Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

168537 December 11, 2008

supervisors. On August 27, 2001, he filed a complaint for illegal dismissal against 3 BMA. On various dates thereafter, BMA agreed to a settlement with some of the 4 5 complainants in the case for underpayment of wages. Eleven of the present petitioners executed quitclaims and releases in favor of BMA and Eusebio in the presence of DOLE district officers. BMA refused to settle the claim of other complainants. On September 13, 2001, petitioners Joan Erico Dumalagan and Ronaldo Salvador were also terminated for failure to perform their job responsibilities. On September 17, 6 2001, Dumalagan and Salvador filed complaints for illegal dismissal against BMA. On October 18, 2001, petitioners held a picket at the warehouse premises to protest BMAs refusal to pay the claim for underpayment of the rest of the workers. This picket disrupted the business operations of private respondents, prompting BMA to terminate their services. Subsequently, petitioners filed separate complaints against 7 BMA, Eusebio, and SMC for illegal dismissal. All the complaints for illegal dismissal were consolidated. Petitioners alleged that they were illegally dismissed after filing a complaint for underpayment of wages and non-payment of benefits before the DOLE; they were terminated after staging a peaceful picket to protest the non-payment of their claims. According to them, BMA is a labor-only contractor. SMC was not only the owner of the warehouse and equipment used by BMA, it was their true employer. The manner and means by which they performed their work were controlled by SMC through its Sales Logistic Coordinator who was overseeing their performance everyday. Private respondents BMA and Eusebio countered that petitioners Caboteja, Dumalagan, and Salvador were validly and justly dismissed. They were among the eleven who already signed quitclaims and releases before the DOLE district office after receiving an amount in settlement of their claims. As for the rest of petitioners (36 complainants), there was no illegal dismissal to speak of. Said employees simultaneously did not go back to work for no apparent reason on October 18, 2001. Private respondent SMC maintained that it had no employer-employee relationship with petitioners who were hired and supervised exclusively by BMA pursuant to a warehousing and delivery agreement in consideration of a fixed monthly fee. SMC argued that BMA is a legitimate and independent contractor, duly registered with the Securities and Exchange Commission (SEC) as a separate and distinct corporation with substantial capitalization, investment, equipment, and tools. It submitted documentary evidence proving that BMA engaged the services of petitioners, paid for their wages and benefits, and exercised exclusive control and supervision over them. SMC showed that under their contract, BMA provided delivery trucks, drivers, and helpers in the storage and distribution of SMC products. On a day-to-day basis, after the routes were made by SMC salesmen, they would book the orders they obtained. In turn, BMAs Schedular Planner, detailed at the Pasig Warehouse, downloaded these booked orders from the computer and processed the necessary documents to be forwarded to the Warehouse Checker, also an employee of BMA. SMC contended that petitioners were dismissed by BMA for staging a two-hour strike without complying with the mandatory requirements for a valid strike. As a result, BMA had to come up with ways and means in order to avoid the disruption of delivery operations.

DAMIAN AKLAN, JUANITO AMIDO, REYNALDO BATICA, RAMIL BAUTISTA, WELARD BAUTISTA, MAMERTO BRIGOLI, ELMER CABOTEJA, JOEL CAMMAYO, WELFREDO CARIO, RODOLFO CINCO, ARWEN DABLO, RUBEN DE CASTRO, ROMEO DEL ROSARIO, RODERICK DELA CRUZ, ALEX DELA VEGA, JOAN ERICO DUMALAGAN, JULITO DURIAN, JOSELITO DUYANEN, REX FARNACIO, ROLANDO FELIZARDO, EFREN FERNANDEZ, BERNARDO GALLOGO, EDUARDO GARCIA, REX IGNACIO, DANIEL JAMISOLA, NOEL JANER, RAQUEL JANER, ROWAN JANER, CONSORCIO LIAN, BERNARD MACARAEG, DARIO MACARAEG, JESUS MACARAEG, EDGARDO MAHAGUAY, IRENEO ODIAMAR, ALEXIS OLIVAR, ARNEL OLIVAR, EDUARDO PEREMNE, ALAN QUILES, JOSEPH QUILES, RHONNEL RODIL, RONALDO SALVADOR, RAMIL SANTIAGO, FRANCIS SUPRINO, REXES SUPRINO, RODRIGO SUPRINO, RONALD SUPRINO, EDUARDO TIONGSON, petitioners, vs. SAN MIGUEL CORPORATION, BMA PHILASIA, INC., and ARLENE EUSEBIO, respondents. DECISION REYES, R.T., J.: WE tackle in this labor case the dichotomy between impermissible labor-only contracting and legitimate job contracting. This is a review on certiorari of the Decision of the Court of Appeals (CA) upholding that of the National Labor Relations Commission (NLRC), finding the dismissal of petitioners justified. The Facts Respondent BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of transporting and hauling of cargoes, goods, and commodities of all kinds. Respondent Arlene Eusebio is the president of BMA. Petitioners, numbering forty-seven (47) in all, are the former employees of respondent BMA at respondent San Miguel Corporations (SMC) warehouse in Pasig City. They were hired under fixed-term contracts beginning October 1999. On July 31, 2001, a number of petitioners went to the Department of Labor and Employment (DOLE) District Office to file a complaint against BMA and Eusebio for underpayment of wages and non-payment of premium pay for rest day, 13th month 2 pay, and service incentive leave pay. On August 14, 2001, petitioner Elmer Caboteja was charged with insubordination and disrespect to superior, failure to properly perform his job assignment, and unauthorized change of schedule. He was directed to submit his written explanation within forty-eight (48) hours. On August 17, 2001, Caboteja was terminated for the offenses of disregard of company rules and regulations and rude attitude to
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Labor Arbiter and NLRC Dispositions After due hearings, Labor Arbiter Veneranda C. Guerrero found respondent BMA liable for illegal dismissal and ordered the reinstatement of petitioners. She ruled that the evidence presented duly established that BMA was a legitimate independent contractor and the actual employer of petitioners. Its failure, however, to comply with the registration and reportorial requirements of the DOLE rendered SMC, its principal, 8 directly liable to the claims of petitioners. Thus, BMA and SMC were found jointly and severally liable for the payment of petitioners backwages and money claims. The dispositive part of the Arbiter ruling runs in this wise: WHEREFORE, all the foregoing considered, judgment is hereby rendered finding respondent BMA Philasia, Inc., liable for illegal dismissal. Accordingly, is it hereby ordered to reinstate all of the complainants to their previous positions, and to pay jointly and severally with respondent San Miguel the complainants backwages reckoned from the time of their illegal dismissal up to their actual/payroll reinstatement, the aggregate amount of which as of this date amounts to SEVEN MILLION FIVE HUNDRED EIGHTEEN THOUSAND TWO HUNDRED FIFTY-TWO AND 89/100 PESOS (P7,518,252.89). In addition respondents are solidarily held liable to pay the complainants Daniel Jamisola, Rodolfo Cinco, Eduardo Garcia, Dario Macaraeg, Romeo Del Rosario, Alan Quiles, Joseph Quiles, Ronald Suprino, Rolando Felizardo, Efren Fernandez, Damian Aklan, Welard Bautista, Rodrigo Suprino, Noel Janer, Jesus Macaraeg, Reynaldo Batica, Rhonnel Rodil, Eduardo Peremne, Mamerto Brigoli, Ireneo Odiamar, Rex Ignacio, Edgardo Mahaguay, Reyes Suprino, Rodrigo Dela Cruz, Ramil Bautista, Francis Suprino, Eduardo Tiongson, Joel Cammayo, Arwen Dablo, Alex Dela Vega, Bernard Gallogo, Rex Farnacio, Ruben De Castro, Rowan Janer, Raquel Janer, and Bernardo Macaraeg their salary differentials, service incentive leave pay and 13th month pay in the aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED SIXTY-SIX and 80/100 PESOS (P1,256,366.80). Respondents are further assessed the amount equivalent to ten percent (10%) of the total award, as and for attorneys fees. The computation of the complainants individually adjudged benefits shall form part of this Decision as Annex "A" hereof. All other claims are DISMISSED for lack of merit. SO ORDERED. (Emphasis supplied) Respondents appealed the decision of the Labor Arbiter to the NLRC. On December 19, 2003, the NLRC reversed the Labor Arbiter disposition and ruled that there was no illegal dismissal. The fallo of the NLRC decision reads: WHEREFORE, in view of all the foregoing, the appealed decision of the Labor Arbiter is hereby REVERSED and SET ASIDE and a new decision is hereby rendered finding that there was no illegal dismissal committed by respondents, hence, no liability for backwages. However, complainants are awarded their salary differentials, service incentive leave pay and 13th month pay except for the year 2000 in the aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED
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SIXTY-SIX AND 80/100 (P1,256,366.80) and 10% ATTORNEYs FEES based on the salary differentials, SILP and 13th month pay. SO ORDERED.
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The NLRC found that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid causes. They were given the opportunity to explain their sides. As for the quitclaims previously executed by the other petitioners, the NLRC ruled that these were sufficient basis to release respondent BMA from liability. With respect to the first and second assigned errors, the records show that complainants Elmer Caboteja, Erico "Jojo" Dumalagan and Ronaldo Salvador were separated from their jobs for just and valid causes and after they were given the chance to explain their sides. Copies of memoranda were served upon them advising their violation of company rules and regulations and rude attitude and disrespect to superiors and disrespect to superiors in the case of Caboteja and failure to perform duties and responsibilities in the case of Dumalagan and Salvador. They were asked to explain and finding their explanations unacceptable, respondents dismissed them. Hence, they are not entitled to separation pay. As regards the other complainants, there is no showing that they were illegally dismissed from their jobs by BMA. They have not given details on to whom they reported for work, who barred them from entering the respondents premises and from working, in so many words how they were told that they were already dismissed. The only evident fact is that they just stopped reporting for work beginning October 18, 2001 without informing BMA why there were doing so. Their claim that they were not allowed by the respondents to return to their work is hard to believe. Why should the respondents terminate simultaneously the services of the complainants and completely paralyze respondents business operation, particularly their service contract with SMC? Complainants have not shown any reason which would compel the respondents to resort to mass dismissal. On the other hand, complainants have strong reason to paralyze respondents operation in order to force compliance to their demands. xxxx In fact, the records of this case also disclose that during the mandatory conciliation proceedings, BMA urged these complainants to go back to work, but may refused to do so. Obviously, their refusal to go back to their work was a deliberate move to force respondents to give in to their demands. Considering this refusal, it is not hard to believe that complainants were not dismissed but rather they refused to work in order to paralyze respondents 11 operations and force them to give in to complainants demands. (Emphasis supplied) CA Disposition Aggrieved, petitioners filed a Rule 65 petition with the CA. The following grounds were interposed: (1) that the NLRC gravely abused its discretion in holding that Caboteja, Dumalagan, and Salvador were validly dismissed; (2) that the other petitioners were not dismissed but were guilty of abandonment; and (3) that the quitclaims executed by eleven of the petitioners barred the complaint for illegal 12 dismissal.

