The only exception occurs when the
state29 in any of its manifestations or actions has been found to
have become entwined or involved in the wrongful private
conduct.27 Obviously, however, the exception is not present in
this case. Significantly, the company actually enforced the policy
after repeated requests to the employee to comply with the policy.
Indeed, the application of the policy was made in an impartial and
even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and
the policy in its employee handbook, it is clear that Glaxo does not
impose an absolute prohibition against relationships between its
employees and those of competitor companies. Its employees are
free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of
interest between the employee and the company that may arise
out of such relationships. As succinctly explained by the appellate
court, thus:
The policy being questioned is not a policy against marriage. An
employee of the company remains free to marry anyone of his or
her choosing. The policy is not aimed at restricting a personal
prerogative that belongs only to the individual. However, an
employees personal decision does not detract the employer from
exercising management prerogatives to ensure maximum profit
and business success. . .28
The Court of Appeals also correctly noted that the assailed
company policy which forms part of respondents Employee Code
of Conduct and of its contracts with its employees, such as that
signed by Tescon, was made known to him prior to his
employment. Tecson, therefore, was aware of that restriction
when he signed his employment contract and when he entered

into a relationship with Bettsy. Since Tecson knowingly and

voluntarily entered into a contract of employment with Glaxo, the
stipulations therein have the force of law between them and, thus,
should be complied with in good faith."29 He is therefore
estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tescon was
constructively dismissed when he was transferred from the
Camarines Norte-Camarines Sur sales area to the Butuan CitySurigao City-Agusan del Sur sales area, and when he was
excluded from attending the companys seminar on new products
which were directly competing with similar products manufactured
by Astra. Constructive dismissal is defined as a quitting, an
involuntary resignation resorted to when continued employment
becomes impossible, unreasonable, or unlikely; when there is a
demotion in rank or diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes
unbearable to the employee.30 None of these conditions are
present in the instant case. The record does not show that Tescon
was demoted or unduly discriminated upon by reason of such
transfer. As found by the appellate court, Glaxo properly exercised
its management prerogative in reassigning Tecson to the Butuan
City sales area:
. . . In this case, petitioners transfer to another place of
assignment was merely in keeping with the policy of the company
in avoidance of conflict of interest, and thus validNote that
[Tecsons] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work
in close coordination with District Managers and Medical
Representatives. Her duties include monitoring sales of Astra
products, conducting sales drives, establishing and furthering
relationship with customers, collection, monitoring and managing
Astras inventoryshe therefore takes an active participation in
the market war characterized as it is by stiff competition among
pharmaceutical companies. Moreover, and this is significant,
petitioners sales territory covers Camarines Sur and Camarines
Norte while his wife is supervising a branch of her employer in
Albay. The proximity of their areas of responsibility, all in the same
Bicol Region, renders the conflict of interest not only possible, but
actual, as learning by one spouse of the others market strategies
in the region would be inevitable. [Managements] appreciation of
a conflict of interest is therefore not merely illusory and wanting in
factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations
Commission,32 which involved a complaint filed by a medical
representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he
refused to accept his reassignment to a new area, the Court
upheld the right of the drug company to transfer or reassign its
employee in accordance with its operational demands and
requirements. The ruling of the Court therein, quoted hereunder,
also finds application in the instant case:

By the very nature of his employment, a drug salesman or

medical representative is expected to travel. He should anticipate
reassignment according to the demands of their business. It
would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening
or expansion or to areas where the need for pushing its products
is great. More so if such reassignments are part of the
employment contract.33
As noted earlier, the challenged policy has been implemented by
Glaxo impartially and disinterestedly for a long period of time. In
the case at bar, the record shows that Glaxo gave Tecson several
chances to eliminate the conflict of interest brought about by his
relationship with Bettsy. When their relationship was still in its
initial stage, Tecsons supervisors at Glaxo constantly reminded
him about its effects on his employment with the company and on
the companys interests. After Tecson married Bettsy, Glaxo gave
him time to resolve the conflict by either resigning from the
company or asking his wife to resign from Astra. Glaxo even
expressed its desire to retain Tecson in its employ because of his
satisfactory performance and suggested that he ask Bettsy to
resign from her company instead. Glaxo likewise acceded to his
repeated requests for more time to resolve the conflict of interest.
When the problem could not be resolved after several years of
waiting, Glaxo was constrained to reassign Tecson to a sales area
different from that handled by his wife for Astra. Notably, the Court
did not terminate Tecson from employment but only reassigned
him to another area where his home province, Agusandel Sur,
was included. In effecting Tecsons transfer, Glaxo even
considered the welfare of Tecsons family. Clearly, the foregoing
dispels any suspicion of unfairness and bad faith on the part of
Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs
against petitioners.
SUNACE INTERNATIONAL
MANAGEMENT SERVICES, INCPetitioner,- versus G.R. No. 161757NATIONAL LABOR RELATIONS
COMMISSION, Second Division;HON. ERNESTO S. DINOPOL,
in his capacity as Labor Arbiter, NLRC; NCR, Arbitration
Branch, Quezon City and DIVINA A. MONTEHERMOZO,
January 25, 2006
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace),
a corporation duly organized and existing under the laws of the
Philippines, deployed to Taiwan Divina A. Montehermozo (Divina)
as a domestic helper under a 12-month contract effective
February 1, 1997.[1] The deployment was with the assistance of
a Taiwanese broker, Edmund Wang, President of Jet Crown
International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina

continued working for her Taiwanese employer, Hang Rui Xiong,
for two more years, after which she returned to the Philippines on
February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a
complaint[2] before the National Labor Relations Commission
(NLRC) against Sunace, one Adelaide Perez, the Taiwanese
broker, and the employer-foreign principal alleging that she was
jailed for three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration
Associate Regina T. Gavin issued Summons[3] to the Manager of
Sunace, furnishing it with a copy of Divinas complaint and
directing it to appear for mandatory conference on February 28,
2000.
The scheduled mandatory conference was reset. It appears to
have been concluded, however.
On April 6, 2000, Divina filed her Position Paper[4] claiming that
under her original one-year contract and the 2-year extended
contract which was with the knowledge and consent of Sunace,
the following amounts representing income tax and savings were
deducted:
Year
Deduction for
Income Tax
Deduction for Savings
1997
1998
1999

NT10,450.00
NT9,500.00
NT13,300.00

NT23,100.00
NT36,000.00
NT36,000.00;[5]

and while the amounts deducted in 1997 were refunded to her,

those deducted in 1998 and 1999 were not.
On even date,
Sunace, by its Proprietor/General Manager Maria Luisa Olarte,
filed its Verified Answer and Position Paper,[6] claiming as follows,
quoted verbatim:
COMPLAINANT IS NOT ENTITLED
FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3. Complainant could not anymore claim nor
entitled for the refund of her 24 months savings as she already
took back her saving already last year and the employer did not
deduct any money from her salary, in accordance with a Fascimile
Message from the respondent SUNACEs employer, Jet Crown

International Co. Ltd., a xerographic copy of which is herewith

attached as ANNEX 2 hereof;
COMPLAINANT IS NOT ENTITLED
TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEYS FEES
4. There is no basis for the grant of tax refund to
the complainant as the she finished her one year contract and
hence, was not illegally dismissed by her employer. She could
only lay claim over the tax refund or much more be awarded of
damages such as attorneys fees as said reliefs are available only
when the dismissal of a migrant worker is without just valid or
lawful cause as defined by law or contract.
The rationales behind the award of tax refund and
payment of attorneys fees is not to enrich the complainant but to
compensate him for actual injury suffered. Complainant did not
suffer injury, hence, does not deserve to be compensated for
whatever kind of damages.
Hence, the complainant has NO cause of action
against respondent SUNACE for monetary claims, considering
that she has been totally paid of all the monetary benefits due her
under her Employment Contract to her full satisfaction.
6.
Furthermore, the tax deducted from her salary is in
compliance with the Taiwanese law, which respondent SUNACE
has no control and complainant has to obey and this Honorable
Office has no authority/jurisdiction to intervene because the power
to tax is a sovereign power which the Taiwanese Government is
supreme in its own territory. The sovereign power of taxation of a
state is recognized under international law and among sovereign
states
7. That respondent SUNACE respectfully reserves
the right to file supplemental Verified Answer and/or Position
Paper to substantiate its prayer for the dismissal of the above
case against the herein respondent. AND BY WAY OF Reacting to Divinas Position Paper, Sunace filed on April
25, 2000 an . . . ANSWER TO COMPLAINANTS POSITION
PAPER[7] alleging that Divinas 2-year extension of her contract
was without its knowledge and consent, hence, it had no liability
attaching to any claim arising therefrom, and Divina in fact
executed a Waiver/Quitclaim and Release of Responsibility and
an Affidavit of Desistance, copy of each document was annexed
to said . . . ANSWER TO COMPLAINANTS POSITION PAPER.

To Sunaces . . . ANSWER TO COMPLAINANTS

POSITION PAPER, Divina filed a 2-page reply,[8] without,
however, refuting Sunaces disclaimer of knowledge of the
extension of her contract and without saying anything about the
Release, Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunaces claim that the
extension of Divinas contract for two more years was without its
knowledge and consent in this wise:
We reject Sunaces submission that it should not be held
responsible for the amount withheld because her contract was
extended for 2 more years without its knowledge and consent
because as Annex B[9] shows, Sunace and Edmund Wang have
not stopped communicating with each other and yet the matter of
the contracts extension and Sunaces alleged non-consent
thereto has not been categorically established.
What Sunace should have done was to write to POEA about the
extension and its objection thereto, copy furnished the
complainant herself, her foreign employer, Hang Rui Xiong and
the Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to the
extension and should be liable for anything that resulted thereform
(sic).[10] (Underscoring supplied)
The Labor Arbiter rejected too Sunaces argument that it is
not liable on account of Divinas execution of a Waiver and
Quitclaim and an Affidavit of Desistance. Observed the Labor
Arbiter:
Should the parties arrive at any agreement as to the whole or any
part of the dispute, the same shall be reduced to writing and
signed by the parties and their respective counsel (sic), if any,
before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being
satisfied that it was voluntarily entered into by the parties and after
having explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the
presence of the Labor Arbiter before whom the case is pending
shall be approved by him, if after confronting the parties,
particularly the complainants, he is satisfied that they understand
the terms and conditions of the settlement and that it was entered
into freely voluntarily (sic) by them and the agreement is not
contrary to law, morals, and public policy.

And because no consideration is indicated in the

documents, we strike them down as contrary to law, morals, and
public policy.[11]
He accordingly decided in favor of Divina, by decision of October
9, 2000,[12] the dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents
SUNACE INTERNATIONAL SERVICES and its owner ADELAIDA
PERGE, both in their personal capacities and as agent of Hang
Rui Xiong/Edmund Wang to jointly and severally pay complainant
DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its peso
equivalent at the date of payment, as refund for the amounts
which she is hereby adjudged entitled to as earlier discussed plus
10% thereof as attorneys fees since compelled to litigate,
complainant had to engage the services of counsel.
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,
[14] affirmed the Labor Arbiters decision.
Via petition for certiorari,[15] Sunace elevated the case to the
Court of Appeals which dismissed it outright by Resolution of
November 12, 2002,[16] the full text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of
discretion on the part of the public respondent amounting to lack
of jurisdiction when the NLRC affirmed the Labor Arbiters finding
that petitioner Sunace International Management Services
impliedly consented to the extension of the contract of private
respondent Divina A. Montehermozo. It is undisputed that
petitioner was continually communicating with private
respondents foreign employer (sic). As agent of the foreign
principal, petitioner cannot profess ignorance of such extension
as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it. Grave abuse of
discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE
and DISMISSED.[17]
Its Motion for Reconsideration having been denied by the
appellate court by Resolution of January 14, 2004,[18] Sunace
filed the present petition for review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRCs
finding that Sunace knew of and impliedly consented to the
extension of Divinas 2-year contract. It went on to state that It
is undisputed that [Sunace] was continually communicating with
[Divinas] foreign employer. It thus concluded that [a]s agent of

the foreign principal, petitioner cannot profess ignorance of such

extension as obviously, the act of the principal extending
complainant (sic) employment contract necessarily bound it.
Contrary to the Court of Appeals finding, the alleged continuous
communication was with the Taiwanese broker Wang, not with the
foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese
broker to Sunace, the only basis of a finding of continuous
communication, reads verbatim:
Regarding to Divina, she did not say anything about her saving in
police station. As we contact with her employer, she took back
her saving already last years. And they did not deduct any money
from her salary. Or she will call back her employer to check it
again. If her employer said yes! we will get it back for her.
Thank you and best regards.
(sgd.)
Edmund Wang
President[19]
The finding of the Court of Appeals solely on the basis of the
above-quoted telefax message, that Sunace continually
communicated with the foreign principal (sic) and therefore was
aware of and had consented to the execution of the extension of
the contract is misplaced. The message does not provide
evidence that Sunace was privy to the new contract executed
after the expiration on February 1, 1998 of the original contract.
That Sunace and the Taiwanese broker communicated regarding
Divinas allegedly withheld savings does not necessarily mean
that Sunace ratified the extension of the contract. As Sunace
points out in its Reply[20] filed before the Court of Appeals,
As can be seen from that letter communication, it was just an
information given to the petitioner that the private respondent had
t[aken] already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the
extension or the petitioners consent thereto.[21]
Parenthetically, since the telefax message is dated February 21,
2000, it is safe to assume that it was sent to enlighten Sunace
who had been directed, by Summons issued on February 15,
2000, to appear on February 28, 2000 for a mandatory
conference following Divinas filing of the complaint on February
14, 2000.
Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess

ignorance of such an extension as obviously, the act of its
principal extending [Divinas] employment contract necessarily
bound it,[22]
it too is a misapplication, a misapplication of the theory of imputed
knowledge.
The theory of imputed knowledge ascribes the knowledge
of the agent, Sunace, to the principal, employer Xiong, not the
other way around.[23] The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and
consented to be bound under the 2-year employment contract
extension, it cannot be said to be privy thereto. As such, it and its
owner cannot be held solidarily liable for any of Divinas claims
arising from the 2-year employment extension. As the New Civil
Code provides,
Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation
or by provision of law.[24]
Furthermore, as Sunace correctly points out, there was an implied
revocation of its agency relationship with its foreign principal
when, after the termination of the original employment contract,
the foreign principal directly negotiated with Divina and entered
into a new and separate employment contract in Taiwan. Article
1924 of the New Civil Code reading
The agency is revoked if the principal directly manages the
business entrusted to the agent, dealing directly with third
persons.
thus applies.
In light of the foregoing discussions, consideration of the validity
of the Waiver and Affidavit of Desistance which Divina executed in
favor of Sunace is rendered unnecessary.
WHEREFORE, the petition is GRANTED.
The challenged
resolutions of the Court of Appeals are hereby REVERSED and
SET ASIDE.
The complaint of respondent Divina A.
Montehermozo against petitioner is DISMISSED.
G.R. No. 167614
March 24, 2009
ANTONIO M. SERRANO, Petitioner, vs.
Gallant MARITIME SERVICES, INC. and MARLOW
NAVIGATION CO.,INC., Respondents.

AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire
families and communities out of poverty. Their earnings have built
houses, provided health care, equipped schools and planted the
seeds of businesses. They have woven together the world by
transmitting ideas and knowledge from country to country. They
have provided the dynamic human link between cultures,
societies and economies. Yet, only recently have we begun to
understand not only how much international migration impacts
development, but how smart public policies can magnify this
effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last
clause in the 5th paragraph of Section 10, Republic Act (R.A.) No.
8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve
percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers
(OFWs) to national development, but exacerbates the hardships
borne by them by unduly limiting their entitlement in case of illegal
dismissal to their lump-sum salary either for the unexpired portion
of their employment contract "or for three months for every year of
the unexpired term, whichever is less" (subject clause). Petitioner
claims that the last clause violates the OFWs' constitutional rights
in that it impairs the terms of their contract, deprives them of equal
protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court,
petitioner assails the December 8, 2004 Decision3 and April 1,
2005 Resolution4 of the Court of Appeals (CA), which applied the
subject clause, entreating this Court to declare the subject clause
unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and
Marlow Navigation Co., Ltd. (respondents) under a Philippine
Overseas Employment Administration (POEA)-approved Contract
of Employment with the following terms and conditions:
Duration of contract
12 months
Position Chief Officer
Basic monthly salary
US$1,400.00
Hours of work
48.0 hours per week
Overtime
US$700.00 per month
Vacation leave with pay
7.00 days per month5
On March 19, 1998, the date of his departure, petitioner was
constrained to accept a downgraded employment contract for the
position of Second Officer with a monthly salary of US$1,000.00,

upon the assurance and representation of respondents that he

would be made Chief Officer by the end of April 1998.6
Respondents did not deliver on their promise to make petitioner
Chief Officer.7 Hence, petitioner refused to stay on as Second
Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or
from March 19, 1998 up to March 19, 1999, but at the time of his
repatriation on May 26, 1998, he had served only two (2) months
and seven (7) days of his contract, leaving an unexpired portion of
nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against
respondents for constructive dismissal and for payment of his
money claims in the total amount of US$26,442.73, broken down
as follows:
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the
dismissal of petitioner illegal and awarding him monetary benefits,
to wit:
WHEREFORE, premises considered, judgment is hereby
rendered declaring that the dismissal of the complainant
(petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the time of
payment, the amount of EIGHT THOUSAND SEVEN HUNDRED
SEVENTY U.S. DOLLARS (US $8,770.00), representing the
complainants salary for three (3) months of the unexpired portion
of the aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant
[petitioner], jointly and severally, in Philippine Currency, based on
the rate of exchange prevailing at the time of payment, the
amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12
representing the complainants claim for a salary differential. In
addition, the respondents are hereby ordered to pay the
complainant, jointly and severally, in Philippine Currency, at the
exchange rate prevailing at the time of payment, the
complainants (petitioner's) claim for attorneys fees equivalent to
ten percent (10%) of the total amount awarded to the aforesaid
employee under this Decision.
The claims of the complainant for moral and exemplary damages
are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA
based his computation on the salary period of three months only
-- rather than the entire unexpired portion of nine months and 23
days of petitioner's employment contract - applying the subject
clause. However, the LA applied the salary rate of US$2,590.00,
consisting of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14

Respondents appealed15 to the National Labor Relations

Commission (NLRC) to question the finding of the LA that
petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the
LA erred in not applying the ruling of the Court in Triple Integrated
Services, Inc. v. National Labor Relations Commission17 that in
case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA
Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.
Respondents are hereby ordered to pay complainant, jointly and
severally, in Philippine currency, at the prevailing rate of exchange
at the time of payment the following:
1. Three (3) months salary
$1,400 x 3
US$4,200.00
2. Salary differential
45.00
US$4,245.00
3. 10% Attorneys fees
424.50
TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary
awarded to petitioner by reducing the applicable salary rate from
US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not
provide for the award of overtime pay, which should be proven to
have been actually performed, and for vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time
he questioned the constitutionality of the subject clause.21 The
NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating
the constitutional challenge against the subject clause.24 After
initially dismissing the petition on a technicality, the CA eventually
gave due course to it, as directed by this Court in its Resolution
dated August 7, 2003 which granted the petition for certiorari,
docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC
ruling on the reduction of the applicable salary rate; however, the
CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the
CA,27 petitioner brings his cause to this Court on the following
grounds:
I
The Court of Appeals and the labor tribunals have decided the
case in a way not in accord with applicable decision of the
Supreme Court involving similar issue of granting unto the migrant
worker back wages equal to the unexpired portion of his contract
of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor
Tribunals were merely applying their interpretation of Section 10
of Republic Act No. 8042, it is submitted that the Court of Appeals

gravely erred in law when it failed to discharge its judicial duty to

decide questions of substance not theretofore determined by the
Honorable Supreme Court, particularly, the constitutional issues
raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award
for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10
of Republic Act No. 8042, the Court of Appeals gravely erred in
law in excluding from petitioners award the overtime pay and
vacation pay provided in his contract since under the contract they
form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his
petition as he is already old and sickly, and he intends to make
use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a
motion, urging the court to allow partial execution of the
undisputed monetary award and, at the same time, praying that
the constitutional question be resolved.30
Considering that the parties have filed their respective
memoranda, the Court now takes up the full merit of the petition
mindful of the extreme importance of the constitutional question
raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal
of petitioner was illegal is not disputed. Likewise not disputed is
the salary differential of US$45.00 awarded to petitioner in all
three fora. What remains disputed is only the computation of the
lump-sum salary to be awarded to petitioner by reason of his
illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the
lump-sum salary of petitioner at the monthly rate of US$1,400.00
covering the period of three months out of the unexpired portion of
nine months and 23 days of his employment contract or a total of
US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner
contends that, in addition to the US$4,200.00 awarded by the
NLRC and the CA, he is entitled to US$21,182.23 more or a total
of US$25,382.23, equivalent to his salaries for the entire nine
months and 23 days left of his employment contract, computed at
the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional
because it unduly impairs the freedom of OFWs to negotiate for
and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.32 It
also impinges on the equal protection clause, for it treats OFWs
differently from local Filipino workers (local workers) by putting a
cap on the amount of lump-sum salary to which OFWs are entitled
in case of illegal dismissal, while setting no limit to the same
monetary award for local workers when their dismissal is declared
illegal; that the disparate treatment is not reasonable as there is

no substantial distinction between the two groups;33 and that it

defeats Section 18,34 Article II of the Constitution which
guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the
labor tribunals are not in line with existing jurisprudence on the
issue of money claims of illegally dismissed OFWs. Though there
are conflicting rulings on this, petitioner urges the Court to sort
them out for the guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject
clause into R.A. No. 8042 serves no other purpose but to benefit
local placement agencies. He marks the statement made by the
Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder
the payment of money claims in the event that jurisdiction over the
foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are
unnecessarily penalized for the acts of the foreign employer. To
protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money claims was
reduced under Section 10 of R.A. No. 8042. 37(Emphasis
supplied)
Petitioner argues that in mitigating the solidary liability of
placement agencies, the subject clause sacrifices the well-being
of OFWs. Not only that, the provision makes foreign employers
better off than local employers because in cases involving the
illegal dismissal of employees, foreign employers are liable for
salaries covering a maximum of only three months of the
unexpired employment contract while local employers are liable
for the full lump-sum salaries of their employees. As petitioner
puts it:
In terms of practical application, the local employers are not
limited to the amount of backwages they have to give their
employees they have illegally dismissed, following wellentrenched and unequivocal jurisprudence on the matter. On the
other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3)
months unpaid salaries notwithstanding the unexpired term of the
contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due
process clause, for it deprives him of the salaries and other
emoluments he is entitled to under his fixed-period employment
contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that
the constitutional issue should not be entertained, for this was
belatedly interposed by petitioner in his appeal before the CA, and
not at the earliest opportunity, which was when he filed an appeal
before the NLRC.40
The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042
took effect on July 15, 1995, its provisions could not have
impaired petitioner's 1998 employment contract. Rather, R.A. No.
8042 having preceded petitioner's contract, the provisions thereof
are deemed part of the minimum terms of petitioner's
employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers
differ in terms of the nature of their employment, such that their
rights to monetary benefits must necessarily be treated differently.
The OSG enumerates the essential elements that distinguish
OFWs from local workers: first, while local workers perform their
jobs within Philippine territory, OFWs perform their jobs for foreign
employers, over whom it is difficult for our courts to acquire
jurisdiction, or against whom it is almost impossible to enforce
judgment; and second, as held in Coyoca v. National Labor
Relations Commission43 and Millares v. National Labor Relations
Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are
or can become regular employees. Hence, the OSG posits that
there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable
and valid basis for the differentiated treatment under the subject
clause of the money claims of OFWs who are illegally dismissed.
Thus, the provision does not violate the equal protection clause
nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause
as a police power measure adopted to mitigate the solidary
liability of placement agencies for this "redounds to the benefit of
the migrant workers whose welfare the government seeks to
promote. The survival of legitimate placement agencies helps
[assure] the government that migrant workers are properly
deployed and are employed under decent and humane
conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial
review of the acts of its co-equals, such as the Congress, it does
so only when these conditions obtain: (1) that there is an actual
case or controversy involving a conflict of rights susceptible of
judicial determination;47 (2) that the constitutional question is
raised by a proper party48 and at the earliest opportunity;49 and
(3) that the constitutional question is the very lis mota of the
case,50otherwise the Court will dismiss the case or decide the
same on some other ground.51
Without a doubt, there exists in this case an actual controversy
directly involving petitioner who is personally aggrieved that the
labor tribunals and the CA computed his monetary award based
on the salary period of three months only as provided under the
subject clause.
The constitutional challenge is also timely. It should be borne in
mind that the requirement that a constitutional issue be raised at

the earliest opportunity entails the interposition of the issue in the

pleadings before acompetent court, such that, if the issue is not
raised in the pleadings before that competent court, it cannot be
considered at the trial and, if not considered in the trial, it cannot
be considered on appeal.52 Records disclose that the issue on
the constitutionality of the subject clause was first raised, not in
petitioner's appeal with the NLRC, but in his Motion for Partial
Reconsideration with said labor tribunal,53 and reiterated in his
Petition forCertiorari before the CA.54 Nonetheless, the issue is
deemed seasonably raised because it is not the NLRC but the CA
which has the competence to resolve the constitutional issue. The
NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining
questions of fact to which the legislative policy of R.A. No. 8042 is
to be applied and to resolving such questions in accordance with
the standards laid down by the law itself;55 thus, its foremost
function is to administer and enforce R.A. No. 8042, and not to
inquire into the validity of its provisions. The CA, on the other
hand, is vested with the power of judicial review or the power to
declare unconstitutional a law or a provision thereof, such as the
subject clause.56Petitioner's interposition of the constitutional
issue before the CA was undoubtedly seasonable. The CA was
therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the
resolution of the case likewise obtains because the monetary
claim of petitioner to his lump-sum salary for the entire unexpired
portion of his 12-month employment contract, and not just for a
period of three months, strikes at the very core of the subject
clause.
Thus, the stage is all set for the determination of the
constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the
stipulations in his contract on the term of his employment and the
fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws
newly enacted have only a prospective operation,58and cannot
affect acts or contracts already perfected;59 however, as to laws
already in existence, their provisions are read into contracts and
deemed a part thereof.60 Thus, the non-impairment clause under
Section 10, Article II is limited in application to laws about to be
enacted that would in any way derogate from existing acts or
contracts by enlarging, abridging or in any manner changing the
intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in
1995 preceded the execution of the employment contract between
petitioner and respondents in 1998. Hence, it cannot be argued

that R.A. No. 8042, particularly the subject clause, impaired the
employment contract of the parties. Rather, when the parties
executed their 1998 employment contract, they were deemed to
have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject
clause may not be declared unconstitutional on the ground that it
impinges on the impairment clause, for the law was enacted in the
exercise of the police power of the State to regulate a business,
profession or calling, particularly the recruitment and deployment
of OFWs, with the noble end in view of ensuring respect for the
dignity and well-being of OFWs wherever they may be
employed.61 Police power legislations adopted by the State to
promote the health, morals, peace, education, good order, safety,
and general welfare of the people are generally applicable not
only to future contracts but even to those already in existence, for
all private contracts must yield to the superior and legitimate
measures taken by the State to promote public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due
process of law nor shall any person be denied the equal
protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all
members of the labor sector, without distinction as to place of
deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing
constitutional provisions translate to economic security and parity:
all monetary benefits should be equally enjoyed by workers of
similar category, while all monetary obligations should be borne
by them in equal degree; none should be denied the protection of
the laws which is enjoyed by, or spared the burden imposed on,
others in like circumstances.65
Such rights are not absolute but subject to the inherent power of
Congress to incorporate, when it sees fit, a system of
classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is based
on substantial distinctions; 2) it is germane to the purposes of the
law; 3) it is not limited to existing conditions only; and 4) it applies
equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the
constitutionality of a classification embodied in a law: a) the
deferential or rational basis scrutiny in which the challenged
classification needs only be shown to be rationally related to
serving a legitimate state interest;67 b) the middle-tier or
intermediate scrutiny in which the government must show that the
challenged classification serves an important state interest and
that the classification is at least substantially related to serving
that interest;68 and c) strict judicial scrutiny69 in which a