On April, 15, 2005, the CA denied the petition, affirming in full the NLRC disposition, thus: WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. The assailed Decision dated December 19, 2003 and Resolution dated July 20, 2004 of the National Labor Relations Commission in the consolidated cases, NLRC Case No. CN 08-04522-01-CA No. 036856-03 (NLRC NCR North Sector Case Nos. 08-04522-2001, 09-04941-2001, 00-11-05023-2001, 00-1105969-2001, 11-01-00450-2002, 02-00934-2002, 12-06288-2001, and 1206320-2001), are hereby AFFIRMED and UPHELD. No pronouncement as to costs. SO ORDERED.
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Our Ruling Petitioners argue mainly that their employer is, in fact, respondent SMC, not respondent BMA. They contend that BMA is a labor-only contractor and SMC, as their true employer, should be held directly liable for their money claims. A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed contractor, and the "labor-only" contractor is considered as a 15 mere agent of the principal, the real employer. Both the Labor Arbiter and the NLRC found that the employment contracts of petitioners duly prove that an employer-employee relationship existed between petitioners and BMA. We hasten to add that the existence of an employer-employee relationship is ultimately a question of fact and the findings by the Labor Arbiter and the NLRC on that score shall be accorded not only respect but even finality when 16 supported by ample evidence. In its ruling, the NLRC considered the following elements to determine the existence of an employer-employee relationship: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and 17 (4) the power to control the workers conduct. All four elements were found by the NLRC to be vested in BMA. This NLRC finding was affirmed by the CA: x x x It is the BMA which actually conducts the hauling, storage, handling, transporting, and delivery operations of SMCs products pursuant to their warehousing and Delivery Agreement. BMA itself hires and supervises its own workers to carry out the aforesaid business activities. Apart from the fact that it was BMA which paid for the wages and benefits, as well as SSS contributions of petitioners, it was also the management of BMA which directly supervised and imposed disciplinary actions on the basis of established rules and regulations of the company. The documentary evidence consisting of numerous memos throughout the period of petitioners employment leaves no doubt in the mind of this Court that petitioners are only too aware of who is their true employer. Petitioners received daily instructions on their tasks form BMA management, particularly, private respondent Arlene C. Eusebio, and whenever they committed lapses or offenses in connection with their work, it was to said officer that they submitted compliance such as written explanations, and 18 brought matters connected with their specific responsibilities. The employer-employee relationship between BMA and petitioners is not tarnished by the absence of registration with DOLE as an independent job contractor on the part of BMA. The absence of registration only gives rise to the presumption that the contractor is engaged in labor-only contracting, a presumption that respondent BMA ably refuted. Thus, We find no grave abuse of discretion in the CA observation that respondent BMA is the true employer of petitioners who should be held directly liable for their claims. Likewise, no grave abuse of discretion can be ascribed to the CA when it ruled that illegal dismissal was absent. The records fully disclose that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid causes. Caboteja was cited for violation of

In ruling against petitioners, the CA found that the NLRC committed no reversible error or grave abuse of discretion in ruling that petitioners were not illegally dismissed but actually refused to report back to work after staging a surprise stoppage that paralyzed respondent BMAs business operations at the Pasig warehouse on October 18, 2001. Issues Undaunted, petitioners resorted to this review on certiorari, anchored on the following grounds: The CA committed a serious legal error in not ruling that respondent San Miguel Corporation (principal of respondent BMA Philasia), and respondent Arlene Eusebio, (president and owner of respondent BMA Philasia) are all solidarily liable for petitioners money claims. The CA committed a serious legal error in ruling that the quitclaims executed by eleven (11) of the petitioners, in relation to their claims for underpayment of wages before the DOLE, also barred their subsequent complaint for illegal dismissal, despite the fact that the said complaint was not yet in existence at the time the quitclaims were executed. The CA committed a serious legal error in refusing to hold that respondent San Miguel Corporation was petitioners real employer despite the fact that respondent BMA Philasia was not duly registered with the DOLE and caused the workers to perform tasks directly related to the business of respondent San Miguel Corporation and under the latters supervision. The CA committed a legal error and acted with grave abuse of discretion in holding that petitioners Elmer Caboteja, Joan Erico Dumalagan, and Ronaldo Salvador were not illegally dismissed from their jobs, despite a previous ruling of the Labor Arbiter to the contrary. The CA committed a serious legal error in not awarding damages, at the very least, to petitioners Joan Erico Dumalagan, and Ronaldo Salvador for violation of their right to due process. The CA seriously committed an error of law in holding that the rest of the petitioners abandoned their jobs and were not dismissed therefrom, contrary 14 to the findings of the Labor Arbiter who heard the case. (Underscoring supplied)

company rules and regulations and disrespectful conduct. Dumalagan and Salvador were investigated for failure to perform duties and responsibilities. After their explanations were found unacceptable, they were accordingly dismissed. As for the other petitioners, they contend that they were illegally dismissed when respondent BMA barred them from entering the work premises and from performing their work. Both the NLRC and the CA found that petitioners failed to substantiate this contention. Rather, what was shown in the records was that they simply stopped reporting for work starting October 18, 2001 when they staged a picket. The CA observation along this line is worth restating: x x x petitioners failed to substantiate their claim that they had been prevented from entering the work premises after staging a "picket" on October 18, 2001 to further press their demands for payment of their money claims. At this time, the labor standards case was already pending with the DOLE District Office and petitioners could have availed of said proceedings with the intervention of DOLE officials. Instead, however, they resorted to an illegal stoppage of work that paralyzed the business operations of BMA. As aptly noted by the NLRC, there is simply no probable or logical reason for private respondent BMA to simultaneously dismiss its workers that will disrupt business operations at the warehouse. Under the factual circumstances, it clearly appears that petitioners refused to report back to their work in order to force their employer BMA to give in to their immediate demand for the salary differentials and unpaid benefits subject of their complaint with the DOLE. Hence, BMA cannot be held liable for illegal dismissal. While it is true that the defense of abandonment may not be given credence or is negated by the immediate filing of illegal dismissal cases by the affected employees, records clearly reveal that as of October 18, 2001, petitioners without justifiable cause failed and refused to report back to their work. Their claim of having been prevented from entering the work premises was not given due weight for no particulars was even alleged by them in their report back to their jobs, who prevented their entry to the company premises and details as to what steps they took to bring the matter to the attention of DOLE District Office wherein their complaint for labor standards 19 violation was already pending. (Emphasis supplied) Moreover, eleven of petitioners contend that their quitclaims should not be considered as a bar to their complaint for illegal dismissal because that complaint was not yet in existence at the time the quitclaims were executed. That the quitclaims were executed voluntarily is not denied by petitioners. They, however, contend that the quitclaims should be construed as limited to the money claims in connection with the 20 first labor standards complaint they had filed before the DOLE district office. Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld by this Court as the law between 21 the parties. If the agreement was voluntarily entered into by the employee, with full understanding of what he was doing, and represents a reasonable settlement of the claims of the employee, it is binding on the parties and may not be later disowned 22 simply because of a change of mind. In the case under review, the quitclaims and releases signed by petitioners stated:

That for and in consideration of the sum of FIFTY-THREE THOUSAND 23 PESOS (P53,000.00) in settlement of my/our claim/s as financial assistance and/or gratuitously given by my/our employer receipt of which is hereby acknowledge to my/our complete and full satisfaction, I/we hereby release and discharge the above respondent and/or its officers from any and all claims by way of wages, overtime pay, differential pay, or otherwise as may be due me/us incident to my/our past employment with said establishment. I/we hereby state further that I/we have no more claim, right or action of whatsoever nature whether past, present or contingent against 24 the said respondent and/or its officers. (Emphasis supplied) As correctly observed by the NLRC, the language employed by the above quitclaims and releases indicates in no uncertain terms that petitioners voluntarily and freely acknowledged receipt of full satisfaction of all claims against respondents. Thus, the quitclaims effectively barred petitioners from questioning their dismissal. 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 25 evenly extended to all groups as a combined force in our social and economic life. While labor should be protected at all times, this protection must not be at the expense of capital. WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. SO ORDERED.

Serrano v. Gallant Maritime Services GR No. 167614 24 March 2009 Austria-Martinez, J.

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

FACTS: Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a POEA-approved Contract of Employment. 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. However, respondents did not deliver on their promise to make petitioner Chief Officer. Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May. 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 Complaint against respondents for constructive dismissal and for payment of his money claims. LA rendered the dismissal of petitioner illegal and awarding him monetary benefits. Respondents appealed to the NLRC to question the finding of the LA. Likewise, petitioner also appealed 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 Commission that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts. Petitioner also appealed 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 Commission that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts. Petitioner filed a Motion for Partial Reconsideration; he questioned the constitutionality of the subject clause. Petitioner filed a Petition for Certiorari with the CA, reiterating the constitutional challenge against the subject clause. CA affirmed the NLRC ruling on the reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner. The last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. 8042, to wit:

ISSUES: 1. W/N petitioner entitled to his monetary claim which is the lump-sum salary for the entire unexpired portion of his 12-month employment contract, and not just for a period of three months 2. W/N the clause or for three months for every year of the unexpired term, whichever is less found in Section 10 of RA 8042 is constitutionally valid. 3. W/N overtime and leave pay should form part of the salary basis in the computation of monetary award for being fixed benefits.

RULING: 1. Yes. 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. 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 declared unconstitutional. 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. 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. The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of

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.

nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042.

Obiter: 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.

2. NO. The clause violates Section 1, Article III; Section 18, Article II; and Section 3, Article XIII of the Constitution. Section 10 of RA 8042 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. It violates Serranos right to substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid governmental purpose. The subject clause being unconstitutional, Serrano 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 RA 8042. 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: OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more; OFWs with employment contracts of more than one year; OFWs vis--vis local workers with fixed period employment.

3. 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.

Doctrine There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law: 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; 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; and The strict judicial scrutiny in which a legislative classification which impermissibly interferes with the exercise of a fundamental right or operates to the peculiar disadvantage of a suspect class is presumed unconstitutional, and the burden is upon the government to prove that classification is necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest. 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. When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as Congress, it does so only when these conditions obtain: That there is an actual case or controversy involving a conflict of rights susceptible of judicial determination; That the constitutional question is raised by a proper party at the earliest opportunity; and That the constitutional question is the very lis mota of the case.

Doctrine: 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. 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. The rendition of overtime work and the submission of sufficient proof that said work was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 172818 March 31, 2009

Respondents appealed the decision of the Labor Arbiter to the NLRC. The NLRC found that petitioners were only part-time teachers who did not acquire permanent status; hence, their dismissal was legal. The dispositive portion of its decision reads: WHEREFORE, all the above facts considered, the judgments in favor of Alwyn Ong Lim and Evelyn Lukang Lim in the consolidated decision dated November 7, 2003 are hereby MODIFIED insofar as the award of 13th month and service incentive leave pays are concerned. Accordingly, the respondent Lega[z]pi Hope Christian School is hereby ordered to pay the said complainants their proportionate 13th month and service incentive leave pays for the year 2002, computed up to May 31, 2002, and based on their monthly salaries of PHP7,000.00 and PHP4,925.00, respectively. Their claims for illegal dismissal, and consequently for attorneys fees and damages, are hereby DISMISSED, for lack of merit. SO ORDERED.11

SPOUSES ALWYN ONG LIM and EVELYN LUKANG LIM, Petitioners, vs. LEGAZPI HOPE CHRISTIAN SCHOOL/ RAMON SIA/ OMEGA SIA/ HELEN SIA/ CECILIO K. PEDRO, Respondents. DECISION QUISUMBING, J.: This instant petition for review assails the Decision dated November 30, 2005 of the Court of Appeals in CA-G.R. SP No. 88728 and its Resolution2 dated May 24, 2006 denying the motion for reconsideration. The appellate court had affirmed the Decision 3 dated May 18, 2004 of the National Labor Relations Commission (NLRC) which found that petitioners were not illegally dismissed. The antecedent facts are as follows: Petitioner-spouses Alwyn Ong Lim and Evelyn Lukang Lim were hired in June 1999. Alwyn was assigned to teach Mathematics, Geometry, Algebra and Trigonometry subjects in the high school department of Legazpi Hope Christian School. Evelyn, on the other hand, was assigned to teach Chinese Language 1 and 2 and Chinese Math subjects in the elementary department of the same school.4 On April 4, 2002, respondent Helen Sia, head teacher of the schools Chinese department, verbally informed petitioners that their employment with the school were to be terminated, without giving the reasons therefor. 5 Thus, petitioners filed their complaints for illegal dismissal and monetary claims against the school and its officials on April 5, 2002. 6 On May 31, 2002, respondent Ramon Sia, Vice Chairman of the schools Board of Directors, sent a letter to the petitioners stating that their three-year probation had expired and that the school management had decided to discontinue their employment. 7 Before the Labor Arbiter, respondents claimed that petitioners were merely part-time teachers and thus they can be dismissed even without waiting for the three-year probation period to lapse, as they never acquired permanent status.8 The Labor Arbiter ruled in favor of petitioners. The dispositive portion of the Consolidated Decision9 dated November 7, 2003 reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainants, spouses ALWYN LIM and EVELYN LIM and LIGAYA DEBLOIS, and against the respondents LEGAZPI HOPE CHRISTIAN SCHOOL, CECILIO PEDRO, RAMON SIA, HELEN SIA and OMEGA SIA, ordering the latter to: 1. Reinstate the three (3) complainants herein to their former position in the respondent school without loss of seniority rights; and 2. Pay jointly and severally the complainants herein their back wages, 13th month pay, moral and exemplary damages and attorneys fees as computed above. SO ORDERED.10
1

Petitioners filed a motion for reconsideration, 12 but it was denied in the Resolution13 dated November 30, 2004. They then filed a petition for certiorari with the Court of Appeals. The Court of Appeals affirmed the NLRC decision and disposed as follows: WHEREFORE, in view of the foregoing, the instant petition for certiorari is PARTLY GRANTED. The assailed decision dated May 18, 2004 of public respondent NLRC insofar as NLRC RAB V Cases Nos. 04-00239-02 and 04-00240-02 involving Alwyn Ong Lim and Evelyn Lukang Lim are concerned is hereby AFFIRMED.... SO ORDERED.14 The Court of Appeals denied petitioners motion for reconsideration. Hence, petitioners now raise the following issues: I. WHETHER OR NOT [PETITIONER-SPOUSES LIM] WERE HIRED AS PERMANENT TEACHING PERSONNEL ON THE BASIS OF ESTABLISHED FACTS. II. WHETHER OR NOT [PETITIONER-SPOUSES LIM] WERE TERMINATED WITHOUT LAWFUL AND JUST CAUSE OR CAUSES AND IN VIOLATION OF [PETITIONERSPOUSES LIMS] RIGHTS TO DUE PROCESS OF LAW. III. WHETHER OR NOT [PETITIONER-SPOUSES LIM] ARE ENTITLED TO THE RELIEF OF REINSTATEMENT PLUS BACK WAGES, FROM THE TIME THEY WERE UNLAWFULLY TERMINATED UNTIL ACTUAL REINSTATEMENT WITHOUT LOSS OF SENIORITY RIGHTS AND OTHER PRIVILEGES INCLUDING WITHOUT LIMITATION TO MORAL/EXEMPLARY DAMAGES AS WELL AS ATTORNEYS FEES.15 Petitioners contend that they were not issued any formal written probationary contract. They also contend that they were never informed of reasonable standards under which they would be evaluated or rated in connection with their supposed probationary period of employment. Thus, in the absence of a written contract of employment, upon their satisfactory completion of their three-year probationary period they contend that they are considered as, and became, regular and permanent teaching personnel of the respondent school.16 Petitioners further claim that they are full-time, not part-time, teaching personnel. They claim to have no other outside remunerative occupation requiring regular hours of work that will conflict with the working hours of the respondent school, 17 and in addition to their