legislative classification which impermissibly interferes with the

exercise of a fundamental right70 or operates to the peculiar
disadvantage of a suspect class71 is presumed unconstitutional,
and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest
and that it is the least restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered
by suspect classifications73 based on race74 or gender75 but not
when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v.
Bangko Sentral ng Pilipinas,77 the constitutionality of a provision
in the charter of the Bangko Sentral ng Pilipinas (BSP), a
government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file
employees of other GFIs had been exempted from the SSL by
their respective charters. Finding that the disputed provision
contained a suspect classification based on salary grade, the
Court deliberately employed the standard of strict judicial scrutiny
in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad
outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid
classification, and its policies should be accorded recognition and
respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification violates
a fundamental right, or prejudices persons accorded special
protection by the Constitution. When these violations arise, this
Court must discharge its primary role as the vanguard of
constitutional guaranties, and require a stricter and more exacting
adherence to constitutional limitations. Rational basis should not
suffice.
Admittedly, the view that prejudice to persons accorded special
protection by the Constitution requires a stricter judicial scrutiny
finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per
se controlling in this jurisdiction. At best, they are persuasive and
have been used to support many of our decisions. We should not
place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to
our own decisions through the employment of our own
endowments. We live in a different ambience and must decide our
own problems in the light of our own interests and needs, and of
our qualities and even idiosyncrasies as a people, and always
with our own concept of law and justice. Our laws must be
construed in accordance with the intention of our own lawmakers
and such intent may be deduced from the language of each law
and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public
interest which is the be-all and the end-all of all our laws. And it

need not be stressed that our public interest is distinct and

different from others.
Further, the quest for a better and more "equal" world calls for the
use of equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action
in the Constitution. The Preamble proclaims "equality" as an ideal
precisely in protest against crushing inequities in Philippine
society. The command to promote social justice in Article II,
Section 10, in "all phases of national development," further
explicitated in Article XIII, are clear commands to the State to take
affirmative action in the direction of greater equality. x x x [T]here
is thus in the Philippine Constitution no lack of doctrinal support
for a more vigorous state effort towards achieving a reasonable
measure of equality.
Our present Constitution has gone further in guaranteeing vital
social and economic rights to marginalized groups of society,
including labor. Under the policy of social justice, the law bends
over backward to accommodate the interests of the working class
on the humane justification that those with less privilege in life
should have more in law. And the obligation to afford protection to
labor is incumbent not only on the legislative and executive
branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for the humanization of laws and
the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may
at least be approximated.
Under most circumstances, the Court will exercise judicial
restraint in deciding questions of constitutionality, recognizing the
broad discretion given to Congress in exercising its legislative
power. Judicial scrutiny would be based on the "rational basis"
test, and the legislative discretion would be given deferential
treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against
persons favored by the Constitution with special protection,
judicial scrutiny ought to be more strict. A weak and watered down
view would call for the abdication of this Courts solemn duty to
strike down any law repugnant to the Constitution and the rights it
enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or
one of its instrumentalities. Oppressive acts will be struck down
regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of
the salary grade or officer-employee status. It is akin to a
distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the
lower grades. Officers of the BSP now receive higher
compensation packages that are competitive with the industry,
while the poorer, low-salaried employees are limited to the rates
prescribed by the SSL. The implications are quite disturbing: BSP
rank-and-file employees are paid the strictly regimented rates of

the SSL while employees higher in rank - possessing higher and

better education and opportunities for career advancement - are
given higher compensation packages to entice them to stay.
Considering that majority, if not all, the rank-and-file employees
consist of people whose status and rank in life are less and
limited, especially in terms of job marketability, it is they - and not
the officers - who have the real economic and financial need for
the adjustment . This is in accord with the policy of the
Constitution "to free the people from poverty, provide adequate
social services, extend to them a decent standard of living, and
improve the quality of life for all." Any act of Congress that runs
counter to this constitutional desideratum deserves strict scrutiny
by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to
labor," the Court in the present case also employs the standard of
strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral,
for it applies to all OFWs. However, a closer examination reveals
that the subject clause has a discriminatory intent against, and an
invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-vis OFWs with employment contracts ofone year or more;
Second, among OFWs with employment contracts of more than
one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis
OFWs with employment contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning
Agency, Inc. v. National Labor Relations Commission79 (Second
Division, 1999) that the Court laid down the following rules on the
application of the periods prescribed under Section 10(5) of R.A.
No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which
amount to award an illegally dismissed overseas contract worker,
i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of
the unexpired term, whichever is less, comes into play only when
the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words "for every year of the
unexpired term" which follows the words "salaries x x x for three
months."To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the
lesser amount is to completely disregard and overlook some
words used in the statute while giving effect to some. This is
contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word
thereof be given effect since the law-making body is presumed to
know the meaning of the words employed in the statue and to
have used them advisedly. Ut res magis valeat quam pereat.80
(Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two

months into his 10-month contract, but was awarded his salaries
for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the
Court made conflicting rulings on Section 10(5). One was Asian
Center for Career and Employment System and Services v.
National Labor Relations Commission(Second Division, October
1998),81 which involved an OFW who was awarded a two-year
employment contract,but was dismissed after working for one
year and two months. The LA declared his dismissal illegal and
awarded him SR13,600.00 as lump-sum salary covering eight
months, the unexpired portion of his contract. On appeal, the
Court reduced the award to SR3,600.00 equivalent to his three
months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from
overseas employment without just, valid or authorized cause is
entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired
term, whichever is less.
In the case at bar, the unexpired portion of private respondents
employment contract is eight (8) months. Private respondent
should therefore be paid his basic salary corresponding to three
(3) months or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National
Labor Relations Commission (Third Division, December 1998),83
which involved an OFW (therein respondent Erlinda Osdana) who
was originally granted a 12-month contract, which was deemed
renewed for another 12 months. After serving for one year and
seven-and-a-half months, respondent Osdana was illegally
dismissed, and the Court awarded her salaries for the entire
unexpired portion of four and one-half months of her contract.
As the foregoing matrix readily shows, the subject clause
classifies OFWs into two categories. The first category includes
OFWs with fixed-period employment contracts of less than one
year; in case of illegal dismissal, they are entitled to their salaries
for the entire unexpired portion of their contract. The second
category consists of OFWs with fixed-period employment
contracts of one year or more; in case of illegal dismissal, they are
entitled to monetary award equivalent to only 3 months of the
unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be
discounted. In Skippers, the respondent OFW worked for only 2
months out of his 6-month contract, but was awarded his salaries
for the remaining 4 months. In contrast, the respondent OFWs in
Oriental and PCL who had also worked for about 2 months out of
their 12-month contracts were awarded their salaries for only 3
months of the unexpired portion of their contracts. Even the
OFWs involved in Talidano and Univan who had worked for a
longer period of 3 months out of their 12-month contracts before
being illegally dismissed were awarded their salaries for only 3
months.

To illustrate the disparity even more vividly, the Court assumes a

hypothetical OFW-A with an employment contract of 10 months at
a monthly salary rate of US$1,000.00 and a hypothetical OFW-B
with an employment contract of 15 months with the same monthly
salary rate of US$1,000.00. Both commenced work on the same
day and under the same employer, and were illegally dismissed
after one month of work. Under the subject clause, OFW-A will be
entitled to US$9,000.00, equivalent to his salaries for the
remaining 9 months of his contract, whereas OFW-B will be
entitled to only US$3,000.00, equivalent to his salaries for 3
months of the unexpired portion of his contract, instead of
US$14,000.00 for the unexpired portion of 14 months of his
contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes
into account jurisprudence that, prior to the effectivity of R.A. No.
8042 on July 14, 1995,97 illegally dismissed OFWs, no matter
how long the period of their employment contracts, were entitled
to their salaries for the entire unexpired portions of their contracts.
The matrix below speaks for itself:
It is plain that prior to R.A. No. 8042, all OFWs, regardless of
contract periods or the unexpired portions thereof, were treated
alike in terms of the computation of their monetary benefits in
case of illegal dismissal. Their claims were subjected to a uniform
rule of computation: their basic salaries multiplied by the entire
unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced
a differentiated rule of computation of the money claims of illegally
dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an
unexpired portion of one year or more and subjecting them to the
peculiar disadvantage of having their monetary awards limited to
their salaries for 3 months or for the unexpired portion thereof,
whichever is less, but all the while sparing the other category from
such prejudice, simply because the latter's unexpired contracts fall
short of one year.
Among OFWs With Employment Contracts of More Than One
Year
Upon closer examination of the terminology employed in the
subject clause, the Court now has misgivings on the accuracy of
the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months
for every year of the unexpired term, whichever is less" contains
the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite
extent of time.105 Corollarily, that "every year" is but part of an
"unexpired term" is significant in many ways: first, the unexpired
term must be at least one year, for if it were any shorter, there
would be no occasion for such unexpired term to be measured by
every year; and second, the original term must be more than one
year, for otherwise, whatever would be the unexpired term thereof
will not reach even a year. Consequently, the more decisive factor
in the determination of when the subject clause "for three (3)

months forevery year of the unexpired term, whichever is less"

shall apply is not the length of the original contract period as held
in Marsaman,106 but the length of the unexpired portion of the
contract period -- the subject clause applies in cases when the
unexpired portion of the contract period is at least one year, which
arithmetically requires that the original contract period be more
than one year.
Viewed in that light, the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more
than one year: those who are illegally dismissed with less than
one year left in their contracts shall be entitled to their salaries for
the entire unexpired portion thereof, while those who are illegally
dismissed with one year or more remaining in their contracts shall
be covered by the subject clause, and their monetary benefits
limited to their salaries for three months only.
To concretely illustrate the application of the foregoing
interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month
contract at a salary rate of US$1,000.00 per month. OFW-C is
illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in
the contract period of OFW-C, the subject clause applies to the
computation of the latter's monetary benefits. Thus, OFW-C will
be entitled, not to US$12,000,00 or the latter's total salaries for
the 12 months unexpired portion of the contract, but to the lesser
amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand,
OFW-D is spared from the effects of the subject clause, for there
are only 11 months left in the latter's contract period. Thus, OFWD will be entitled to US$11,000.00, which is equivalent to his/her
total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of
computation of the monetary awards of illegally dismissed OFWs
was in place. This uniform system was applicable even to local
workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was
actually Article 299 of the Code of Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop
clerks and employees should have been made of a fixed period,
none of the contracting parties, without the consent of the other,
may withdraw from the fulfillment of said contract until the
termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss
and damage suffered, with the exception of the provisions
contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the
foregoing provision to determine the liability of a shipping
company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein held

the shipping company liable for the salaries of its managers for
the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned:
Article 605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the
crew with the agent should be for a definite period or voyage, they
cannot be discharged until the fulfillment of their contracts, except
for reasons of insubordination in serious matters, robbery, theft,
habitual drunkenness, and damage caused to the vessel or to its
cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v.
Ogilvie,110 in
which the Court held the shipping company liable for the salaries
and subsistence allowance of its illegally dismissed employees for
the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111
Article 299 of the Code of Commerce was replaced by Art. 1586
of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers
hired for a certain time and for a certain work cannot leave or be
dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the
disjunctive "or" in Article 1586 as a conjunctive "and" so as to
apply the provision to local workers who are employed for a time
certain although for no particular skill. This interpretation of Article
1586 was reiterated in Garcia Palomar v. Hotel de France
Company.113 And in both Lemoine and Palomar, the Court
adopted the general principle that in actions for wrongful
discharge founded on Article 1586, local workers are entitled to
recover damages to the extent of the amount stipulated to be paid
to them by the terms of their contract. On the computation of the
amount of such damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and
nothing has been brought to our attention to the contrary under
Spanish jurisprudence, that when an employee is wrongfully
discharged it is his duty to seek other employment of the same
kind in the same community, for the purpose of reducing the
damages resulting from such wrongful discharge. However, while
this is the general rule, the burden of showing that he failed to
make an effort to secure other employment of a like nature, and
that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a
contract of employment his prima facie damage is the amount
which he would be entitled to had he continued in such
employment until the termination of the period. (Howard vs. Daly,
61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School
District No. 2, 98 Mich., 43.)115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new
provisions on fixed-term employment: Section 2 (Obligations with
a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor)
and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book

IV.116 Much like Article 1586 of the Civil Code of 1889, the new
provisions of the Civil Code do not expressly provide for the
remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio &
Telegraph Co., Inc. v. Rich,117 the Court carried over the
principles on the payment of damages underlying Article 1586 of
the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period
employment contract was entered into in 1952, when the new
Civil Code was already in effect.118
More significantly, the same principles were applied to cases
involving overseas Filipino workers whose fixed-term employment
contracts were illegally terminated, such as in First Asian Trans &
Shipping Agency, Inc. v. Ople,119involving seafarers who were
illegally discharged. In Teknika Skills and Trade Services, Inc. v.
National Labor Relations Commission,120 an OFW who was
illegally dismissed prior to the expiration of her fixed-period
employment contract as a baby sitter, was awarded salaries
corresponding to the unexpired portion of her contract. The Court
arrived at the same ruling in Anderson v. National Labor Relations
Commission,121 which involved a foreman hired in 1988 in Saudi
Arabia for a fixed term of two years, but who was illegally
dismissed after only nine months on the job -- the Court awarded
him salaries corresponding to 15 months, the unexpired portion of
his contract. In Asia World Recruitment, Inc. v. National Labor
Relations Commission,122 a Filipino working as a security officer
in 1989 in Angola was awarded his salaries for the remaining
period of his 12-month contract after he was wrongfully
discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor
Relations Commission,123 an OFW whose 12-month contract
was illegally cut short in the second month was declared entitled
to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with
fixed-term employment who were illegally discharged were treated
alike in terms of the computation of their money claims: they were
uniformly entitled to their salaries for the entire unexpired portions
of their contracts. But with the enactment of R.A. No. 8042,
specifically the adoption of the subject clause, illegally dismissed
OFWs with an unexpired portion of one year or more in their
employment contract have since been differently treated in that
their money claims are subject to a 3-month cap, whereas no
such limitation is imposed on local workers with fixed-term
employment.
The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits
of fixed-term employees who are illegally discharged, it imposes a
3-month cap on the claim of OFWs with an unexpired portion of
one year or more in their contracts, but none on the claims of
other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and
burdens it with a peculiar disadvantage.