teaching jobs, they were performing non-teaching functions like preparing lesson plans, checking of notebooks and test papers, assisting during enrolment period, attending to school programs and other tasks. They were required to report as early as 7 a.m. until their respective classes ended.18 On the other hand, respondents argue that under the Manual of Regulations for Private Schools,19 a full-time instructor is one who has a teaching load of at least 15 hours a week or is paid on a full salary basis, while a part-time instructor is one who has a teaching load of less than 15 hours a week. Thus, according to respondents, since petitioners have a teaching load that is less than 15 hours a week then they are only part-time instructors and do not enjoy security of tenure.20 In resolving the issue of whether or not petitioners were hired as permanent teaching personnel, it is relevant to first determine whether petitioners are part-time or full-time teachers. As found by both the NLRC and the Court of Appeals, petitioners stated in their complaints that their work schedules are "7:30 a.m. to 9:30 a.m." 21 for Evelyn and "7:00 a.m. to 12:00 noon"22 for Alwyn.1avvphi1 Relevantly, the Manual of Regulations for Private Schools provides: Section 45. Full-time and Part-time Faculty. Full-time academic personnel are those meeting all the following requirements: a. Who possess at least the minimum academic qualifications prescribed by the Department under this Manual for all academic personnel; b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the policies, rules and standards of the Department and the school; c. Whose total working day of not more than eight hours a day is devoted to the school; d. Who have no other remunerative occupation elsewhere requiring regular hours of work that will conflict with the working hours in the school; and e. Who are not teaching full-time in any other educational institution. All teaching personnel who do not meet the foregoing qualifications are considered parttime. (Emphasis supplied.) xxxx Section 92. Probationary Period. Subject in all instances to compliance with Department and school requirements, the probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, Section 93. Regular or Permanent Status. Those who have served the probationary period shall be made regular or permanent. Full-time teachers who have satisfactorily completed their probationary period shall be considered regular or permanent. (Emphasis supplied.) In University of Sto. Tomas v. NLRC,23 we ruled that for a private school teacher to acquire permanent status in employment, the following requisites must concur: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years of service; and (3) such service must have been satisfactory. 24 The burden is on petitioners to prove their affirmative allegation that they are permanent teaching personnel. However, there is not enough evidence on record to show that their total working day is devoted to the school. There is no showing of what the regular work

schedule of a regular teacher in respondent school is. What is clear in the records is that Evelyn and Alwyn spent two hours and four hours, respectively, but not the entire working day, at the respondent school. They do not meet requirement "c" of Section 45 of the Manual. Hence, we sustain the findings of the Court of Appeals that the petitioners are part-time teachers. Being part-time teachers, in accordance with University of Sto. Tomas v. NLRC, they cannot acquire permanent status. In this case, the contracts of employment of the petitioners were not presented. It is in fact claimed that they have no written contracts, and such contracts are not disclosed by the records in the instant case. However on record, attached as part of a pleading of petitioners, is a copy of the "TEACHERS GUIDELINES" 25 of respondent school which, in part, state: STATUS & PRIVILEGES OF TEACHERS 1. New Teachers a. New Teachers are on probation for three (3) years, within the duration, they must submit a letter of re-application for each school year. After the expiration date of the contract, a new one must be signed if it is sent to you. b. A full time new teacher is under 10-month contract only. If his/her performance is satisfactory, he/she will be rehired and will be entitled to receive the salaries for the 2month summer vacation. (Emphasis supplied.) xxxx Considering that petitioners were new teachers, then in accordance with the above-quoted guidelines their unwritten contracts were considered to be for one school year at a time, they being required to submit a letter of re-application for each school year. After the end of each school year, the school did not have any obligation to give them any teaching loads, they being part-time teachers.26 That respondents did not give any teaching assignment to the petitioners after the school year 2001-2002 did not amount to an actionable violation of petitioners right. It did not amount to illegal dismissal. 27 In view of the foregoing finding that petitioners were not illegally dismissed, there is also no basis to order their reinstatement and the payment of damages and attorneys fees to them.28 WHEREFORE, the petition is DENIED. The Decision dated November 30, 2005 of the Court of Appeals in CA-G.R. SP No. 88728 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 170116 December 23, 2008

ATTY. CAROLINA R. RAMOS, petitioners, vs. COURT OF APPEALS, NATIONAL LABOR COMMISSION, BILLEX GROUP OF COMPANIES, MILAGROS O. HOW, WILLIAM Y. HOW and EDUARDO P. FRANCISCO, respondent. DECISION TINGA, J.: Atty. Carolina R. Ramos assails the Decision1 of the Court of Appeals dated May 16, 2005, which declared her a probationary employee of respondent Billex Group of Companies (Billex Group)2 who had been validly terminated by the latter. She also questions the appellate courts Resolution 3 dated September 16, 2005, which denied her motion for reconsideration. There is some variance in the facts laid out by the Court of Appeals and those presented by petitioner. Our own review of the records reveals that petitioner was hired by the Billex Group as its in-house counsel effective on June 23, 1999. Although no formal employment contract or appointment was executed between the parties, 4 it was agreed that petitioners monthly compensation would be P25,000.00 and that she would work in the morning office hours from Monday to Saturday. 5 On July 1, 1999, petitioner was informed that she would be hired on a full-time basis and that she shall receive P50,000.00 as compensation therefor. However, on August 2, 1999, she was informed that her status shall temporarily revert to "part-time" and that her salary would accordingly be reduced to P25,000.00. On August 14, 1999, petitioner was verbally informed that her employment would be terminated at the close of business hours of the same day. Two days later, she received a formal letter of termination dated August 14, 1999. The foregoing circumstances prompted petitioner to file a complaint for illegal dismissal. She alleged in her complaint that she had acquired the status of a regular employee after serving the company for more than two (2) weeks, which, according to company policy, is the period for probationary employment. Being a regular employee, her services cannot be terminated without just or authorized cause and without compliance with due process requirements. Agreeing with petitioner, the labor arbiter rendered a decision 6 dated February 25, 2003, the dispositive portion of which states: WHEREFORE, premises all considered, judgment is hereby rendered finding the dismissal illegal and ordering respondents to pay the complainant backwages in the amount of P2,078,000.00 (8/14/99-1/31/03 = 41.56 x P50,000.00 = P2,078,000.00); moral damages of P75,000.00 and exemplary damages of P50,000.00 and 10% of the total monetary award by way of attorneys fees. SO ORDERED.7 The National Labor Relations Commission (NLRC), on appeal, reversed the decision of the labor arbiter.8 According to the NLRC, in the absence of a written employment contract,

Art. 281 of the Labor Code shall apply. Under the cited provision, probationary employment shall not exceed six (6) months from the date the employee started working and may be terminated for cause if the employee fails to qualify as a regular employee based on reasonable standards made known at the time of engagement. The NLRC seized upon a letter drafted by petitioner suggesting to respondent Eduardo P. Francisco (Francisco) that the probationary period should be lengthened to five (5) months instead of two weeks. This letter, the NLRC ruled, is an acknowledgement by petitioner herself that the Billex Groups policy for the probationary period is five (5) months and not two (2) weeks. The NLRC denied reconsideration. On certiorari, the Court of Appeals affirmed the NLRCs resolution. Reconsideration was likewise denied by the appellate court. In the instant Petition for Review9 dated October 25, 2005, petitioner argues that she attained the status of a regular employee not only because she had passed the two (2)week probationary period set by the Billex Group but, more importantly, because she allegedly performed work that was usually necessary and desirable to the usual trade and business of the Billex Group. Her dismissal was allegedly without due process; hence, void. The Billex Group filed a Comment10 dated March 13, 2006, insisting that petitioner knew that her status was that of a probationary employee. She was allegedly informed of the tasks expected of her, such as the completion of the job descriptions for the various positions in the company, but her work product allegedly failed to meet the standards of the company. The Billex Group further asserts that as a probationary employee, petitioners employment can be terminated for cause any time. The company further points out that the NLRC resolution dated October 30, 2003, reversing the decision of the labor arbiter, had already become final and executory since no petition for certiorari had been filed within the reglementary period. An Entry of Judgment was, in fact, issued by the NLRC certifying that its resolution became final and executory on June 5, 2004. Allegedly, petitioners motion for reconsideration of the resolution of the NLRC (reversing the decision of the labor arbiter) was filed 14 days after the period for filing the same had already prescribed. Thus, the motion for reconsideration was denied. The petition for certiorari was allegedly filed five (5) months after the period for filing the same had already prescribed, considering that petitioner received a copy of the NLRC resolution on December 16, 2003 and had only until February 15, 2004 within which to file a petition for certiorari with the Court of Appeals. In her Reply11 dated June 10, 2006, petitioner pleads leniency and asks the Court to relax the application of the rules to enable her to fully ventilate her side. It should be emphasized at the outset that this petition suffers from procedural imperfections too grave to merely be ignored. The NLRC resolved respondents appeal (of the labor arbiters decision) on October 30, 2003. Its Resolution was received by petitioner on December 16, 2003, as she herself stated in her motion for reconsideration. 12 She therefore had 10 days thence within which to file said motion. However, she only filed her motion for reconsideration on January 9, 2004,13 14 days after the period for filing the same had already prescribed. The motion was expectedly denied for having been filed beyond the 10-day reglementary period and for lack of merit in the NLRC Resolution dated May 14, 2004. Entry of Judgment 14 was issued on August 3, 2004, stating that the May 14, 2004 Resolution became final and executory on June 5, 2004. Another Resolution dated September 30, 2004 15 was issued by the NLRC declaring the case closed and terminated. In Zapata v. NLRC16 we held that the implementing rules of respondent NLRC are unequivocal in requiring that a motion for reconsideration of the order, resolution, or

decision of the respondent Commission should be seasonably filed as a precondition for pursuing any further or subsequent remedy, otherwise the said order, resolution or decision shall become final and executory after 10 calendar days from receipt thereof. Petitioners procedural missteps in the NLRC also resulted in the late filing of her petition for certiorari with the Court of Appeals. For these reasons alone, the petition for certiorari already warranted outright dismissal. Petitioner cannot hide behind the mantle of liberality. Being herself a lawyer, she is presumed to know and is expected to follow procedural rules to the letter. Even foregoing the procedural issues, the present petition should be denied for lack of merit. Petitioner herself admitted that the Billex Group initially hires its officers and employees on a probationary status17 although she asserts, without proof, that the probationary period is only two (2) weeks. In support of her allegation, petitioner referred to a statement allegedly made by respondent Milagros How that: "Tama na ang dalawang linggo. Sa loob ng panahon na yon, makikilala mo na ang tao."18 Again, no proof that these words were uttered was presented by petitioner. A probationary employee is engaged specifically with the view of eventually converting the employment into regular status if the employee meets the standards for regular employment. The probationary period serves as a trial period during which the employees performance is evaluated. Naturally, the employee would have to render services which are usually necessary and desirable to the business of the employer for how else would the employer be able to assess the employees performance? Petitioners statement, therefore, that she performed services which were necessary to respondents business does not necessarily negate the probationary status of her employment. The Labor Code and its Implementing Rules govern probationary employment. Art. 281 of the Labor Code states: Art. 281. Probationary Employment.Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Book VI, Rule I, Sec. 6, of the Implementing Rules provides: Probationary employment.There is probationary employment where the employee, upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment, based on reasonable standards made known to him at the time of engagement. Probationary employment shall be governed by the following rules: xxx (c) The services of an employee who has been engaged on probationary basis may be terminated only for a just cause, when he fails to qualify as a regular employee in accordance with the reasonable standards prescribed by the employer. (d) In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at

the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee. Both the NLRC and the appellate court singled out a letter written by petitioner addressed to respondent Francisco in which she suggested a probationary period of five (5) months instead of two (2) weeks presumably for another employee of the company whose employment petitioner was then reviewing. The letter states: EDF, I prefer this letter form agreement than the employment contract. Likewise, I suggest a probationary period of five (5) mos. I could not see the advantage of limiting the period to two weeks, anyway, the Company has the option to terminate it anytime within the period. CRR19 This letter acknowledges that petitioner was well aware of the limits of her probationary employment. She must have known, too, that under Sec. 2, Rule I, Book VI of the Implementing Rules, "If the termination is brought about by the completion of the contract, or by failure of an employee to meet the standards of the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from the effective date of termination." Petitioners dismissal, effected through a letter dated August 14, 1999 which petitioner received on August 16, 1999, sufficiently meets the criteria set forth above for the legality in the cause and manner of dismissal. This letter of termination cited "business considerations"20 as the reason therefor, although respondent also insisted that the quality of petitioners work failed to meet the standards set out by respondent and made known to petitioner at the time of her engagement. In view of the foregoing, we find no reason to disturb the findings of the NLRC affirmed by the Court of Appeals. WHEREFORE, the Decision and Resolution of the Court of Appeals respectively dated May 16, 2005 and September 16, 2005, affirming the Resolutions of the National Labor Relations Commission dated October 30, 2003 and May 14, 2004, are AFFIRMED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Baguio City FIRST DIVISION

Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their work and break time schedules will be maintained as it is now. 1 Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC. 2 However, the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise of management prerogative and that the new work schedule, break time and one-hour lunch break did not have the effect of diminishing the benefits granted to factory workers as the working time did not exceed eight (8) hours. The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid during their lunch break even if they were no longer "on call" or required to work during the break. He also ruled that the decision in the earlier Sime Darby case 3 was not applicable to the instant case because the former involved discrimination of certain employees who were not paid for their 30-minute lunch break while the rest of the factory workers were paid; hence, this Court ordered that the discriminated employees be similarly paid the additional compensation for their lunch break. Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the Labor Arbiter and dismissed the appeal. 4 However, upon motion for reconsideration by private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter. 5 The NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay "the money value of these covered employees deprived of lunch and/or working time breaks." The public respondent declared that the new work schedule deprived the employees of the benefits of a time-honored company practice of providing its employees a 30-minute paid lunch break resulting in an unjust diminution of company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in the implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC, petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the work schedule of its employees which is expressly recognized in the collective bargaining agreement between petitioner and private respondent.

G.R. No. 119205 April 15, 1998 SIME DARBY PILIPINAS, INC. petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.: Is the act of management in revising the work schedule of its employees and discarding their paid lunch break constitutive of unfair labor practice? Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of monthly salaried employees of petitioner at its Marikina factory. Prior to the present controversy, all company factory workers in Marikina including members of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break. On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance Department working on shifts, a change in work schedule effective 14 September 1992 thus TO: ALL FACTORY-BASED EMPLOYEES RE: NEW WORK SCHEDULE Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows: 7:45 A.M. 4:45 P.M. (Monday to Friday) 7:45 A.M. 11:45 A.M. (Saturday). Coffee break time will be ten minutes only anytime between: 9:30 A.M. 10:30 A.M. and 2:30 P.M. 3:30 P.M. Lunch break will be between: 12:00 NN 1:00 P.M. (Monday to Friday).

The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that the petitioner be granted, alleging that the 14 August 1992 memorandum which contained the new work schedule was not discriminatory of the union members nor did it constitute unfair labor practice on the part of petitioner. We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its business operations and its improved production. 6 It rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees could be called upon to do jobs during that period as they were "on call." Even if denominated as lunch break, this period could very well be considered as working time because the factory employees were required to work if necessary and were paid accordingly for working. With the new work schedule, the employees are now given a one-hour lunch break without any interruption from their employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use this hour not only for eating but also for their rest and comfort which are conducive to more efficiency and better performance in their work. Since the employees are no longer required to work during this one-hour lunch break, there is no more need for them to be compensated for this period. We agree with the Labor Arbiter that the new work schedule fully complies with the daily work period of eight (8) hours without violating the Labor Code. 7 Besides, the new schedule applies to all employees in the factory similarly situated whether they are union members or not. 8 Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby case 9 with the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that case involved the matter of granting lunch breaks to certain employees while depriving the other employees of such breaks. This Court affirmed in that case the NLRC's finding that such act of management was discriminatory and constituted unfair labor practice. The case before us does not pertain to any controversy involving discrimination of employees but only the issue of whether the change of work schedule, which management deems necessary to increase production, constitutes unfair labor practice. As shown by the records, the change effected by management with regard to working time is made to apply to all factory employees engaged in the same line of work whether or not they are members of private respondent union. Hence, it cannot be said that the new scheme adopted by management prejudices the right of private respondent to self-organization. Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. 10 Thus, management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline,

dismissal and recall of workers. 11 Further, management retains the prerogative, whenever exigencies of the service so require, to change the working hours of its employees. So long as such prerogative is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold such exercise. 12 While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every dispute will be automatically decided in favor of labor. Management also has rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although this Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 13 WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing the complaint against petitioner for unfair labor practice is AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 101013 February 2, 1993 ABRAHAM B. BLANCAFLOR, ANASTACIO T. MERCADO, LEONARDO DANTES, ANA B. AGAIN, MARVIN B. VICENTE, ROBERTO Z. CALICA, MARYLYN M. KARGANILLA and LYDIA S. YUSAY, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, GREGORIO ARANETA UNIVERSITY FOUNDATION and ILUMINADO G. VALENCIA, respondents. Marcelo C. Amiana and Filomeno N. Lantion for petitioners. Gonzales, Batiller, Bilog & Associates for private respondents.

b) To also immediately reinstate all the other eight complainants to their respective former positions with similar payment of full backwages as that of complainant Blancaflor. However, if their positions have indeed been abolished, respondents are also hereby directed (to pay), in addition to the backwages which shall be computed until rendition of this decision, complainant's separation pay on the basis of one month's salary for every year of service, a fraction of at least six months to be considered one year, effective January 1984 until May 1988 but they shall remain as faculty members; and c) To pay all nine complainants their retirement benefits or separation pay, whichever is higher, due them as of 1984 when they were retrenched then rehired, based on their rates of pay then applicable or on the computation of their claims now in possession of respondents, whichever is more beneficial to them. Considering the high administrative positions held by all complainants and the manner by which they were unceremoniously dismissed therefrom, respondents are hereby directed to pay jointly and severally all of them moral damages in the amount of P30,000.00 each and exemplary damages P10,000.00 each. Respondents are likewise assessed the amount equivalent to 10% of the above total awards, payable to complainants' counsel on record, as attorney's fees. Complainants' claim for unpaid wages or commission is hereby DISMISSED for want of evidence. 3 Private respondent GAUF appealed the decision to the National Labor Relations Commission (NLRC) which rendered its decision dated May 24, 1991, reversing the labor arbiter's aforestated decision and dismissing petitioners' complaint for lack of merit. 4 Petitioners motion for reconsideration and related reliefs was denied in the resolution of the NLRC dated July 23, 1991. 5 Not satisfied therewith, petitioners are now before us on a petition for certiorari seeking the annulment of the foregoing decision and resolution and raising the following issues and sub-issues for our adjudication: 1. Whether or not private respondents' appeal was deemed perfected without the required appeal having been posted within the prescribed appeal period of ten calendar days; 2. Whether or not petitioners were considered dismissed from service in respondent university when despite their termination as dean, department heads and institute secretaries, respectively, they still remain under the employ of said respondent as faculty members: 3. Whether or not the aforesaid termination of petitioners was in accordance with due process of law in terms of the following subissues; a. whether or not the retrenchment of petitioners is valid in the absence of proof of the valid cause or causes thereof, i.e. financial losses; b. whether or not petitioners were validly retrenched in the absence of proof of the approval of the alleged abolition of their positions as dean,