There being a suspect classification involving a vulnerable sector

protected by the Constitution, the Court now subjects the
classification to a strict judicial scrutiny, and determines whether it
serves a compelling state interest through the least restrictive
means.
What constitutes compelling state interest is measured by the
scale of rights and powers arrayed in the Constitution and
calibrated by history.124 It is akin to the paramount interest of the
state125 for which some individual liberties must give way, such
as the public interest in safeguarding health or maintaining
medical standards,126 or in maintaining access to information on
matters of public concern.127
In the present case, the Court dug deep into the records but found
no compelling state interest that the subject clause may possibly
serve.
The OSG defends the subject clause as a police power measure
"designed to protect the employment of Filipino seafarers
overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign
employers." The limitation also protects the interest of local
placement agencies, which otherwise may be made to shoulder
millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder
the payment of money claims in the event that jurisdiction over the
foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies
that are in good faith and which fulfill their obligations are
unnecessarily penalized for the acts of the foreign employer. To
protect them and to promote their continued helpful contribution in
deploying Filipino migrant workers, liability for money are reduced
under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers
whose welfare the government seeks to promote. The survival of
legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under
decent and humane conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the
OSG cite the source of its perception of the state interest sought
to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of
Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314
(HB 14314), from which the law originated;130 but the speech
makes no reference to the underlying reason for the adoption of
the subject clause. That is only natural for none of the 29
provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a
provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days

after the filing of the complaint, the claims arising out of an

employer-employee relationship or by virtue of the complaint, the
claim arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for
overseas employment including claims for actual, moral,
exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency
or any and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on
any money claims exclusive of damages under this Section shall
not be less than fifty percent (50%) of such money claims:
Provided, That any installment payments, if applicable, to satisfy
any such compromise or voluntary settlement shall not be more
than two (2) months. Any compromise/voluntary agreement in
violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of
cases provided under this Section shall subject the responsible
officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision
or resolution within the prescribed period shall be, or caused to
be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be
without prejudice to any liability which any such official may have
incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any
rule on the computation of money claims.
A rule on the computation of money claims containing the subject
clause was inserted and eventually adopted as the 5th paragraph
of Section 10 of R.A. No. 8042. The Court examined the rationale
of the subject clause in the transcripts of the "Bicameral
Conference Committee (Conference Committee) Meetings on the
Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No.
2077 and House Bill No. 14314)." However, the Court finds no
discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject
clause.
In fine, the Government has failed to discharge its burden of
proving the existence of a compelling state interest that would
justify the perpetuation of the discrimination against OFWs under
the subject clause.
Assuming that, as advanced by the OSG, the purpose of the
subject clause is to protect the employment of OFWs by mitigating
the solidary liability of placement agencies, such callous and
cavalier rationale will have to be rejected. There can never be a
justification for any form of government action that alleviates the
burden of one sector, but imposes the same burden on another
sector, especially when the favored sector is composed of private
businesses such as placement agencies, while the disadvantaged

sector is composed of OFWs whose protection no less than the

Constitution commands. The idea that private business interest
can be elevated to the level of a compelling state interest is
odious.
Moreover, even if the purpose of the subject clause is to lessen
the solidary liability of placement agencies vis-a-vis their foreign
principals, there are mechanisms already in place that can be
employed to achieve that purpose without infringing on the
constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and
Employment of Land-Based Overseas Workers, dated February
4, 2002, imposes administrative disciplinary measures on erring
foreign employers who default on their contractual obligations to
migrant workers and/or their Philippine agents. These disciplinary
measures range from temporary disqualification to preventive
suspension. The POEA Rules and Regulations Governing the
Recruitment and Employment of Seafarers, dated May 23, 2003,
contains similar administrative disciplinary measures against
erring foreign employers.
Resort to these administrative measures is undoubtedly the less
restrictive means of aiding local placement agencies in enforcing
the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of
R.A. No. 8042 is violative of the right of petitioner and other OFWs
to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach
the declaration of the unconstitutionality of the subject clause from
the lone perspective that the clause directly violates state policy
on labor under Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed
self-executing,132 there are some which this Court has declared
not judicially enforceable, Article XIII being one,133 particularly
Section 3 thereof, the nature of which, this Court, in Agabon v.
National Labor Relations Commission,134 has described to be
not self-actuating:
Thus, the constitutional mandates of protection to labor and
security of tenure may be deemed as self-executing in the sense
that these are automatically acknowledged and observed without
need for any enabling legislation. However, to declare that the
constitutional provisions are enough to guarantee the full exercise
of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal
of such view presents the dangerous tendency of being overbroad
and exaggerated. The guarantees of "full protection to labor" and
"security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible suggests a
blanket shield in favor of labor against any form of removal
regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion,
doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of
these guaranteed rights to ensure the protection and promotion,

not only the rights of the labor sector, but of the employers' as
well. Without specific and pertinent legislation, judicial bodies will
be at a loss, formulating their own conclusion to approximate at
least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own,
be a source of a positive enforceable rightto stave off the
dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers
of the 1987 Constitution, the provisions on social justice require
legislative enactments for their enforceability.135 (Emphasis
added)
Thus, Section 3, Article XIII cannot be treated as a principal
source of direct enforceable rights, for the violation of which the
questioned clause may be declared unconstitutional. It may
unwittingly risk opening the floodgates of litigation to every worker
or union over every conceivable violation of so broad a concept as
social justice for labor.
It must be stressed that Section 3, Article XIII does not directly
bestow on the working class any actual enforceable right, but
merely clothes it with the status of a sector for whom the
Constitution urges protection through executive or legislative
action and judicial recognition. Its utility is best limited to being an
impetus not just for the executive and legislative departments, but
for the judiciary as well, to protect the welfare of the working
class. And it was in fact consistent with that constitutional agenda
that the Court in Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas,
penned by then Associate Justice now Chief Justice Reynato S.
Puno, formulated the judicial precept that when the challenge to a
statute is premised on the perpetuation of prejudice against
persons favored by the Constitution with special protection -- such
as the working class or a section thereof -- the Court may
recognize the existence of a suspect classification and subject the
same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict
judicial scrutiny formulated in Central Bank Employee Association
exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in
conjunction with the equal protection clause. Article XIII, by itself,
without the application of the equal protection clause, has no life
or force of its own as elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the
subject clause violates petitioner's right to substantive due
process, for it deprives him of property, consisting of monetary
benefits, without any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of
the subject clause of limiting the entitlement of OFWs to their
three-month salary in case of illegal dismissal, is to give them a
better chance of getting hired by foreign employers. This is plain
speculation. As earlier discussed, there is nothing in the text of the
law or the records of the deliberations leading to its enactment or
the pleadings of respondent that would indicate that there is an

existing governmental purpose for the subject clause, or even just

a pretext of one.
The subject clause does not state or imply any definitive
governmental purpose; and it is for that precise reason that the
clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section 1,137
Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to
his salaries for the entire unexpired period of nine months and 23
days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form
part of the salary basis in the computation of his monetary award,
because these are fixed benefits that have been stipulated into his
contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and
leave pay. For seafarers like petitioner, DOLE Department Order
No. 33, series 1996, provides a Standard Employment Contract of
Seafarers, in which salary is understood as the basic wage,
exclusive of overtime, leave pay and other bonuses; whereas
overtime pay is compensation for all work "performed" in excess
of the regular eight hours, and holiday pay is compensation for
any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the
automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is
evidence that he performed work during those periods. As the
Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be
disallowed in light of our ruling in Cagampan v. National Labor
Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient
proof that said was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly
salary. In short, the contract provision guarantees the right to
overtime pay but the entitlement to such benefit must first be
established.
In the same vein, the claim for the day's leave pay for the
unexpired portion of the contract is unwarranted since the same is
given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject
clause "or for three months for every year of the unexpired term,
whichever is less" in the 5th paragraph of Section 10 of Republic
Act No. 8042 is DECLAREDUNCONSTITUTIONAL; and the
December 8, 2004 Decision and April 1, 2005 Resolution of the
Court of Appeals are MODIFIED to the effect that petitioner is
AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days
computed at the rate of US$1,400.00 per month.

PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, SUPREME PACKAGING, INC. and
ALVIN LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the
Resolution[1] dated December 15, 2000 of the Court of Appeals
(CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP
No. 52485. The assailed resolution reinstated the Decision dated
July 10, 1998 of the National Labor Relations Commission
(NLRC), dismissing the complaint for illegal dismissal filed by
herein petitioner Pedro Chavez. The said NLRC decision similarly
reversed its earlier Decision dated January 27, 1998 which,
affirming that of the Labor Arbiter, ruled that the petitioner had
been illegally dismissed by respondents Supreme Packaging, Inc.
and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the
business of manufacturing cartons and other packaging materials
for export and distribution. It engaged the services of the
petitioner, Pedro Chavez, as truck driver on October 25, 1984. As
such, the petitioner was tasked to deliver the respondent
companys products from its factory in Mariveles, Bataan, to its
various customers, mostly in Metro Manila. The respondent
company furnished the petitioner with a truck. Most of the
petitioners delivery trips were made at nighttime, commencing at
6:00 p.m. from Mariveles, and returning thereto in the afternoon
two or three days after. The deliveries were made in accordance
with the routing slips issued by respondent company indicating
the order, time and urgency of delivery. Initially, the petitioner was
paid the sum of P350.00 per trip. This was later adjusted to
P480.00 per trip and, at the time of his alleged dismissal, the
petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin
Lee, respondent companys plant manager, his (the petitioners)
desire to avail himself of the benefits that the regular employees
were receiving such as overtime pay, nightshift differential pay,
and 13th month pay, among others. Although he promised to
extend these benefits to the petitioner, respondent Lee failed to
actually do so.
On February 20, 1995, the petitioner filed a complaint for
regularization with the Regional Arbitration Branch No. III of the
NLRC in San Fernando, Pampanga. Before the case could be
heard, respondent company terminated the services of the
petitioner. Consequently, on May 25, 1995, the petitioner filed an
amended complaint against the respondents for illegal dismissal,
unfair labor practice and non-payment of overtime pay, nightshift
differential pay, 13th month pay, among others. The case was
docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an
employer-employee relationship between the respondent
company and the petitioner. They averred that the petitioner was

an independent contractor as evidenced by the contract of service

which he and the respondent company entered into. The said
contract provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these
presents, agrees to hire and the Contractor [referring to Pedro
Chavez], by nature of their specialized line or service jobs,
accepts the services to be rendered to the Principal, under the
following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be
performed by the contractor to the principal, shall only cover travel
route from Mariveles to Metro Manila. Otherwise, any change to
this travel route shall be subject to further agreement by the
parties concerned.
2. That the payment to be made by the Principal for any hauling
or delivery transport services fully rendered by the Contractor
shall be on a per trip basis depending on the size or classification
of the truck being used in the transport service, to wit:
a)
If the hauling or delivery service shall require a truck of six
wheeler, the payment on a per trip basis from Mariveles to Metro
Manila shall be THREE HUNDRED PESOS (P300.00) and
EFFECTIVE December 15, 1984.
b)
If the hauling or delivery service require a truck of ten
wheeler, the payment on a per trip basis, following the same route
mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos
and Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic]
provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be
responsible to the Principal for the cost of any damage to, loss of
any goods, cargoes, finished products or the like, while the same
are in transit, or due to reckless [sic] of its men utilized for the
purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary
power over its men working for him subject to this agreement, and
that the Contractor shall hold the Principal free and harmless from
any liability or claim that may arise by virtue of the Contractors
non-compliance to the existing provisions of the Minimum Wage
Law, the Employees Compensation Act, the Social Security
System Act, or any other such law or decree that may hereafter
be enacted, it being clearly understood that any truck drivers,
helpers or men working with and for the Contractor, are not
employees who will be indemnified by the Principal for any such
claim, including damages incurred in connection therewith;
6. This contract shall take effect immediately upon the signing by
the parties, subject to renewal on a year-to-year basis.[2]
This contract of service was dated December 12, 1984. It was
subsequently renewed twice, on July 10, 1989 and September 28,
1992. Except for the rates to be paid to the petitioner, the terms
of the contracts were substantially the same. The relationship of
the respondent company and the petitioner was allegedly
governed by this contract of service.