REGALADO, J.: On March 15, 1983, Cesar A. Mijares, the former president of respondent Gregorio Araneta University Foundation (GAUF), sent a letter to the then Minister of Labor and Employment requesting approval of the Reorganization, Retrenchment and Restructuring (hereinafter referred to as RRR) Program of the GAUF on the ground of serious business losses and financial reverses being experienced by the university. 1 In a letter dated March 29, 1983, Minister Blas F. Ople approved the RRR Program without any serious objection, but with the requirement that the implementation thereof shall be instituted without prejudice to whatever benefits may have accrued in favor of the employees concerned. 2 Petitioners in the case at bar are regular members of the faculty of respondent university and were concurrently holding administrative positions as dean, department heads and institute secretaries therein. In the implementation of the RRR Program effective January 1, 1984, herein petitioners were retired but subsequently rehired. Their appointment to their administrative positions as dean, department heads and institute secretaries, respectively, had been extended by private respondent from time to time until the expiration of their last appointment on May 31, 1988. With the aforestated subsequent termination of their tenure in said administrative positions having been implemented, petitioners filed with the Arbitration Branch of the Department of Labor and Employment a case against private respondent GAUF for illegal dismissal, unpaid wages, separation pay and/or retirement pay, damages and attorney's fees. On May 29, 1989, the labor arbiter rendered a decision in favor of petitioners with the following dispositive portion: WHEREFORE, judgment is hereby rendered declaring that all complainants were illegally dismissed and ordering respondents University and Valencia jointly and severally: a) To immediately reinstate complainant Abraham B. Blancaflor to his former position of Dean, Institute of Engineering, with payment of full backwages from June 1, 1988 until reinstatement, the occupancy of the present incumbent notwithstanding;

department heads respectively;

and

institute

secretaries,

c. whether or not petitioners were given due notice of their aforesaid termination from service; and d. whether or not public respondent deviated from the precedent rulings of this Court in reversing the decision of the labor arbiter in the case at bar. 4. Whether or not petitioners are entitled to separation/ retirement pay under respondent university's 1983 RRR Program; 5. Whether or not petitioners were entitled to immediate reinstatement to their respective former positions in respondent university effective upon promulgation of the decision of the labor arbiter based on R.A. No. 6715; and 6. Whether or not private respondents, who bad been adjudged liable for illegal dismissal three times based on its same RRR Program conformably to recent cases decided by this Court, may be held liable for damages, including attorney's fees, in the instant case. 6 Inceptively, it is the contention of petitioners that the NLRC gravely abused its discretion in giving due course to the appeal of private respondents, the same having been filed out of time by reason of the latter's failure to file a supersedeas bond within ten days from receipt of the labor arbiter's decision as mandated by Republic Act No. 6715. We disagree. We have previously ruled that while Article 223 of the Labor Code, as amended by Republic Act No. 6715, requiring a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from for the perfection of an appeal may be considered a jurisdictional requirement, nevertheless, adhering to the principle that substantial justice is better served by allowing the appeal on the merits to be threshed out by the NLRC, the foregoing requirement of the law should be given a liberal interpretation. 7 In the case at bar, a relaxation of the rule is called for. At the time the appeal was made, there were still no implementing rules and regulations on the aforestated requirement. It was only on February 12, 1991, that the NLRC required herein private respondents to post a cash or surety bond which the latter complied with on February 25, 1991. As aptly explained by the NLRC: In our review of the record, we found that appellants failed to post the required surety/appeal bond. Since the appealed decision is under date of May 29, 1989, or after the effectivity of Republic Act 6715 on March 21, 1989 which mandated the posting of the bond, but before September 5, 1989, the adoption of the NLRC Interim Rules which implemented the aforesaid Act, appellants were notified on February 12, 1991 to post the required bond. On February 25, 1991, appellant complied by posting the appeal bond with the Cashier of this Office in the amount equal to the judgment award in this case. 8 Additionally, in the appealed decision of the labor arbiter the exact amount due to petitioners is not stated, hence there could be no basis for determining the amount of the bond to be filed by private respondents. It was only the NLRC in its order, dated February 12, 1991, that specified the amount of the bond to be posted by private respondents. 9 Our ruling in Rada vs. National Labor Relations Commission, et al., factual setting, is squarely applicable to the case at bar. Thus:
10

While it is true that the payment of the supersedeas bond is an essential requirement in the perfection of an appeal, however, where the fee had been paid although payment was delayed, the broader interests of justice and the desired objective of resolving controversies on the merits demands that the appeal be given due course. Besides, it was within the inherent power of the NLRC to have allowed late payment of the bond, considering that the aforesaid decision of the labor arbiter was received by private respondent on October 13, 1989. However, said decision did not state the amount awarded as backwages and overtime pay, hence the amount of the supersedeas bond could not be determined. It was only in the order of the NLRC of February 16, 1990 that the amount of the supersedeas bond was specified and which bond, after an extension granted by the NLRC, was timely filed by private respondent. We turn then to the main issue in this case, that is, whether petitioners were illegally dismissed. Our answer is in the negative. There was no illegal dismissal. Petitioners herein were dismissed by reason of the expiration of their contracts of employment. Petitioners' appointments as dean, department heads and institute secretaries were for fixed terms of definite periods as shown by their respective contracts of employment, which all expired on the same date, May 31, 1988. 11 The validity of employment for a fixed period has been acknowledged and affirmed by this Court in Brent School Inc., et. al. vs. Zamora, et. al., 12 where we held: Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written and oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Herein petitioners voluntarily signed the appointments extended to them as attested by their signature over the word "conforme" in their contracts of employment. As we observed in Brent, it is the practice and policy of educational institutions that appointment to the positions of department heads and other high administrative offices are held by faculty members only on a temporary or non-permanent basis either within a specified term or at the pleasure of the school head or board of regents. There is nothing whatever amiss in said practice of having teachers serve as administrative officials for a fixed term or in a non-permanent capacity in order to accord to as many of the teaching staff as possible the opportunity to serve as dean, principal, or administrative officer of one type or another.

with the same

We have also ruled in La Salette of Santiago, Inc. vs. National Labor Relations Commission, et al. 13 that: Unlike teachers (assistant instructors, instructors, assistant professors, associate professors, full professors) who aspire for and expect to acquire permanency, or security of tenure, in their employment as faculty members, teachers who are appointed as department heads or administrative officials (e.g., college or department secretaries, principals, directors, assistant deans, deans) do not normally, and should not expect to, acquire a second status of permanency, or additional or second security of tenure as such officer. The acquisition of such an additional tenure, to repeat, is not consistent normal practice, constitutes the exception rather than the rule, and may take place only where categorically and explicitly provided by law or agreement of the parties. The alleged lack of notice of termination to petitioners is of no consequence. Petitioners were lawfully terminated upon the expiration of their contracts with respondent without the necessity of any notice. When the contract specifies the period of its duration it terminates on the expiration of such period. A contract for employment for a definite period terminates by its own term at the end of such period. 14 The general notice of termination given by respondent university to petitioners was a mere reminder that their contracts of employment were due to expire and that the contract would no longer be renewed. 15 Further, it must be noted that after the employment contracts of herein petitioners as administrative officers expired, they were retained as faculty members by private respondent. On the claims of herein petitioners for separation or retirement pay by reason of the RRR Program of 1984, the contention of private respondents that petitioners are not entitled to the same, since they were not separated, is not well-taken. The right of herein petitioners to claim the said benefits under the 1984 RRR Program of respondent university is unquestionably evident. Under the reorganizational setup pursuant to the 1984 RRR Program, all employees including herein petitioners were considered resigned. The guidelines of the retrenchment program as approved by the Minister of Labor specifically states that under the reorganizational setup all the employees of the university would be considered separated or retired "with corresponding grants of termination pay or retirement benefits, whichever is higher," and all would be rehired except those whose present positions would be affected by the proposed reorganizational changes. 16 It is apparent that said RRR Program calls for the separation and retirement of all personnel of respondent GAUF with the corresponding grants of termination pay or retirement benefits, whichever is higher, regardless of whether or not they will be rehired by the university. Moreover, the grant of separation and retirement pay is exigently required. The payment of said benefits is the basic component of the 1984 RRR Program since it involves not only a reduction of personnel of respondent university but a top-to-bottom and university-wide reorganization, functional and structural in scope, with a reduction in salary and discontinuance of existing benefits. The said changes can only be lawfully done by considering all the employees terminated with the corresponding payment of retirement or separation pay. That arrangement was explicitly requested in the letter of the president of respondent university to the then Minister of Labor and Employment and which was approved by the latter, as stated at the outset. The pertinent portion of said letter of March 15, 1983 is hereunder quoted:

This University can no longer afford to continue operation under the present salary rates of its personnel. The reduction of personnel is not an adequate solution to this problem because to do so would not enable the University to accommodate its present enrollment. . . . xxx xxx xxx 2. The cost of operation, especially personnel cost, has been increasing tremendously during the last several years. For the last five years, this University has incurred very high percentages of personnel cost in relation to its total income from student fees, . . . xxx xxx xxx Reducing the salaries of personnel even to an amount which is not below the statutory minimum is not legally allowable. Therefore, the only effective solution is for the University to have all its personnel resign and pay them their separation pays, or retirement pays, whichever is higher, so that it could effect a top-to-bottom reorganization and restructure its salary rates and other benefits not mandated by law but were only granted unilaterally by the University to its employees long before the present hard times of inflation. After we have paid our employees their separation/retirement pays, we will immediately rehire them in accordance (with) new and restructured salary rates which are not, of course, below the statutory minimum and without the benefits not mandated by law and/or paying our faculty members on the hourly basis, subject to the University's actual needs under its reorganized set-up. 17 (Emphasis supplied.) On the foregoing premises, it is ineluctable, and we so hold, that petitioners are entitled to their respective termination or retirement benefits when they were considered separated or retired under the 1984 RRR Program. As to the claim for damages, the NLRC properly disallowed the award for lack of legal and factual bases since the dismissal of petitioners from their administrative positions was justified and lawful. With regard to attorney's fees claimed by petitioners, respondent NLRC did not err in denying the same since this case does not involve an unlawful withholding of wages. 18 WHEREFORE, subject to the modification regarding the award of separation pay or retirement benefits, whichever is higher, and which is hereby ordered to be paid by respondent Gregorio Araneta University Foundation to herein petitioners, the assailed decision and resolution of public respondent are AFFIRMED in all other aspects. SO ORDERED.

Bernardo vs. NLRC (1999) G.R. 122917 Facts: Complainants numbering 43 are deaf-mutes who were hired on various periods from 1988 to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly worded agreement called 'Employment Contract for Handicapped Workers.' Petitioners maintain that they should be considered regular employees, because their task as money sorters and counters was necessary and desirable to the business of respondent bank. They further allege that their contracts served merely to preclude the application of Article 280 and to bar them from becoming regular employees. Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should not in any way be considered as part of the regular complement of the Bank." Rather, they were "special" workers under Article 80 of the Labor Code. Private respondent contends that it never solicited the services of petitioners, whose employment was merely an "accommodation" in response to the requests of government officials and civic-minded citizens. They were told from the start, "with the assistance of government representatives," that they could not become regular employees because there were no plantilla positions for "money sorters," whose task used to be performed by tellers. Their contracts were renewed several times, not because of need "but merely for humanitarian reasons." Respondent submits that "as of the present, the 'special position' that was created for the petitioners no longer exists in private respondent bank, after the latter had decided not to renew anymore their special employment contracts." In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees under Article 280 of the Labor Code, as amended, Respondent Commission ratiocinated as follows: "We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that complainants were hired as an accommodation to [the] recommendation of civic oriented personalities whose employment[s] were covered by . . . Employment Contract[s] with special provisions on duration of contract as specified under Art. 80. Hence, as correctly held by the Labor Arbiter a quo, the terms of the contract shall be the law between the parties." The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the prevailing circumstances/milieu of the case."

Held: Yes. The petition is meritorious. However, only the employees, who worked for more than six months and whose contracts were renewed are deemed regular. Hence, their dismissal from employment was illegal. The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the petitioners, except sixteen of them, should be deemed regular employees. As such, they have acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter of compassion but as a consequence of law and justice. The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one month, after which the employer shall determine whether or not they should be allowed to finish the 6-month term of the contract. Furthermore, the employer may terminate the contract at any time for a just and reasonable cause. Unless renewed in writing by the employer, the contract shall automatically expire at the end of the term. According to private respondent, the employment contracts were prepared in accordance with Article 80 of the Labor Code, which provides: "ARTICLE 80. Employment agreement. Any employer who employs handicapped workers shall enter into an employment agreement with them, which agreement shall include: (a) The names and addresses of the handicapped workers to be employed;

(b) The rate to be paid the handicapped workers which shall be not less than seventy five (75%) per cent of the applicable legal minimum wage; (c) (d) The duration of employment period; and The work to be performed by handicapped workers.

The employment agreement shall be subject to inspection by the Secretary of Labor or his duly authorized representatives."The stipulations in the employment contracts indubitably conform with the aforecited provision. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), however, justify the application of Article 280 of the Labor Code. Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring of others lead to the conclusion that their tasks were beneficial and necessary to the bank. More important, these facts show that they were qualified to perform the responsibilities of their positions. In other words, their disability did not render them unqualified or unfit for the tasks assigned to them. QUALIFIED DISABLED PERSONS REMOVE CONTRACT FROM AMBIT OF ARTICLE 80 OF LABOR CODE. - In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same terms and conditions of employment as a qualified ablebodied person. Section 5 of the Magna Carta provides: "SECTION 5. Equal Opportunity for Employment. No disabled person shall be denied access to opportunities for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of employment and the

Issues: 1. Whether or not petitioners have become regular employees.

2. Whether or not the provisions of the Magna Carta for the Disabled (Republic Act No. 7277), on proscription against discrimination against disabled persons is applicable in this case.

same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified able bodied person." The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article 280 of the Labor Code, which provides: ARTICLE 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. "An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists." TEST WHETHER EMPLOYEE IS REGULAR - The test of whether an employee is regular was laid down in De Leon v. NLRC , in which this Court held: "The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also if the employee has been performing the job for at least one year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity, and while such activity exists." Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent bank. With the exception of sixteen of them, petitioners performed these tasks for more than six months. As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum." The contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness for the job. When the bank renewed the contract after the lapse of the six-month probationary period, the employees thereby became regular employees. No employer is allowed to determine indefinitely the fitness of its employees. As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may be terminated only for a just or authorized cause. Because respondent failed to show such cause, these twenty-seven petitioners are

deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of seniority rights and other privileges. Considering the allegation of respondent that the job of money sorting is no longer available because it has been assigned back to the tellers to whom it originally belonged, petitioners are hereby awarded separation pay in lieu of reinstatement. Because the other sixteen worked only for six months, they are not deemed regular employees and hence not entitled to the same benefits. EMPLOYMENT CONTRACT WITH FIXED TERM; RULING IN BRENT CASE NOT APPLICABLE IN CASE AT BAR - Respondent bank, citing Brent School v. Zamora, in which the Court upheld the validity of an employment contract with a fixed term, argues that the parties entered into the contract on equal footing. It adds that the petitioners had in fact an advantage, because they were backed by then DSWD Secretary Mita Pardo de Tavera and Representative Arturo Borjal. We are not persuaded. The term limit in the contract was premised on the fact that the petitioners were disabled, and that the bank had to determine their fitness for the position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted earlier, petitioners proved themselves to be qualified disabled persons who, under the Magna Carta for Disabled Persons, are entitled to terms and conditions of employment enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply because petitioners are qualified for their positions. The validation of the limit imposed on their contracts, imposed by reason of their disability, was a glaring instance of the very mischief sought to be addressed by the new law. Employment contract; impressed with public interest; parties are not at liberty to insulate themselves. - Moreover, it must be emphasized that a contract of employment is impressed with public interest. Provisions of applicable statutes are deemed written into the contract, and the "parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other." Clearly, the agreement of the parties regarding the period of employment cannot prevail over the provisions of the Magna Carta for Disabled Persons, which mandate that petitioners must be treated as qualified ablebodied employees. Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko Sentral ng Pilipinas (BSP) required that cash in the bank be turned over to the BSP during business hours from 8:00 a.m. to 5:00 p.m., respondent resorted to nighttime sorting and counting of money. Thus, it reasons that this task "could not be done by deaf mutes because of their physical limitations as it is very risky for them to travel at night." We find no basis for this argument. Travelling at night involves risks to handicapped and able-bodied persons alike. This excuse cannot justify the termination of their employment. EMPLOYMENT; CHARACTER OF EMPLOYMENT; HOW DETERMINED Respondent argues that petitioners were merely "accommodated" employees. This fact does not change the nature of their employment. As earlier noted, an employee is regular because of the nature of work and the length of service, not because of the mode or even the reason for hiring them. Equally unavailing are private respondent's arguments that it did not go out of its way to recruit petitioners, and that its plantilla did not contain their positions. In

L. T . Datu v. NLRC, the Court held that "the determination of whether employment is casual or regular does not depend on the will or word of the employer, and the procedure of hiring . . . but on the nature of the activities performed by the employee, and to some extent, the length of performance and its continued existence." Private respondent argues that the petitioners were informed from the start that they could not become regular employees. In fact, the bank adds, they agreed with the stipulation in the contract regarding this point. Still, we are not persuaded. In this light, we iterate our ruling in Romares v. NLRC : Article 280 was emplaced in our statute books to prevent the circumvention of the employee's right to be secure in his tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment defined therein. Where an employee has been engaged to perform activities which are usually necessary or desirable in the usual business of the employer, such employee is deemed a regular employee and is entitled to security of tenure notwithstanding the contrary provisions of his contract of employment. "At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As reaffirmed in subsequent cases, this Court has upheld the legality of fixed-term employment. It ruled that the decisive determinant in 'term employment' should not be the activities that the employee is called upon to perform but the day certain agreed upon the parties for the commencement and termination of their employment relationship. But this Court went on to say that where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and morals." In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the working class, but also the concern of the State for the plight of the disabled. The noble objectives of Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice and the equal treatment of qualified persons, disabled or not. In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is the repeated renewal of their employment contracts. Why then should they be dismissed, simply because they are physically impaired? The Court believes, that, after showing their fitness for the work assigned to them, they should be treated and granted the same rights like any other regular employees.