The respondents insisted that the petitioner had the sole control
over the means and methods by which his work was
accomplished. He paid the wages of his helpers and exercised
control over them. As such, the petitioner was not entitled to
regularization because he was not an employee of the respondent
company. The respondents, likewise, maintained that they did not
dismiss the petitioner. Rather, the severance of his contractual
relation with the respondent company was due to his violation of
the terms and conditions of their contract. The petitioner allegedly
failed to observe the minimum degree of diligence in the proper
maintenance of the truck he was using, thereby exposing
respondent company to unnecessary significant expenses of
overhauling the said truck.
After the parties had filed their respective pleadings, the Labor
Arbiter rendered the Decision dated February 3, 1997, finding the
respondents guilty of illegal dismissal. The Labor Arbiter declared
that the petitioner was a regular employee of the respondent
company as he was performing a service that was necessary and
desirable to the latters business. Moreover, it was noted that the
petitioner had discharged his duties as truck driver for the
respondent company for a continuous and uninterrupted period of
more than ten years.
The contract of service invoked by the respondents was declared
null and void as it constituted a circumvention of the constitutional
provision affording full protection to labor and security of tenure.
The Labor Arbiter found that the petitioners dismissal was
anchored on his insistent demand to be regularized. Hence, for
lack of a valid and just cause therefor and for their failure to
observe the due process requirements, the respondents were
found guilty of illegal dismissal. The dispositive portion of the
Labor Arbiters decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby
rendered declaring respondent SUPREME PACKAGING, INC.
and/or MR. ALVIN LEE, Plant Manager, with business address at
BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering said
respondent to pay complainant his separation pay equivalent to
one (1) month pay per year of service based on the average
monthly pay ofP10,800.00 in lieu of reinstatement as his
reinstatement back to work will not do any good between the
parties as the employment relationship has already become
strained and full backwages from the time his compensation was
withheld on February 23, 1995 up to January 31, 1997 (cut-off
date) until compliance, otherwise, his backwages shall continue to
run. Also to pay complainant his 13th month pay, night shift
differential pay and service incentive leave pay hereunder
computed as follows:
a)
Backwages .. P248,400.00
b)
Separation Pay .... P140,400.00
c)
13th month pay .P 10,800.00
d)
Service Incentive Leave Pay ..
2,040.00
TOTAL
P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due

the complainant as attorneys fees.
SO ORDERED.[3]
The respondents seasonably interposed an appeal with the
NLRC. However, the appeal was dismissed by the NLRC in its
Decision[4] dated January 27, 1998, as it affirmed in toto the
decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent
company and the petitioner as a scheme that was resorted to by
the respondents who, taking advantage of the petitioners
unfamiliarity with the English language and/or legal niceties,
wanted to evade the effects and implications of his becoming a
regularized employee.[5]
The respondents sought reconsideration of the January 27, 1998
Decision of the NLRC. Acting thereon, the NLRC rendered
another Decision[6] dated July 10, 1998, reversing its earlier
decision and, this time, holding that no employer-employee
relationship existed between the respondent company and the
petitioner. In reconsidering its earlier decision, the NLRC stated
that the respondents did not exercise control over the means and
methods by which the petitioner accomplished his delivery
services. It upheld the validity of the contract of service as it
pointed out that said contract was silent as to the time by which
the petitioner was to make the deliveries and that the petitioner
could hire his own helpers whose wages would be paid from his
own account. These factors indicated that the petitioner was an
independent contractor, not an employee of the respondent
company.
The NLRC ruled that the contract of service was not intended to
circumvent Article 280 of the Labor Code on the regularization of
employees.
Said contract, including the fixed period of
employment contained therein, having been knowingly and
voluntarily entered into by the parties thereto was declared valid
citing Brent School, Inc. v. Zamora.[7] The NLRC, thus, dismissed
the petitioners complaint for illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998
Decision but it was denied by the NLRC in its Resolution dated
September 7, 1998. He then filed with this Court a petition for
certiorari, which was referred to the CA following the ruling in St.
Martin Funeral Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000,
reversing the July 10, 1998 Decision of the NLRC and reinstating
the decision of the Labor Arbiter. In the said decision, the CA
ruled that the petitioner was a regular employee of the respondent
company because as its truck driver, he performed a service that
was indispensable to the latters business. Further, he had been
the respondent companys truck driver for ten continuous years.
The CA also reasoned that the petitioner could not be considered
an independent contractor since he had no substantial capital in
the form of tools and machinery. In fact, the truck that he drove
belonged to the respondent company. The CA also observed that
the routing slips that the respondent company issued to the

petitioner showed that it exercised control over the latter. The

routing slips indicated the chronological order and priority of
delivery, the urgency of certain deliveries and the time when the
goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents claim that the
petitioner abandoned his job noting that he just filed a complaint
for regularization. This actuation of the petitioner negated the
respondents allegation that he abandoned his job. The CA held
that the respondents failed to discharge their burden to show that
the petitioners dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal
dismissal and the decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of
service between the respondent company and the petitioner in
this wise:
In summation, we rule that with the proliferation of contracts
seeking to prevent workers from attaining the status of regular
employment, it is but necessary for the courts to scrutinize with
extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into
to preclude acquisition of tenurial security by the employee, they
should be struck down and disregarded as contrary to public
policy and morals. In this case, the contract of service is just
another attempt to exploit the unwitting employee and deprive him
of the protection of the Labor Code by making it appear that the
stipulations of the parties were governed by the Civil Code as in
ordinary transactions.[9]
However, on motion for reconsideration by the respondents, the
CA made a complete turn around as it rendered the assailed
Resolution dated December 15, 2000 upholding the contract of
service between the petitioner and the respondent company. In
reconsidering its decision, the CA explained that the extent of
control exercised by the respondents over the petitioner was only
with respect to the result but not to the means and methods used
by him. The CA cited the following circumstances: (1) the
respondents had no say on how the goods were to be delivered to
the customers; (2) the petitioner had the right to employ workers
who would be under his direct control; and (3) the petitioner had
no working time.
The fact that the petitioner had been with the respondent
company for more than ten years was, according to the CA, of no
moment because his status was determined not by the length of
service but by the contract of service. This contract, not being
contrary to morals, good customs, public order or public policy,
should be given the force and effect of law as between the
respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the
December 15, 2000 Resolution of the appellate court alleging
that:
(A)

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF

DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
GIVING MORE CONSIDERATION TO THE CONTRACT OF
SERVICE ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF
THE PHILIPPINES WHICH CATEGORICALLY DEFINES A
REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN
AGREEMENT TO THE CONTRARY AND REGARDLESS OF
THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN
REVERSING ITS OWN FINDINGS THAT PETITIONER IS A
REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED
NO
EMPLOYER-EMPLOYEE
RELATIONSHIP
BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS
MUCH AS THE CONTROL TEST WHICH IS CONSIDERED
THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT.[10]
The threshold issue that needs to be resolved is whether there
existed an employer-employee relationship between the
respondent company and the petitioner.
We rule in the
affirmative.
The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the employers power to control the employees conduct.
[11] The most important element is the employers control of the
employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.[12]
All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the
services of the petitioner without the intervention of a third party.
Second. Wages are defined as remuneration or earnings,
however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece or
commission basis, or other method of calculating the same, which
is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or
for service rendered or to be rendered.[13] That the petitioner
was paid on a per trip basis is not significant. This is merely a
method of computing compensation and not a basis for
determining the existence or absence of employer-employee
relationship. One may be paid on the basis of results or time
expended on the work, and may or may not acquire an
employment status, depending on whether the elements of an
employer-employee relationship are present or not.[14] In this
case, it cannot be gainsaid that the petitioner received
compensation from the respondent company for the services that
he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every
employer is required to pay his employees by means of payroll.

[15] The payroll should show, among other things, the employees
rate of pay, deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the
payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that
its presentation would be adverse to their case.[16]
Third. The respondents power to dismiss the petitioner was
inherent in the fact that they engaged the services of the petitioner
as truck driver. They exercised this power by terminating the
petitioners services albeit in the guise of severance of
contractual relation due allegedly to the latters breach of his
contractual obligation.
Fourth. As earlier opined, of the four elements of the employeremployee relationship, the control test is the most important.
Compared to an employee, an independent contractor is one who
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, 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.[17] Hence, while an independent contractor
enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the
employers power to control the means and methods by which the
employees work is to be performed and accomplished.[18]
Although the respondents denied that they exercised control over
the manner and methods by which the petitioner accomplished his
work, a careful review of the records shows that the latter
performed his work as truck driver under the respondents
supervision and control. Their right of control was manifested by
the following attendant circumstances:
1.
The truck driven by the petitioner belonged to respondent
company;
2.
There was an express instruction from the respondents that
the truck shall be used exclusively to deliver respondent
companys goods; [19]
3.
Respondents directed the petitioner, after completion of
each delivery, to park the truck in either of two specific places
only, to wit: at its office in Metro Manila at 2320 Osmea Street,
Makati City or at BEPZ, Mariveles, Bataan;[20] and
4.
Respondents determined how, where and when the
petitioner would perform his task by issuing to him gate passes
and routing slips. [21]
a.
The routing slips indicated on the column REMARKS,
the chronological order and priority of delivery such as 1st drop,
2nd drop, 3rd drop, etc. This meant that the petitioner had to
deliver the same according to the order of priority indicated
therein.
b.
The routing slips, likewise, showed whether the goods
were to be delivered urgently or not by the word RUSH printed
thereon.

c.
The routing slips also indicated the exact time as to
when the goods were to be delivered to the customers as, for
example, the words tomorrow morning was written on slip no.
2776.
These circumstances, to the Courts mind, prove that the
respondents exercised control over the means and methods by
which the petitioner accomplished his work as truck driver of the
respondent company. On the other hand, the Court is hard put to
believe the respondents allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling
services when he did not even own the truck used for such
services. Evidently, he did not possess substantial capitalization
or investment in the form of tools, machinery and work premises.
Moreover, the petitioner performed the delivery services
exclusively for the respondent company for a continuous and
uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual
circumstances earlier discussed indubitably establish the
existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that
the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract and providing
therein that the employee is an independent contractor when, as
in this case, the facts clearly show otherwise. Indeed, the
employment status of a person is defined and prescribed by law
and not by what the parties say it should be.[22]
Having established that there existed an employer-employee
relationship between the respondent company and the petitioner,
the Court shall now determine whether the respondents validly
dismissed the petitioner.
As a rule, the employer bears the burden to prove that the
dismissal was for a valid and just cause.[23] In this case, the
respondents failed to prove any such cause for the petitioners
dismissal. They insinuated that the petitioner abandoned his job.
To constitute abandonment, these two factors must concur: (1) the
failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee
relationship.[24] Obviously, the petitioner did not intend to sever
his relationship with the respondent company for at the time that
he allegedly abandoned his job, the petitioner just filed a
complaint for regularization, which was forthwith amended to one
for illegal dismissal.
A charge of abandonment is totally
inconsistent with the immediate filing of a complaint for illegal
dismissal, more so when it includes a prayer for reinstatement.
[25]
Neither can the respondents claim that the petitioner was guilty of
gross negligence in the proper maintenance of the truck constitute
a valid and just cause for his dismissal. Gross negligence implies
a want or absence of or failure to exercise slight care or diligence,
or the entire absence of care. It evinces a thoughtless disregard
of consequences without exerting any effort to avoid them.[26]
The negligence, to warrant removal from service, should not

merely be gross but also habitual.[27] The single and isolated act
of the petitioners negligence in the proper maintenance of the
truck alleged by the respondents does not amount to gross and
habitual neglect warranting his dismissal.
The Court agrees with the following findings and conclusion of the
Labor Arbiter:
As against the gratuitous allegation of the respondent that
complainant was not dismissed from the service but due to
complainants breach of their contractual relation, i.e., his violation
of the terms and conditions of the contract, we are very much
inclined to believe complainants story that his dismissal from the
service was anchored on his insistent demand that he be
considered a regular employee. Because complainant in his right
senses will not just abandon for that reason alone his work
especially so that it is only his job where he depends chiefly his
existence and support for his family if he was not aggrieved by the
respondent when he was told that his services as driver will be
terminated on February 23, 1995.[28]
Thus, the lack of a valid and just cause in terminating the services
of the petitioner renders his dismissal illegal. Under Article 279 of
the Labor Code, an employee who is unjustly dismissed is entitled
to reinstatement, without loss of seniority rights and other
privileges, and to the payment of full backwages, inclusive of
allowances, and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him
up to the time of his actual reinstatement.[29] However, as found
by the Labor Arbiter, the circumstances obtaining in this case do
not warrant the petitioners reinstatement. A more equitable
disposition, as held by the Labor Arbiter, would be an award of
separation pay equivalent to one month for every year of service
from the time of his illegal dismissal up to the finality of this
judgment in addition to his full backwages, allowances and other
benefits.
WHEREFORE, the instant petition is GRANTED. The Resolution
dated December 15, 2000 of the Court of Appeals reversing its
Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is
REVERSED and SET ASIDE. The Decision dated February 3,
1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5,
finding the respondents guilty of illegally terminating the
employment of petitioner Pedro Chavez, is REINSTATED.
G.R. No. 155831
February 18, 2008
MA. LOURDES T. DOMINGO, petitioner, vs.ROGELIO I.
RAYALA, respondent.
G.R. No. 155840
February 18, 2008
ROGELIO I. RAYALA, petitioner, vs.OFFICE OF THE
PRESIDENT; RONALDO V. ZAMORA, in his capacity as
Executive Secretary; ROY V. SENERES, in his capacity as
Chairman of the National Labor Relations Commission (in
lieu of RAUL T. AQUINO, in his capacity as Acting Chairman
of the National labor Relations Commission); and MA.
LOURDES T. DOMINGO, respondents.
G.R. No. 158700
February 18, 2008