Republic of the Philippines SUPREME COURT Manila EN BANC

that it has no jurisdiction to review decisions in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the rules implementing B.P. Blg. 130. However, in a letter dated July 6, 1987, the respondent arbitrator refused to take cognizance of the case reasoning that he had no more jurisdiction to continue as arbitrator because he had resigned from service effective May 1, 1986. Hence, this petition. The petitioner union raises the following issues: 1) Whether or not Nestle's sales personnel are entitled to holiday pay; and 2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay. The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The respondent company controverts this assertion.

G.R. No. 79255 January 20, 1992 UNION OF FILIPRO EMPLOYEES (UFE), petitioner, vs. BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and NESTL PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents. Jose C. Espinas for petitioner. Siguion Reyna, Montecillo & Ongsiako for private respondent.

GUTIERREZ, JR., J.: This labor dispute stems from the exclusion of sales personnel from the holiday pay award and the change of the divisor in the computation of benefits from 251 to 261 days. On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its rights and obligations respecting claims of its monthly paid employees for holiday pay in the light of the Court's decision in Chartered Bank Employees Association v. Ople (138 SCRA 273 [1985]). Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary arbitrator. On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to: pay its monthly paid employees holiday pay pursuant to Article 94 of the Code, subject only to the exclusions and limitations specified in Article 82 and such other legal restrictions as are provided for in the Code. (Rollo, p. 31) Filipro filed a motion for clarification seeking (1) the limitation of the award to three years, (2) the exclusion of salesmen, sales representatives, truck drivers, merchandisers and medical representatives (hereinafter referred to as sales personnel) from the award of the holiday pay, and (3) deduction from the holiday pay award of overpayment for overtime, night differential, vacation and sick leave benefits due to the use of 251 divisor. (Rollo, pp. 138-145) Petitioner UFE answered that the award should be made effective from the date of effectivity of the Labor Code, that their sales personnel are not field personnel and are therefore entitled to holiday pay, and that the use of 251 as divisor is an established employee benefit which cannot be diminished. On January 14, 1986, the respondent arbitrator issued an order declaring that the effectivity of the holiday pay award shall retroact to November 1, 1974, the date of effectivity of the Labor Code. He adjudged, however, that the company's sales personnel are field personnel and, as such, are not entitled to holiday pay. He likewise ruled that with the grant of 10 days' holiday pay, the divisor should be changed from 251 to 261 and ordered the reimbursement of overpayment for overtime, night differential, vacation and sick leave pay due to the use of 251 days as divisor. Both Nestle and UFE filed their respective motions for partial reconsideration. Respondent Arbitrator treated the two motions as appeals and forwarded the case to the NLRC which issued a resolution dated May 25, 1987 remanding the case to the respondent arbitrator on the ground

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty." The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based. The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working hours which can be determined with reasonable certainty. The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work. We concur with the following disquisition by the respondent arbitrator: The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing administrative control over such personnel. This does not in any manner provide a reasonable level of determination on the actual field work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which are subject to their individual capacity and industry and which "cannot be determined with reasonable certainty." This is the reason why effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides: Rule IV Holidays with Pay Sec. 1. Coverage This rule shall apply to all employees except: xxx xxx xxx (e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis supplied) While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55). Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer. The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m. Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984. The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their performance is proof that their actual hours of work in the field can be determined with reasonable certainty. The Court thinks otherwise. The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190). The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to determination. In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated: The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra compensation. He works away from his employer's place of business, is not subject to the personal

supervision of his employer, and his employer has no way of knowing the number of hours he works per day. While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay benefits also applies. The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor. Arbitrator Vivar's rationale for his decision is as follows: . . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of interpretation which accounts for what is claimed as falling within the concept of "solutio indebti." When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34) The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held: It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise. One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251. In the petitioner's case, its computation of daily ratio since September 1, 1980, is as follows: monthly rate x 12 months 251 days Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261. It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay. Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake. Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised by Nestle. Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious. In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added the "divisor" test. However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction. In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to a legislative or executive act subsequently declared invalid: xxx xxx xxx . . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to

be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435) The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case. Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to Nestle's fault. The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case. WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor to be used in computing holiday pay shall be 251 days. The holiday pay as above directed shall be computed from October 23, 1984. In all other respects, the order of the respondent arbitrator is hereby AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 188949 July 26, 2010

grievance meeting, the representative of petitioner explained that the change in the computation of the 13th-month pay was intended to rectify an error in the computation, particularly the concept of basic pay which should have included only 6 the basic monthly pay of the employees. For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before the National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings, the parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against petitioner for money claims based on the alleged diminution of benefits/erroneous computation of 13th-month pay before 7 the Regional Arbitration Branch of the National Labor Relations Commission (NLRC). On October 31, 2007, the Labor Arbiter rendered a Decision dismissing the complaint and declaring that the petitioner had the right to rectify the error in the 9 computation of the 13th-month pay of its employees. The fallo of the Decision reads: WHEREFORE, premises considered, the complaint filed by the complainants against the respondents should be DISMISSED with prejudice for utter lack of merit. SO ORDERED.
10 11 8

CENTRAL AZUCARERA DE TARLAC, Petitioner, vs. CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent. DECISION NACHURA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of 1 2 Court, assailing the Decision dated May 28, 2009, and the Resolution dated July 28, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106657. The factual antecedents of the case are as follows: Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a legitimate labor organization which serves as the exclusive bargaining representative of petitioners rank-and-file employees. The controversy stems from the interpretation of the term "basic pay," essential in the computation of the 13th-month pay. The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its employees the mandatory thirteenth (13th) month pay since 1975. The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioners computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, 3 petitioner used this computation until 2006. On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared a temporary cessation of operations. In December 2005, all the striking union members were allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted until September 2006. In December 2006, petitioner gave the employees their 13th-month pay based on the employees total earnings during the 4 year divided by 12. Respondent objected to this computation. It averred that petitioner did not adhere to the usual computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not observe the company practice of giving its employees the guaranteed amount equivalent to their one month pay, in instances where the computed 13th-month pay was less than their basic monthly 5 pay. Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure as provided in their collective bargaining agreement. During the

Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision reversing the Labor Arbiter. The dispositive portion of the Decision reads:

WHEREFORE, the decision appealed is reversed and set aside and respondentappellee Central Azucarera de Tarlac is hereby ordered to adhere to its established practice of granting 13th[-] month pay on the basis of gross annual basic which includes basic pay, premium pay for work in rest days and special holidays, night shift differential and paid vacation and sick leaves for each year. Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th month pay. SO ORDERED.
12

Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated November 27, 2008. Petitioner then filed a petition for certiorari 13 under Rule 65 of the Rules of Court before the CA. On May 28, 2009, the CA rendered a Decision the decision and resolution of the NLRC, viz.:
14

dismissing the petition, and affirming

WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14, 2008 Decision and November 27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs. SO ORDERED.
15

Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in affirming the Decision of the NLRC, and praying that the Decision of the Labor Arbiter be reinstated. The petition is denied for lack of merit. The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income based on wage but not part of the wage. It is equivalent to onetwelfth (1/12) of the total basic salary earned by an employee within a calendar year. All rank-and-file employees, regardless of their designation or employment status and

irrespective of the method by which their wages are paid, are entitled to this benefit, provided that they have worked for at least one month during the calendar year. If the employee worked for only a portion of the year, the 13th-month pay is computed pro 16 rata. Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a result of its mistake in implementing P.D. No. 851, an error that was discovered by the management only when respondent raised a question concerning the computation of the employees 13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30) years. Petitioner insists that the length of time during which an employer has performed a certain act beneficial to the employees, does not prove that such an act was not done in error. It maintains that for the claim of mistake to be negated, there must be a clear showing that the employer had freely, voluntarily, and continuously performed the act, knowing that he is under no obligation to do so. 17 Petitioner asserts that such voluntariness was absent in this case. The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines 13th-month pay and basic salary as follows: Sec. 2. Definition of certain terms. - As used in this issuance: (a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; (b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in the computation of the 13th-month pay. On November 16, 1987, the Revised Guidelines on the Implementation of the 13thMonth Pay Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.1avvphi1 Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salaryrelated benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what is included in the term "basic salary" for purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut administrative guidelines have been issued to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851 and its implementing regulations. As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment 18 contract, written or unwritten. The rule against diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law. But even in cases of error, it 19 should be shown that the correction is done soon after discovery of the error. The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employees. Petitioner only changed the formula in the computation of the 13thmonth pay after almost 30 years and only after the dispute between the management and employees erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith. Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the 20 Decree only upon prior authorization by the Secretary of Labor. In this case, no such prior authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption. WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106657 are hereby AFFIRMED. Costs against petitioner. SO ORDERED.