The REPUBLIC OF THE PHILIPPINES, represented by the

OFFICE OF THE PRESIDENT; and ALBERTO G. ROMULO, in
his capacity as Executive Secretary, petitioners, vs.ROGELIO
I. RAYALA, respondent.
NACHURA, J.:
Sexual harassment is an imposition of misplaced "superiority"
which is enough to dampen an employees spirit and her capacity
for advancement. It affects her sense of judgment; it changes her
life.1
Before this Court are three Petitions for Review on Certiorari
assailing the October 18, 2002 Resolution of the CAs Former
Ninth Division2 in CA-G.R. SP No. 61026. The Resolution
modified the December 14, 2001 Decision3of the Court of
Appeals Eleventh Division, which had affirmed the Decision of the
Office of the President (OP) dismissing from the service then
National Labor Relations Commission (NLRC) Chairman Rogelio
I. Rayala (Rayala) for disgraceful and immoral conduct.
All three petitions stem from the same factual antecedents.
On November 16, 1998, Ma. Lourdes T. Domingo (Domingo), then
Stenographic Reporter III at the NLRC, filed a Complaint for
sexual harassment against Rayala before Secretary Bienvenido
Laguesma of the Department of Labor and Employment (DOLE).
To support the Complaint, Domingo executed an Affidavit
narrating the incidences of sexual harassment complained of,
thus:
4. Sa simula ay pabulong na sinasabihan lang ako ni Chairman
Rayala ng mga salitang "Lot, gumaganda ka yata?"
5. Sa ibang mga pagkakataon nilalapitan na ako ni Chairman at
hahawakan ang aking balikat sabay pisil sa mga ito habang ako
ay nagta-type at habang nagbibigay siya ng diktasyon. Sa mga
pagkakataong ito, kinakabahan ako. Natatakot na baka mangyari
sa akin ang mga napapabalitang insidente na nangyari na noon
tungkol sa mga sekretarya niyang nagbitiw gawa ng mga
mahahalay na panghihipo ni Chairman.
6. Noong ika-10 ng Setyembre, 1998, nang ako ay nasa 8th Floor,
may nagsabi sa akin na kailangan akong bumaba sa 7th Floor
kung nasaan ang aming opisina dahil sa may koreksyon daw na
gagawin sa mga papel na tinayp ko. Bumaba naman ako para
gawin ito. Habang ginagawa ko ito, lumabas si Chairman Rayala
sa silid ni Mr. Alex Lopez. Inutusan ako ni Chairman na sumunod
sa kaniyang silid. Nang nasa silid na kami, sinabi niya sa akin:
Chairman: Lot, I like you a lot. Naiiba ka sa lahat.
At pagkatapos ako ay kaniyang inusisa tungkol sa mga personal
na bagay sa aking buhay. Ang ilan dito ay tungkol sa aking mga
magulang, kapatid, pag-aaral at kung may boyfriend na raw ba
ako.
Chairman: May boyfriend ka na ba?
Lourdes: Dati nagkaroon po.
Chairman: Nasaan na siya?
Lourdes: Nag-asawa na ho.
Chairman: Bakit hindi kayo nagkatuluyan?
Lourdes: Nainip po.

Chairman: Pagkatapos mo ng kurso mo ay kumuha ka ng Law at

ako ang bahala sa iyo, hanggang ako pa ang Chairman dito.
Pagkatapos ay kumuha siya ng pera sa kaniyang amerikana at
inaabot sa akin.
Chairman: Kuhanin mo ito.
Lourdes: Huwag na ho hindi ko kailangan.
Chairman: Hindi sige, kuhanin mo. Ayusin mo ang dapat ayusin.
Tinanggap ko po ang pera ng may pag-aalinlangan. Natatakot at
kinakabahan na kapag hindi ko tinanggap ang pera ay baka siya
magagalit kasabay na rito ang pagtapon sa akin kung saan-saan
opisina o kaya ay tanggalin ako sa posisyon.
Chairman: Paglabas mo itago mo ang pera. Ayaw ko ng may
makaka-alam nito. Just the two of us.
Lourdes: Bakit naman, Sir?
Chairman: Basta. Maraming tsismosa diyan sa labas. But I dont
give them a damn. Hindi ako mamatay sa kanila.
Tumayo na ako at lumabas. Pumanhik na ako ng 8th Floor at
pumunta ako sa officemate ko na si Agnes Magdaet. Ikinwento ko
ang nangyari sa akin sa opisina ni Chairman. Habang kinikwento
ko ito kay Agnes ay binilang namin ang pera na nagkakahalaga
ng tatlong libong piso (PHP 3,000). Sinabi ni Agnes na isauli ko
raw ang pera, pero ang sabi ko ay natatakot ako baka magalit si
Sir. Nagsabi agad kami kay EC Perlita Velasco at sinalaysay ko
ang nangyari. Sinabi niya na isauli ko ang pera at noong araw
ding iyon ay nagpasiya akong isauli na nga ito ngunit hindi ako
nagkaroon ng pagkakataon dahil marami siyang naging bisita.
Isinauli ko nga ang pera noong Lunes, Setyembre 14, 1998.
7. Noong huling linggo ng Setyembre, 1998, ay may tinanong din
sa akin si Chairman Rayala na hindi ko masikmura, at sa aking
palagay at tahasang pambabastos sa akin.
Chairman: Lot, may ka live-in ka ba?
Lourdes: Sir, wala po.
Chairman: Bakit malaki ang balakang mo?
Lourdes: Kayo, Sir ha! Masama sa amin ang may ka live-in.
Chairman: Bakit, ano ba ang relihiyon ninyo?
Lourdes: Catholic, Sir. Kailangan ikasal muna.
Chairman: Bakit ako, hindi kasal.
Lourdes: Sir, di magpakasal kayo.
Chairman: Huh. Ibahin na nga natin ang usapan.
8. Noong Oktubre 29, 1998, ako ay pumasok sa kwarto ni
Chairman Rayala. Ito ay sa kadahilanang ang fax machine ay
nasa loob ng kaniyang kwarto. Ang nag-aasikaso nito, si Riza
Ocampo, ay naka-leave kaya ako ang nag-asikaso nito noong
araw na iyon. Nang mabigyan ko na ng fax tone yung kausap ko,
pagharap ko sa kanan ay nakaharang sa dadaanan ko si
Chairman Rayala. Tinitingnan ako sa mata at ang titig niya ay
umuusad mula ulo hanggang dibdib tapos ay ngumiti na may
mahalay na pakahulugan.
9. Noong hapon naman ng pareho pa ring petsa, may nag-aapply
na sekretarya sa opisina, sinabi ko ito kay Chairman Rayala:
Lourdes: Sir, si Pinky po yung applicant, mag-papainterview po
yata sa inyo.

Chairman: Sabihin mo magpa-pap smear muna siya

Chairman: O sige, i-refer mo kay Alex. (Alex Lopez, Chief of
Staff).
10. Noong Nobyembre 9, 1998, ako ay tinawag ni Chairman
Rayala sa kaniyang opisina upang kuhanin ko ang diktasyon niya
para kay ELA Oscar Uy. Hindi pa kami nakakatapos ng unang
talata, may pumasok na bisita si Chairman, si Baby Pangilinan na
sinamahan ni Riza Ocampo. Pinalabas muna ako ni Chairman.
Nang maka-alis na si Ms. Pangilinan, pinapasok na niya ako ulit.
Umupo ako. Lumapit sa likuran ko si Chairman, hinawakan ang
kaliwang balikat ko na pinipisil ng kanang kamay niya at sinabi:
Chairman: Saan na ba tayo natapos?
Palakad-lakad siya sa aking likuran habang nag-didikta. Huminto
siya pagkatapos, at nilagay niya ang kanang kamay niya sa aking
kanang balikat at pinisil-pisil ito pagkatapos ay pinagapang niya
ito sa kanang bahagi ng aking leeg, at pinagapang hanggang
kanang tenga at saka kiniliti. Dito ko inalis ang kaniyang kamay sa
pamamagitan ng aking kaliwang kamay. At saka ko sinabi:
Lourdes: Sir, yung kamay ninyo alisin niyo!
Natapos ko rin ang liham na pinagagawa niya pero halos hindi ko
na maintindihan ang na-isulat ko dahil sa takot at inis na
nararamdaman ko.4
After the last incident narrated, Domingo filed for leave of absence
and asked to be immediately transferred. Thereafter, she filed the
Complaint for sexual harassment on the basis of Administrative
Order No. 250, the Rules and Regulations Implementing RA 7877
in the Department of Labor and Employment.
Upon receipt of the Complaint, the DOLE Secretary referred the
Complaint to the OP, Rayala being a presidential appointee. The
OP, through then Executive Secretary Ronaldo Zamora, ordered
Secretary Laguesma to investigate the allegations in the
Complaint and create a committee for such purpose. On
December 4, 1998, Secretary Laguesma issued Administrative
Order (AO) No. 280, Series of 1998,5 constituting a Committee on
Decorum and Investigation (Committee) in accordance with
Republic Act (RA) 7877, the Anti-Sexual Harassment Act of
1995.6
The Committee heard the parties and received their respective
evidence. On March 2, 2000, the Committee submitted its report
and recommendation to Secretary Laguesma. It found Rayala
guilty of the offense charged and recommended the imposition of
the minimum penalty provided under AO 250, which it erroneously
stated as suspension for six (6) months.
The following day, Secretary Laguesma submitted a copy of the
Committee Report and Recommendation to the OP, but with the
recommendation that the penalty should be suspension for six (6)
months and one (1) day, in accordance with AO 250.
On May 8, 2000, the OP, through Executive Secretary Zamora,
issued AO 119,7 the pertinent portions of which read:
Upon a careful scrutiny of the evidence on record, I concur with
the findings of the Committee as to the culpability of the
respondent [Rayala], the same having been established by clear

and convincing evidence. However, I disagree with the

recommendation that respondent be meted only the penalty of
suspension for six (6) months and one (1) day considering the
circumstances of the case.
What aggravates respondents situation is the undeniable
circumstance that he took advantage of his position as the
superior of the complainant. Respondent occupies the highest
position in the NLRC, being its Chairman. As head of said office, it
was incumbent upon respondent to set an example to the others
as to how they should conduct themselves in public office, to see
to it that his subordinates work efficiently in accordance with Civil
Service Rules and Regulations, and to provide them with healthy
working atmosphere wherein co-workers treat each other with
respect, courtesy and cooperation, so that in the end the public
interest will be benefited (City Mayor of Zamboanga vs. Court of
Appeals, 182 SCRA 785 [1990]).
What is more, public service requires the utmost integrity and
strictest discipline (Gano vs. Leonen, 232 SCRA 99 [1994]). Thus,
a public servant must exhibit at all times the highest sense of
honesty and integrity, and "utmost devotion and dedication to
duty" (Sec. 4 (g), RA 6713), respect the rights of others and shall
refrain from doing acts contrary to law, and good morals (Sec.
4(c)). No less than the Constitution sanctifies the principle that a
public office is a public trust, and enjoins all public officers and
employees to serve with the highest degree of responsibility,
integrity, loyalty and efficiency (Section 1, Article XI, 1987
Constitution).
Given these established standards, I see respondents acts not
just [as] a failure to give due courtesy and respect to his coemployees (subordinates) or to maintain good conduct and
behavior but defiance of the basic norms or virtues which a
government official must at all times uphold, one that is contrary
to law and "public sense of morality." Otherwise stated,
respondent to whom stricter standards must apply being the
highest official [of] the NLRC had shown an attitude, a frame of
mind, a disgraceful conduct, which renders him unfit to remain in
the service.
WHEREFORE, in view of the foregoing, respondent Rogelio I.
Rayala, Chairman, National Labor Relations Commission, is
found guilty of the grave offense of disgraceful and immoral
conduct and is herebyDISMISSED from the service effective upon
receipt of this Order.
SO ORDER[ED].
Rayala filed a Motion for Reconsideration, which the OP denied in
a Resolution8 dated May 24, 2000. He then filed a Petition for
Certiorari and Prohibition with Prayer for Temporary Restraining
Order under Rule 65 of the Revised Rules on Civil Procedure
before this Court on June 14, 2000.9 However, the same was
dismissed in a Resolution dated June 26, 2000 for disregarding
the hierarchy of courts.10 Rayala filed a Motion for
Reconsideration11 on August 15, 2000. In its Resolution12 dated
September 4, 2000, the Court recalled its June 26 Resolution and

referred the petition to the Court of Appeals (CA) for appropriate

action.
The CA rendered its Decision13 on December 14, 2001. It held
that there was sufficient evidence on record to create moral
certainty that Rayala committed the acts he was charged with. It
said:
The complainant narrated her story complete with details. Her
straightforward and uninhibited testimony was not emasculated by
the declarations of Commissioner Rayala or his witnesses. x x x
Moreover, Commissioner Rayala has not proven any vicious
motive for Domingo and her witnesses to invent their stories. It is
very unlikely that they would perjure themselves only to
accommodate the alleged conspiracy to oust petitioner from
office. Save for his empty conjectures and speculations, Rayala
failed to substantiate his contrived conspiracy. It is a hornbook
doctrine that conspiracy must be proved by positive and
convincing evidence (People v. Noroa, 329 SCRA 502 [2000]).
Besides, it is improbable that the complainant would concoct a
story of sexual harassment against the highest official of the
NLRC and thereby expose herself to the possibility of losing her
job, or be the subject of reprisal from her superiors and perhaps
public ridicule if she was not telling the truth.
It also held that Rayalas dismissal was proper. The CA pointed
out that Rayala was dismissed for disgraceful and immoral
conduct in violation of RA 6713, the Code of Conduct and Ethical
Standards for Public Officials and Employees. It held that the OP
was correct in concluding that Rayalas acts violated RA 6713:
Indeed, [Rayala] was a public official, holding the Chairmanship of
the National Labor Relations Commission, entrusted with the
sacred duty of administering justice. Occupying as he does such
an exalted position, Commissioner Rayala must pay a high price
for the honor bestowed upon him. He must comport himself at all
times in such a manner that the conduct of his everyday life
should be beyond reproach and free from any impropriety. That
the acts complained of were committed within the sanctuary of
[his] office compounded the objectionable nature of his
wrongdoing. By daring to violate the complainant within the
solitude of his chambers, Commissioner Rayala placed the
integrity of his office in disrepute. His disgraceful and immoral
conduct warrants his removal from office.14
Thus, it dismissed the petition, to wit:
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby
DISMISSED and Administrative Order No. 119 as well [as] the
Resolution of the Office of the President in O.P. Case No. 00-E9118 dated May 24, 2000 are AFFIRMED IN TOTO. No cost.
SO ORDERED.15
Rayala timely filed a Motion for Reconsideration. Justices
Vasquez and Tolentino voted to affirm the December 14 Decision.
However, Justice Reyes dissented mainly because AO 250 states
that the penalty imposable is suspension for six (6) months and
one (1) day.16 Pursuant to the internal rules of the CA, a Special

Division of Five was constituted.17 In its October 18, 2002

Resolution, the CA modified its earlier Decision:
ACCORDINGLY, the Decision dated December [14], 2001 is
MODIFIED to the effect that the penalty of dismissal is DELETED
and instead the penalty of suspension from service for the
maximum period of one (1) year is HEREBY IMPOSED upon the
petitioner. The rest of the challenged decision stands.
SO ORDERED.
Domingo filed a Petition for Review18 before this Court, which we
denied in our February 19, 2003 Resolution for having a defective
verification. She filed a Motion for Reconsideration, which the
Court granted; hence, the petition was reinstated.
Rayala likewise filed a Petition for Review19 with this Court
essentially arguing that he is not guilty of any act of sexual
harassment.
Meanwhile, the Republic filed a Motion for Reconsideration of the
CAs October 18, 2002 Resolution. The CA denied the same in its
June 3, 2003 Resolution, the dispositive portion of which reads:
ACCORDINGLY, by a majority vote, public respondents Motion
for Reconsideration, (sic) is DENIED.
SO ORDERED.
The Republic then filed its own Petition for Review.20
On June 28, 2004, the Court directed the consolidation of the
three (3) petitions.
G.R. No. 155831
Domingo assails the CAs resolution modifying the penalty
imposed by the Office of the President. She raises this issue:
The Court of Appeals erred in modifying the penalty for the
respondent from dismissal to suspension from service for the
maximum period of one year. The President has the prerogative
to determine the proper penalty to be imposed on an erring
Presidential appointee. The President was well within his power
when he fittingly used that prerogative in deciding to dismiss the
respondent from the service.21
She argues that the power to remove Rayala, a presidential
appointee, is lodged with the President who has control of the
entire Executive Department, its bureaus and offices. The OPs
decision was arrived at after affording Rayala due process.
Hence, his dismissal from the service is a prerogative that is
entirely with the President.22
As to the applicability of AO No. 250, she argues that the same
was not intended to cover cases against presidential appointees.
AO No. 250 refers only to the instances wherein the DOLE
Secretary is the disciplining authority, and thus, the AO does not
circumscribe the power of the President to dismiss an erring
presidential appointee.
G.R. No. 155840
In his petition, Rayala raises the following issues:
I. CONTRARY TO THE FINDINGS OF THE COURT OF
APPEALS, THE ACTS OF HEREIN PETITIONER DO NOT
CONSTITUTE SEXUAL HARASSMENT AS LAID DOWN BY THE

En Banc RULING IN THE CASE OFAQUINO vs. ACOSTA, ibid.,

AS WELL AS IN THE APPLICATION OF EXISTING LAWS.
II. CONTRARY TO THE FINDINGS OF THE HONORABLE
COURT OF APPEALS, INTENT IS AN INDISPENSABLE
ELEMENT IN A CASE FOR SEXUAL HARASSMENT. THE
HONORABLE COURT ERRED IN ITS FINDING THAT IT IS AN
OFFENSE THAT IS MALUM PROHIBITUM.
III. THE INVESTIGATION COMMITTEE, THE OFFICE OF THE
PRESIDENT, AND NOW, THE HONORABLE COURT OF
APPEALS, HAS MISAPPLIED AND EXPANDED THE
DEFINITION OF SEXUAL HARASSMENT IN THE WORKPLACE
UNDER R.A. No. 7877, BY APPLYING DOLE A.O. 250, WHICH
RUNS COUNTER TO THE RECENT PRONOUNCEMENTS OF
THIS HONORABLE SUPREME COURT.23
Invoking Aquino v. Acosta,24 Rayala argues that the case is the
definitive ruling on what constitutes sexual harassment. Thus, he
posits that for sexual harassment to exist under RA 7877, there
must be: (a) demand, request, or requirement of a sexual favor;
(b) the same is made a pre-condition to hiring, re-employment, or
continued employment; or (c) the denial thereof results in
discrimination against the employee.
Rayala asserts that Domingo has failed to allege and establish
any sexual favor, demand, or request from petitioner in exchange
for her continued employment or for her promotion. According to
Rayala, the acts imputed to him are without malice or ulterior
motive. It was merely Domingos perception of malice in his
alleged acts a "product of her own imagination"25 that led her
to file the sexual harassment complaint.
Likewise, Rayala assails the OPs interpretation, as upheld by the
CA, that RA 7877 is malum prohibitum such that the defense of
absence of malice is unavailing. He argues that sexual
harassment is considered an offense against a particular person,
not against society as a whole. Thus, he claims that intent is an
essential element of the offense because the law requires as a
conditio sine qua non that a sexual favor be first sought by the
offender in order to achieve certain specific results. Sexual
harassment is committed with the perpetrators deliberate intent to
commit the offense.26
Rayala next argues that AO 250 expands the acts proscribed in
RA 7877. In particular, he assails the definition of the forms of
sexual harassment:
Rule IV
FORMS OF SEXUAL HARASSMENT
Section 1. Forms of Sexual Harassment. Sexual harassment
may be committed in any of the following forms:
a) Overt sexual advances;
b) Unwelcome or improper gestures of affection;
c) Request or demand for sexual favors including but not limited
to going out on dates, outings or the like for the same purpose;
d) Any other act or conduct of a sexual nature or for purposes of
sexual gratification which is generally annoying, disgusting or
offensive to the victim.27

He posits that these acts alone without corresponding demand,

request, or requirement do not constitute sexual harassment as
contemplated by the law.28 He alleges that the rule-making power
granted to the employer in Section 4(a) of RA 7877 is limited only
to procedural matters. The law did not delegate to the employer
the power to promulgate rules which would provide other or
additional forms of sexual harassment, or to come up with its own
definition of sexual harassment.29
G.R. No. 158700
The Republic raises this issue:
Whether or not the President of the Philippines may validly
dismiss respondent Rayala as Chairman of the NLRC for
committing acts of sexual harassment.30
The Republic argues that Rayalas acts constitute sexual
harassment under AO 250. His acts constitute unwelcome or
improper gestures of affection and are acts or conduct of a sexual
nature, which are generally annoying or offensive to the victim.31
It also contends that there is no legal basis for the CAs reduction
of the penalty imposed by the OP. Rayalas dismissal is valid and
warranted under the circumstances. The power to remove the
NLRC Chairman solely rests upon the President, limited only by
the requirements under the law and the due process clause.
The Republic further claims that, although AO 250 provides only a
one (1) year suspension, it will not prevent the OP from validly
imposing the penalty of dismissal on Rayala. It argues that even
though Rayala is a presidential appointee, he is still subject to the
Civil Service Law. Under the Civil Service Law, disgraceful and
immoral conduct, the acts imputed to Rayala, constitute grave
misconduct punishable by dismissal from the service.32 The
Republic adds that Rayalas position is invested with public trust
and his acts violated that trust; thus, he should be dismissed from
the service.
This argument, according to the Republic, is also supported by
Article 215 of the Labor Code, which states that the Chairman of
the NLRC holds office until he reaches the age of 65 only during
good behavior.33 Since Rayalas security of tenure is conditioned
upon his good behavior, he may be removed from office if it is
proven that he has failed to live up to this standard.
All the issues raised in these three cases can be summed up in
two ultimate questions, namely:
(1) Did Rayala commit sexual harassment?
(2) If he did, what is the applicable penalty?
Initially, however, we must resolve a procedural issue raised by
Rayala. He accuses the Office of the Solicitor General (OSG), as
counsel for the Republic, of forum shopping because it filed a
motion for reconsideration of the decision in CA-G.R. SP No.
61026 and then filed a comment in G.R. No. 155840 before this
Court.
We do not agree.
Forum shopping is an act of a party, against whom an adverse
judgment or order has been rendered in one forum, of seeking
and possibly securing a favorable opinion in another forum, other

than by appeal or special civil action for certiorari.34 It consists of

filing multiple suits involving the same parties for the same cause
of action, either simultaneously or successively, for the purpose of
obtaining a favorable judgment.35
There is forum shopping when the following elements concur: (1)
identity of the parties or, at least, of the parties who represent the
same interest in both actions; (2) identity of the rights asserted
and relief prayed for, as the latter is founded on the same set of
facts; and (3) identity of the two preceding particulars such that
any judgment rendered in the other action will amount to res
judicata in the action under consideration or will constitute litis
pendentia.36
Reviewing the antecedents of these consolidated cases, we note
that the CA rendered the assailed Resolution on October 18,
2002. The Republic filed its Motion for Reconsideration on
November 22, 2002. On the other hand, Rayala filed his petition
before this Court on November 21, 2002. While the Republics
Motion for Reconsideration was pending resolution before the CA,
on December 2, 2002, it was directed by this Court to file its
Comment on Rayalas petition, which it submitted on June 16,
2003.
When the CA denied the Motion for Reconsideration, the Republic
filed its own Petition for Review with this Court on July 3, 2003. It
cited in its "Certification and Verification of a Non-Forum
Shopping" (sic), that there was a case involving the same facts
pending before this Court denominated as G.R. No. 155840. With
respect to Domingos petition, the same had already been
dismissed on February 19, 2003. Domingos petition was
reinstated on June 16, 2003 but the resolution was received by
the OSG only on July 25, 2003, or after it had filed its own
petition.37
Based on the foregoing, it cannot be said that the OSG is guilty of
forum shopping. We must point out that it was Rayala who filed
the petition in the CA, with the Republic as the adverse party.
Rayala himself filed a motion for reconsideration of the CAs
December 21, 2001 Decision, which led to a more favorable
ruling, i.e., the lowering of the penalty from dismissal to one-year
suspension. The parties adversely affected by this ruling
(Domingo and the Republic) had the right to question the same on
motion for reconsideration. But Domingo directly filed a Petition
for Review with this Court, as did Rayala. When the Republic
opted to file a motion for reconsideration, it was merely exercising
a right. That Rayala and Domingo had by then already filed cases
before the SC did not take away this right. Thus, when this Court
directed the Republic to file its Comment on Rayalas petition, it
had to comply, even if it had an unresolved motion for
reconsideration with the CA, lest it be cited for contempt.
Accordingly, it cannot be said that the OSG "file[d] multiple suits
involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a
favorable judgment."
We now proceed to discuss the substantive issues.

It is noteworthy that the five CA Justices who deliberated on the

case were unanimous in upholding the findings of the Committee
and the OP. They found the assessment made by the Committee
and the OP to be a "meticulous and dispassionate analysis of the
testimonies of the complainant (Domingo), the respondent
(Rayala), and their respective witnesses." 38 They differed only
on the appropriate imposable penalty.
That Rayala committed the acts complained of and was guilty of
sexual harassment is, therefore, the common factual finding of
not just one, but three independent bodies: the Committee, the
OP and the CA. It should be remembered that when supported by
substantial evidence, factual findings made by quasi-judicial and
administrative bodies are accorded great respect and even finality
by the courts.39 The principle, therefore, dictates that such
findings should bind us.40
Indeed, we find no reason to deviate from this rule. There appears
no valid ground for this Court to review the factual findings of the
CA, the OP, and the Investigating Committee. These findings are
now conclusive on the Court. And quite significantly, Rayala
himself admits to having committed some of the acts imputed to
him.
He insists, however, that these acts do not constitute sexual
harassment, because Domingo did not allege in her complaint
that there was a demand, request, or requirement of a sexual
favor as a condition for her continued employment or for her
promotion to a higher position.41 Rayala urges us to apply to his
case our ruling in Aquino v. Acosta.42
We find respondents insistence unconvincing.
Basic in the law of public officers is the three-fold liability rule,
which states that the wrongful acts or omissions of a public officer
may give rise to civil, criminal and administrative liability. An action
for each can proceed independently of the others.43 This rule
applies with full force to sexual harassment.
The law penalizing sexual harassment in our jurisdiction is RA
7877. Section 3 thereof defines work-related sexual harassment
in this wise:
Sec. 3. Work, Education or Training-related Sexual Harassment
Defined. Work, education or training-related sexual harassment
is committed by an employer, manager, supervisor, agent of the
employer, teacher, instructor, professor, coach, trainor, or any
other person who, having authority, influence or moral
ascendancy over another in a work or training or education
environment, demands, requests or otherwise requires any sexual
favor from the other, regardless of whether the demand, request
or requirement for submission is accepted by the object of said
Act.
(a) In a work-related or employment environment, sexual
harassment is committed when:
(1) The sexual favor is made as a condition in the hiring or in the
employment, re-employment or continued employment of said
individual, or in granting said individual favorable compensation,
terms, conditions, promotions, or privileges; or the refusal to grant

the sexual favor results in limiting, segregating or classifying the

employee which in a way would discriminate, deprive or diminish
employment opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employees rights or
privileges under existing labor laws; or
(3) The above acts would result in an intimidating, hostile, or
offensive environment for the employee.
This section, in relation to Section 7 on penalties, defines the
criminal aspect of the unlawful act of sexual harassment. The
same section, in relation to Section 6, authorizes the institution of
an independent civil action for damages and other affirmative
relief.
Section 4, also in relation to Section 3, governs the procedure for
administrative cases, viz.:
Sec. 4. Duty of the Employer or Head of Office in a Work-related,
Education or Training Environment. It shall be the duty of the
employer or the head of the work-related, educational or training
environment or institution, to prevent or deter the commission of
acts of sexual harassment and to provide the procedures for the
resolution, settlement or prosecution of acts of sexual
harassment. Towards this end, the employer or head of office
shall:
(a) Promulgate appropriate rules and regulations in consultation
with and jointly approved by the employees or students or
trainees, through their duly designated representatives,
prescribing the procedure for the investigation or sexual
harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to prosecution in the
proper courts for unlawful acts of sexual harassment.
The said rules and regulations issued pursuant to this section (a)
shall include, among others, guidelines on proper decorum in the
workplace and educational or training institutions.
(b) Create a committee on decorum and investigation of cases on
sexual harassment. The committee shall conduct meetings, as the
case may be, with other officers and employees, teachers,
instructors, professors, coaches, trainors and students or trainees
to increase understanding and prevent incidents of sexual
harassment. It shall also conduct the investigation of the alleged
cases constituting sexual harassment.
In the case of a work-related environment, the committee shall be
composed of at least one (1) representative each from the
management, the union, if any, the employees from the
supervisory rank, and from the rank and file employees.
In the case of the educational or training institution, the committee
shall be composed of at least one (1) representative from the
administration, the trainors, teachers, instructors, professors or
coaches and students or trainees, as the case maybe.
The employer or head of office, educational or training institution
shall disseminate or post a copy of this Act for the information of
all concerned.

The CA, thus, correctly ruled that Rayalas culpability is not to be

determined solely on the basis of Section 3, RA 7877, because he
is charged with the administrative offense, not the criminal
infraction, of sexual harassment.44 It should be enough that the
CA, along with the Investigating Committee and the Office of the
President, found substantial evidence to support the
administrative charge.
Yet, even if we were to test Rayalas acts strictly by the standards
set in Section 3, RA 7877, he would still be administratively liable.
It is true that this provision calls for a "demand, request or
requirement of a sexual favor." But it is not necessary that the
demand, request or requirement of a sexual favor be articulated in
a categorical oral or written statement. It may be discerned, with
equal certitude, from the acts of the offender. Holding and
squeezing Domingos shoulders, running his fingers across her
neck and tickling her ear, having inappropriate conversations with
her, giving her money allegedly for school expenses with a
promise of future privileges, and making statements with
unmistakable sexual overtones all these acts of Rayala resound
with deafening clarity the unspoken request for a sexual favor.
Likewise, contrary to Rayalas claim, it is not essential that the
demand, request or requirement be made as a condition for
continued employment or for promotion to a higher position. It is
enough that the respondents acts result in creating an
intimidating, hostile or offensive environment for the employee.45
That the acts of Rayala generated an intimidating and hostile
environment for Domingo is clearly shown by the common factual
finding of the Investigating Committee, the OP and the CA that
Domingo reported the matter to an officemate and, after the last
incident, filed for a leave of absence and requested transfer to
another unit.
Rayalas invocation of Aquino v. Acosta46 is misplaced, because
the factual setting in that case is different from that in the case at
bench. In Aquino, Atty. Susan Aquino, Chief of the Legal and
Technical Staff of the Court of Tax Appeals (CTA), charged then
CTA Presiding Judge (now Presiding Justice) Ernesto Acosta of
sexual harassment. She complained of several incidents when
Judge Acosta allegedly kissed her, embraced her, and put his arm
around her shoulder. The case was referred to CA Justice
Josefina G. Salonga for investigation. In her report, Justice
Salonga found that "the complainant failed to show by convincing
evidence that the acts of Judge Acosta in greeting her with a kiss
on the cheek, in a `beso-beso fashion, were carried out with
lustful and lascivious desires or were motivated by malice or ill
motive. It is clear from the circumstances that most of the kissing
incidents were done on festive and special occasions," and they
"took place in the presence of other people and the same was by
reason of the exaltation or happiness of the moment." Thus,
Justice Salonga concluded:
In all the incidents complained of, the respondent's pecks on the
cheeks of the complainant should be understood in the context of
having been done on the occasion of some festivities, and not the

assertion of the latter that she was singled out by Judge Acosta in
his kissing escapades. The busses on her cheeks were simply
friendly and innocent, bereft of malice and lewd design. The fact
that respondent judge kisses other people on the cheeks in the
'beso-beso' fashion, without malice, was corroborated by Atty.
Florecita P. Flores, Ms. Josephine Adalem and Ms. Ma. Fides
Balili, who stated that they usually practice 'beso-beso' or kissing
on the cheeks, as a form of greeting on occasions when they
meet each other, like birthdays, Christmas, New Year's Day and
even Valentine's Day, and it does not matter whether it is Judge
Acosta's birthday or their birthdays. Theresa Cinco Bactat, a
lawyer who belongs to complainant's department, further attested
that on occasions like birthdays, respondent judge would likewise
greet her with a peck on the cheek in a 'beso-beso' manner.
Interestingly, in one of several festive occasions, female
employees of the CTA pecked respondent judge on the cheek
where Atty. Aquino was one of Judge Acosta's well wishers.
In sum, no sexual harassment had indeed transpired on those six
occasions. Judge Acosta's acts of bussing Atty. Aquino on her
cheek were merely forms of greetings, casual and customary in
nature. No evidence of intent to sexually harass complainant was
apparent, only that the innocent acts of 'beso-beso' were given
malicious connotations by the complainant. In fact, she did not
even relate to anyone what happened to her. Undeniably, there is
no manifest sexual undertone in all those incidents.47
This Court agreed with Justice Salonga, and Judge Acosta was
exonerated.
To repeat, this factual milieu in Aquino does not obtain in the case
at bench. While in Aquino, the Court interpreted the acts (of Judge
Acosta) as casual gestures of friendship and camaraderie, done
during festive or special occasions and with other people present,
in the instant case, Rayalas acts of holding and squeezing
Domingos shoulders, running his fingers across her neck and
tickling her ear, and the inappropriate comments, were all made in
the confines of Rayalas office when no other members of his staff
were around. More importantly, and a circumstance absent in
Aquino, Rayalas acts, as already adverted to above, produced a
hostile work environment for Domingo, as shown by her having
reported the matter to an officemate and, after the last incident,
filing for a leave of absence and requesting transfer to another
unit.
Rayala also argues that AO 250 does not apply to him. First, he
argues that AO 250 does not cover the NLRC, which, at the time
of the incident, was under the DOLE only for purposes of program
and policy coordination. Second, he posits that even assuming
AO 250 is applicable to the NLRC, he is not within its coverage
because he is a presidential appointee.
We find, however, that the question of whether or not AO 250
covers Rayala is of no real consequence. The events of this case
unmistakably show that the administrative charges against Rayala
were for violation of RA 7877; that the OP properly assumed
jurisdiction over the administrative case; that the participation of

the DOLE, through the Committee created by the Secretary, was

limited to initiating the investigation process, reception of evidence
of the parties, preparation of the investigation report, and
recommending the appropriate action to be taken by the OP. AO
250 had never really been applied to Rayala. If it was used at all,
it was to serve merely as an auxiliary procedural guide to aid the
Committee in the orderly conduct of the investigation.
Next, Rayala alleges that the CA erred in holding that sexual
harassment is an offense malum prohibitum. He argues that intent
is an essential element in sexual harassment, and since the acts
imputed to him were done allegedly without malice, he should be
absolved of the charges against him.
We reiterate that what is before us is an administrative case for
sexual harassment. Thus, whether the crime ofsexual harassment
is malum in se or malum prohibitum is immaterial.
We also reject Rayalas allegations that the charges were filed
because of a conspiracy to get him out of office and thus
constitute merely political harassment. A conspiracy must be
proved by clear and convincing evidence. His bare assertions
cannot stand against the evidence presented by Domingo. As we
have already ruled, the acts imputed to Rayala have been proven
as fact. Moreover, he has not proven any ill motive on the part of
Domingo and her witnesses which would be ample reason for her
to conjure stories about him. On the contrary, ill motive is belied
by the fact that Domingo and her witnesses all employees of the
NLRC at that time stood to lose their jobs or suffer unpleasant
consequences for coming forward and charging their boss with
sexual harassment.
Furthermore, Rayala decries the alleged violation of his right to
due process. He accuses the Committee on Decorum of
railroading his trial for violation of RA 7877. He also scored the
OPs decision finding him guilty of "disgraceful and immoral
conduct" under the Revised Administrative Code and not for
violation of RA 7877. Considering that he was not tried for
"disgraceful and immoral conduct," he argues that the verdict is a
"sham and total nullity."
We hold that Rayala was properly accorded due process. In
previous cases, this Court held that:
[i]n administrative proceedings, due process has been recognized
to include the following: (1) the right to actual or constructive
notice of the institution of proceedings which may affect a
respondents legal rights; (2) a real opportunity to be heard
personally or with the assistance of counsel, to present witnesses
and evidence in ones favor, and to defend ones rights; (3) a
tribunal vested with competent jurisdiction and so constituted as
to afford a person charged administratively a reasonable
guarantee of honesty as well as impartiality; and (4) a finding by
said tribunal which is supported by substantial evidence submitted
for consideration during the hearing or contained in the records or
made known to the parties affected.48
The records of the case indicate that Rayala was afforded all
these procedural due process safeguards. Although in the

beginning he questioned the authority of the Committee to try

him,49 he appeared, personally and with counsel, and
participated in the proceedings.
On the other point raised, this Court has held that, even in
criminal cases, the designation of the offense is not controlling,
thus:
What is controlling is not the title of the complaint, nor the
designation of the offense charged or the particular law or part
thereof allegedly violated, these being mere conclusions of law
made by the prosecutor, but the description of the crime charged
and the particular facts therein recited. The acts or omissions
complained of must be alleged in such form as is sufficient to
enable a person of common understanding to know what offense
is intended to be charged, and enable the court to pronounce
proper judgment. No information for a crime will be sufficient if it
does not accurately and clearly allege the elements of the crime
charged. Every element of the offense must be stated in the
information. What facts and circumstances are necessary to be
included therein must be determined by reference to the
definitions and essentials of the specified crimes. The requirement
of alleging the elements of a crime in the information is to inform
the accused of the nature of the accusation against him so as to
enable him to suitably prepare his defense.50
It is noteworthy that under AO 250, sexual harassment amounts to
disgraceful and immoral conduct.51 Thus, any finding of liability
for sexual harassment may also be the basis of culpability for
disgraceful and immoral conduct.
With the foregoing disquisitions affirming the finding that Rayala
committed sexual harassment, we now determine the proper
penalty to be imposed.
Rayala attacks the penalty imposed by the OP. He alleges that
under the pertinent Civil Service Rules, disgraceful and immoral
conduct is punishable by suspension for a period of six (6) months
and one (1) day to one (1) year. He also argues that since he is
charged administratively, aggravating or mitigating circumstances
cannot be appreciated for purposes of imposing the penalty.
Under AO 250, the penalty for the first offense is suspension for
six (6) months and one (1) day to one (1) year, while the penalty
for the second offense is dismissal.52 On the other hand, Section
22(o), Rule XVI of the Omnibus Rules Implementing Book V of the
Administrative Code of 198753 and Section 52 A(15) of the
Revised Uniform Rules on Administrative Cases in the Civil
Service54 both provide that the first offense of disgraceful and
immoral conduct is punishable by suspension of six (6) months
and one (1) day to one (1) year. A second offense is punishable
by dismissal.
Under the Labor Code, the Chairman of the NLRC shall hold
office during good behavior until he or she reaches the age of
sixty-five, unless sooner removed for cause as provided by law or
becomes incapacitated to discharge the duties of the office.55
In this case, it is the President of the Philippines, as the proper
disciplining authority, who would determine whether there is a

valid cause for the removal of Rayala as NLRC Chairman. This

power, however, is qualified by the phrase "for cause as provided
by law." Thus, when the President found that Rayala was indeed
guilty of disgraceful and immoral conduct, the Chief Executive did
not have unfettered discretion to impose a penalty other than the
penalty provided by law for such offense. As cited above, the
imposable penalty for the first offense of either the administrative
offense of sexual harassment or for disgraceful and immoral
conduct is suspension of six (6) months and one (1) day to one
(1) year. Accordingly, it was error for the Office of the President to
impose upon Rayala the penalty of dismissal from the service, a
penalty which can only be imposed upon commission of a second
offense.
Even if the OP properly considered the fact that Rayala took
advantage of his high government position, it still could not validly
dismiss him from the service. Under the Revised Uniform Rules
on Administrative Cases in the Civil Service,56 taking undue
advantage of a subordinate may be considered as an aggravating
circumstance57and where only aggravating and no mitigating
circumstances are present, the maximum penalty shall be
imposed.58 Hence, the maximum penalty that can be imposed on
Rayala is suspension for one (1) year.
Rayala holds the exalted position of NLRC Chairman, with the
rank equivalent to a CA Justice. Thus, it is not unavailing that rigid
standards of conduct may be demanded of him. In Talens-Dabon
v. Judge Arceo,59 this Court, in upholding the liability of therein
respondent Judge, said:
The actuations of respondent are aggravated by the fact that
complainant is one of his subordinates over whom he exercises
control and supervision, he being the executive judge. He took
advantage of his position and power in order to carry out his
lustful and lascivious desires. Instead of he being in loco parentis
over his subordinate employees, respondent was the one who
preyed on them, taking advantage of his superior position.
In yet another case, this Court declared:
As a managerial employee, petitioner is bound by more exacting
work ethics. He failed to live up to his higher standard of
responsibility when he succumbed to his moral perversity. And
when such moral perversity is perpetrated against his
subordinate, he provides a justifiable ground for his dismissal for
lack of trust and confidence. It is the right, nay, the duty of every
employer to protect its employees from oversexed superiors.60
It is incumbent upon the head of office to set an example on how
his employees should conduct themselves in public office, so that
they may work efficiently in a healthy working atmosphere.
Courtesy demands that he should set a good example.61
Rayala has thrown every argument in the book in a vain effort to
effect his exoneration. He even puts Domingos character in
question and casts doubt on the morality of the former President
who ordered, albeit erroneously, his dismissal from the service.
Unfortunately for him, these are not significant factors in the

disposition of the case. It is his character that is in question here

and sadly, the inquiry showed that he has been found wanting.

WHEREFORE, the foregoing premises considered, the October

18, 2002 Resolution of the Court of Appeals in CA-G.R. SP No.
61026 is AFFIRMED. Consequently, the petitions in G.R. Nos.

155831, 155840, and 158700 areDENIED. No pronouncement as

to costs.